Post Conflict Reconstruction as Development: Donors, Context and Institutions in Kosovo
Mary Venner
A thesis submitted for the degree of Doctor of Philosophy at the University of New South Wales, Sydney, Australia
School of Social Sciences
Faculty of Arts and Social Sciences
April 2014
Originality Statement
‘I hereby declare that this submission is my own work and to the best of my knowledge it contains no materials previously published or written by another person, or substantial proportions of material which have been accepted for the award of any other degree or diploma at UNSW or any other educational institution, except where due acknowledgement is made in the thesis. Any contribution made to the research by others, with whom I have worked at UNSW or elsewhere, is explicitly acknowledged in the thesis. I also declare that the intellectual content of this thesis is the product of my own work, except to the extent that assistance from others in the project's design and conception or in style, presentation and linguistic expression is acknowledged.’
Signed ......
7 May 2014 Date ......
i Table of Contents
Originality Statement i
Acknowledgements vii
List of Tables viii
List of Figures viii
List of Abbreviations ix
1 Introduction 1
1.1 Post Conflict Reconstruction as Development 1
1.2 The Setting for International Involvement 4
1.3 Research Question 6
1.4 Research Strategy 7 1.4.1 Development assistance 8 1.4.2 Multiple actors 9 1.4.3 Extended timeframe 9 1.4.4 The definition of success 9
1.5 Approach and Methodology 10 1.5.1 Kosovo reconstruction as a case study 10 1.5.2 The focus on public finance and the civil service 11 1.5.3 Measuring and explaining outcomes 12 1.5.4 Originality of the thesis 14 1.5.5 Methodology 16 1.5.6 Limitations of the thesis 18 1.5.7 Note on terminology 19
1.6 Structure of the Thesis 19
2 The Theory and Practice of Development Assistance 21
2.1 Ideas and theories 22 2.1.1 Economic development 22 2.1.2 Social and cultural transformation 23 2.1.3 Peacekeeping, post conflict reconstruction and state building 25 2.1.4 Democratic transition and EU-isation 27 2.1.5 Development as social engineering 28 2.1.6 Critical responses and alternatives to development 30 2.1.7 The development agenda in Kosovo 32
2.2 Development Assistance in Practice 33 2.2.1 The aid project model and technical assistance 33 ii 2.2.2 Development assistance effectiveness: does aid work? 37 2.2.3 The aid effectiveness agenda 39
2.3 Summary 41
3 The Context 44
3.1 How Kosovo became an aid project 44 3.1.1 From peacekeeping to development 45 3.1.2 The ‘blank slate’, the ‘lost decade’, and the ‘window of opportunity’ 49 3.1.3 Economic development and the question of ‘ownership’ 51
3.2 Kosovo in June 1999 54 3.2.1 The Albanian Kosovars 55 3.2.2 The other Kosovars: ethnic relations 57 3.2.3 Economic conditions 58
3.3 The First Months 60 3.3.1 Serb exodus 61 3.3.2 Albanian political factions 63 3.3.3 Nostalgia for 1989 64 3.3.4 The challenge of civil administration 64
3.4 Summary 65
4 International Actors: Donors, Projects and Participants 67
4.1 The United Nations Mission in Kosovo (UNMIK) 69 4.1.1 The establishment of UN administration 69 4.1.2 UNMIK structure and organisation 71 4.1.3 UN performance 73 4.1.4 Political achievements 75
4.2 The UN’s Office of Civil Affairs (Pillar II) 80 4.2.1 Establishment, structure and activities 80 4.2.2 Pillar II performance 83
4.3 The European Union in the Western Balkans 84 4.3.1 The Europeanization objective of EU assistance 86 4.3.2 EU effectiveness 88
4.4 The EU in UNMIK (Pillar IV) 90 4.4.1 History, structure and activities 90 4.4.2 Pillar IV performance 92
4.5 EU Development Assistance: EAR and ECLO 93 4.5.1 History, structure and activities 93 4.5.2 EAR/ECLO performance 97
iii 4.6 The United States in Kosovo 101 4.6.1 Objectives of US assistance 101
4.7 United States Agency for International Development (USAID) 104 4.7.1 USAID and public finance management 104 4.7.2 USAID performance 107
4.8 UK Department for International Development (DFID) 109 4.8.1 DFID performance 110
4.9 The World Bank and the IMF 111 4.9.1 IFI involvement in Kosovo 111 4.9.2 World Bank financial assistance 112 4.9.3 World Bank performance 115 4.9.4 The IMF’s role 115
4.10 Relations between actors 117 4.10.1 Conflict between UNMIK Pillars 117 4.10.2 Relations within Pillar IV 121 4.10.3 Relations between international actors and Kosovars 123
4.11 Summary 128
5 Public Finance Management Institutions and Policies 133
5.1 The Significance of Public Finance in Development 134
5.2 Factors Affecting Public Finance Development in Kosovo 135 5.2.1 Donor unity 136 5.2.2 Significant effort and investment 137 5.2.3 Early ‘Kosovarisation’ 139 5.2.4 The post conflict context 141 5.2.5 The nature of the PFM institutions 142
5.3 Overview of PFM development in Kosovo 143
5.4 Revenue Agencies 145 5.4.1 The Customs Service 145 5.4.2 Tax administration 147 5.4.3 ‘Kosovarisation’ 151 5.4.4 EU-isation of the tax system 152 5.4.5 Revenue issues after Independence 154
5.5 Budget, Treasury and Payments 155 5.5.1 Central Fiscal Authority 155 5.5.2 Banking and payments 157 5.5.3 Budget planning and expenditure policy 159 5.5.4 Transfer of budget functions to the PISG 160 iv 5.5.5 Fiscal policy under the PISG 164 5.5.6 The need for a plan: the Kosovo Development Strategy, MTEFs and PIPs 165
5.6 Public Procurement 168 5.6.1 Financial Administration Instruction No 2 1999 170 5.6.2 The 2004 PISG Procurement Law 171 5.6.3 2007 Amendments to the Law on Public Procurement 173 5.6.4 The 2010 Republic of Kosovo Procurement Law 175
5.7 Accounting, Audit and Financial Control 177 5.7.1 Internal Audit: Pillar IV and USAID 1999-2003 178 5.7.2 The EU and Public Internal Financial Control 179
5.8 PFM Outcomes 183 5.8.1 PFM successes 183 5.8.2 PFM failures 187
5.9 Summary 190
6 Public Administration and the Kosovo Civil Service 192
6.1 The Significance of Civil Service Management and Public Administration 193
6.2 Factors Affecting Civil Service Development in Kosovo 195 6.2.1 Failures of international actors 196 6.2.2 The post conflict context and the nature of public sector institutions 201
6.3 The Kosovo Civil Service in 1999 202 6.3.1 Recruitment 202 6.3.2 Civil service pay 204 6.3.3 Employment terms and conditions 206
6.4 Public Administration under the Joint Interim Administrative Structure (JIAS) 207 6.4.1 Terms and Conditions: UNMIK Civil Service Regulation 2001/36 208
6.5 The Civil Service under the Provisional Institutions of Self Government (PISG) 209 6.5.1 ‘Kosovarisation’ 209 6.5.2 Terms and conditions: DFID’s PPP Project and Administrative Direction 2003/2 212 6.5.3 Getting to Westminster: The Senior Public Appointments Committee 215 6.5.4 A guarantee of fair treatment: the Independent Oversight Board 216 6.5.5 Civil Service Salaries 219 6.5.6 EU Pay and Grading project 2004-2005 220
6.6 The Civil Service after 2005 223 6.6.1 Capacity development and public administration reform 223 6.6.2 Functional Reviews and DFID’s FRIDOM project 2008-2010 226
6.7 The Civil Service since Independence 227
v 6.7.1 The new Civil Service Law 2010 228 6.7.2 The Law on Salaries of Civil Servants 2010 230
6.8 Public Administration Outcomes 231 6.8.1 Civil service size and cost 232 6.8.2 Productivity and efficiency 235 6.8.3 Lack of basic legal frameworks, rules and procedures 236 6.8.4 Politicisation 236 6.8.5 Corruption 239 6.8.6 Quality of public services 240
6.9 Summary 240
7 Conclusion 242
7.1 Successes and failures of reconstruction in Kosovo 242
7.2 Factors contributing to successes and failures in institutional development 245 7.2.1 Donors 245 7.2.2 Context 247 7.2.3 The institutions 247
7.3 Issues for development assistance 248 7.3.1 The value of a long-term perspective 248 7.3.2 The window of opportunity versus the need for ownership 249 7.3.3 Donor attitudes to Kosovars and the logic of capacity development 249
7.4 The future 250
Annex 1: Explanation of Interview Codes 252
Annex 2: Major Events in Kosovo, 1999 – 2008 254
References 261
vi Acknowledgements
I would like to say thank you to my academic supervisors: Gavin Kitching who got me off to a good start, Marc Williams, who kept me firmly on track, and Elizabeth Thurbon, who was wonderfully reassuring; and to the University of New South Wales for providing the opportunity to do this research and also provided financial support for my fieldwork in Kosovo.
To colleagues in Kosovo and elsewhere who provided valuable insights, colourful comments, and access to otherwise unavailable documents; and to the people in Kosovo who gave their time to talk to yet another foreign visitor with a list of questions.
To Donna and Judy for sharing the mid-life PhD experience; to David who married this thesis and has always been supportive; and to my mother and father who are ultimately responsible for anything I have achieved.
vii List of Tables Table 1.1 Interview numbers and categories ...... 17
Table 4.1 Estimated Total EU Support to Kosovo, 1999-2010 ...... 85
Table 4.2 Major EAR and ECLO Projects in Public Administration ...... 96
Table 4.3 USAID Projects in Economic Governance 1999-2010 ...... 107
Table 4.4 DFID Projects in Public Administration 1999-2010 ...... 110
Table 4.5 World Bank Funding for Public Finance and Public Administration 1999-2010 .. 114
Table 5.1 Indicative funding for technical assistance in public finance development by major donors 1999 – 2010 ($1 = €0.85) ...... 137
Table 6.1 International and local staff in Pillar II departments 2000-2001 (approximate numbers) ...... 198
List of Figures Figure 4.1 The main actors in public finance and civil service development ...... 68
Figure 4.2 UN Special Representatives in Kosovo since 1999...... 73
Figure 4.3 Total International and Locally Engaged UN Staff, 1999-2010 (excluding Police)74
Figure 5.1 Approximate timing of major technical assistance projects in PFM 1999-2010 .. 143
Figure 5.2 List of tax laws approved by UNMIK 1999-2002...... 149
Figure 5.3 Kosovo Legislation on Public Procurement 1999 - 2010 ...... 170
Figure 6.1 Budgeted Civil Service Employment Numbers 2000-2010 ...... 233
Figure 6.2 Budgeted Average Salaries 2000-2010 ...... 235
viii List of Abbreviations
AAK Alliance for the Future of Kosovo BPK Bank and Payments Authority of Kosovo CAFAO Customs and Fiscal Assistance Office (EU) CAM-K Customs Assistance Mission - Kosovo (EU) CARDS Community Assistance for Reconstruction, Development and Stabilisation (EU) CBAK Central Banking Authority of Kosovo CEO Chief Executive Officer CFA Central Fiscal Authority CIDA Canadian International Development Agency CMPS Centre for Management and Policy Studies (UK) CPE Central Procurement Entity CRS Congressional Research Service DANIDA Denmark development cooperation program, Ministry of Foreign Affairs, Denmark DCSA Department of Civil Service Administration DFID Department for International Development (UK) DM Deutsch Mark DOR UNMIK Department of Reconstruction DPS UNMIK Department of Public Services EAG Economic Assistance Grants (World Bank) EAR European Agency for Reconstruction (EU) EC European Commission ECLO European Commission Liaison Office in Kosovo ESI European Stability Initiative ESPIG Economic Strategy and Project Identification Group EU European Union EUCTA EU Customs and Taxation Assistance EULEX EU Law and Justice Mission in Kosovo EUSR European Union Special Representative EWR Early Warning Report FAI Finance Administrative Instruction FRIDOM Functional Review and Institutional Design of Ministries FRY Federal Republic of Yugoslavia FYROM Former Yugoslav Republic of Macedonia GDP Gross Domestic Product GERAP Group of Experts for Reform of Public Administration IAC Interim Administrative Council ICA Institute for Civil Administration (OECD) ICG International Crisis Group ICO International Civilian Office
ix ICR International Civilian Representative ICTY International Criminal Tribunal for the former Yugoslavia IMF International Monetary Fund IOB Independent Oversight Board IPA Instrument of Pre Accession Assistance (EU) JCC Joint Civilian Commission JIAS Joint Interim Administrative Structure KCAP Kosovo Capacity Assessment Project (UNDP) KCB Kosovo Consolidated Budget KCSL Kosovo Civil Service Law KDOM Kosovo Diplomatic Observer Mission KDSP Kosovo Development Strategy and Plan KFOR Kosovo Force KIPA Kosovo Institute for Public Administration KLA Kosovo Liberation Army KPS Kosovo Police Service KSIP Kosovo Standards Implementation Plan KTC Kosovo Transitional Council KVM Kosovo Verification Mission LDK Democratic League of Kosovo LOI Letter of Intent MFE Ministry of Finance and Economy MIPD Multi-Annual Indicative Planning Document (EU) MPA Ministry of Public Administration MPS Ministry of Public Services MTEF Medium Term Expenditure Framework NATO North Atlantic Treaty Organisation NGO Non-Government Organisation ODA Official Development Assistance OECD Organisation for Economic Cooperation and Development OECD DAC OECD Development Assistance Committee OEIP Office of European Integration Processes OMB Office of Management and Budget (US) OPM Office of the Prime Minister OSCE Organisation for Security and Cooperation in Europe PAR Public Administration Reform PDK Democratic Party of Kosovo PEMTAG Public Expenditure Management Technical Assistance Grant PFM Public Finance Management PIFC Public Internal Financial Control Pillar II UN-funded component of UNMIK, responsible for Civil Administration Pillar IV EU-funded component of UNMIK, responsible for Reconstruction PIO Principal International Officer PIP Public Investment Program
x PISG Provisional Institutions for Self Government PPA Public Procurement Agency PPK Parliamentary Party of Kosovo PPPP Personnel Policies and Procedures Project PPRB Public Procurement Regulatory Body PRB Procurement Review Body PSMP Public Sector Modernisation Project RTK Radio Television Kosovo SAP Stability and Association Process SIDA Swedish International Development Agency SIGMA Support for Improvement in Governance and Management (OECD) SOE Socially Owned Enterprise SPAC Senior Public Appointments Committee SRSG Special Representative of the Secretary General TAFKO Kosovo Task Force TAK Tax Administration of Kosovo UK United Kingdom UN United Nations UNCITRAL UN Commission on International Trade Law UNDESA UN Department of Economic and Social Affairs UNDP United Nations Development Program UNGA United Nations General Assembly UNHCR United Nations High Commissioner for Refugees UNKT UN Kosovo Team UNMIK United Nations Mission in Kosovo UNSC United Nations Security Council US United States USAID United States Agency for International Development VAT Value Added Tax WBG World Bank Group
xi
1 Introduction
1.1 Post Conflict Reconstruction as Development
In June 1999, the United Nations, together with a large number of other international bodies, bilateral aid donors and NGOs, embarked on a major program of post conflict reconstruction and development in the small, former Yugoslav province of Kosovo. Under the terms of UN Security Council Resolution 1244, negotiated to end a long- standing conflict between the ethnic Albanian population and the Yugoslav Government, the United Nations set up a transitional administration mission with a mandate which included performing basic civil administration functions in the territory, developing local self government institutions, and progressively handing responsibility for these institutions to the local population (UNSCR 1244, clause 11 (b)-(d)). Thousands of foreign staff and donor-funded consultants and advisers soon arrived and began what was, at the time, the largest ever post conflict reconstruction operation. The UN created an international civil administration, staffed by UN officials, and established interim administrative departments to coordinate the delivery of public services. The major donors and international organisations supported the UN’s civil administration effort in various ways but primarily through technical assistance projects, making use of foreign experts to set up new government institutions, develop policy and legislation, and transfer their skills to Kosovar staff.
The aim of this thesis is to examine the outcomes of this intense international engagement more than ten years later to assess to what extent donors and international organisations have achieved what they set out to achieve in developing the public administration, and to consider the factors that affected their successes and failures. Academic literature on this period in Kosovo has generally been presented within discussions of peacebuilding or post conflict reconstruction1 but, as many authors point out, the last thing many in the international community intended to do in Kosovo was to
1 Examples of this literature include Chesterman (2001, 2004), Paris (2004a), Caplan (2005b), Covey, Dziedzic et al. (2005), Herrero (2005), and Knudsen, T. B. and Laustsen (2006).
1 Chapter 1: Introduction
reconstruct either the socialist institutions that existed before 1989, or the ethnically divided parallel administrations of the decade up to 1999. Most of the leading international actors shared the overall goal of implementing a comprehensive transformation of the political and economic environment towards democracy and a market economy. The rebuilding efforts after the conflict thus extended well beyond physical reconstruction to include the creation of new political, social and administrative institutions and substantial change in many aspects of everyday life. In this respect the objectives of reconstruction in Kosovo were not that different from activities implemented by international organisations and bilateral donors in any developing country under the umbrella of development assistance. Although the environment in which they worked was much more complex, the activities implemented by international actors, in general, addressed the same issues, used the same methods, sources of funding and personnel, and had the same ambitious objectives as most development assistance. The thesis thus approaches the activities of international actors in Kosovo as an example of development assistance and assesses them in terms of the literature and ideas on development assistance. The thesis documents in detail what international organisations and donors did in several important areas of public administration and how they went about it, their different motivations and strategies, the relationships and interactions between them, the constraints they each faced in implementing their assistance programs, and how these factors affected the outcomes achieved.
The international Mission’s responsibilities were extensive and encompassed all aspects of government from municipal service provision to the administration of justice. The thesis focuses on two specific areas within this scope that are of long-term importance for economic development and effective governance: the management of public finances and the development and regulation of the civil service. Public finance was nominally the responsibility of the European Union (EU), but the United States, through the US Agency for International Development (USAID), also played a significant role. Civil service development was one of the very many public sector functions managed by the United Nations. The thesis tracks developments in these two sectors over the period from 1999 to 2010 and assesses the performance of the Kosovo government in these fields today. By examining in detail the combined impact of the activities and interactions of a number of major international actors in one place over an extended
2 Chapter 1: Introduction
period of time the thesis is able to compare the effectiveness of different actors and activities and to draw conclusions about development assistance implementation more broadly.
After many years of intense activity, and a considerable amount of aid expenditure,2 international actors have failed, so far, to achieve their stated goal of transforming Kosovo into a smoothly functioning, ethnically harmonious, market democracy with a modern, effective public administration. This was always an unrealistically ambitious objective. They have, however, succeeded in establishing a large number of new government institutions and have provided them with trained and capable staff. Nevertheless, the results of these efforts to develop public administration functions in the emerging Kosovo government, as assessed by the international actors themselves, have been very uneven. In some public finance management institutions, for example, the outcomes have generally been positive and, as a result, these fields of government receive little attention in the literature. In other areas, particularly the management of the civil service, the results are judged to have been poor. The thesis examines the evidence for these assessments, and suggests several possible explanations for the variability in outcomes. They include the failures and deficiencies of the different international donors, the social, political and cultural context in Kosovo, and the nature of the public administration institutions themselves. The thesis argues that, while all three factors are relevant, to a significant extent it is what the international actors did and how they did it that affected the outcomes achieved in different fields of public administration development. On the one hand this finding supports the value of institutional development programs and the use of technical assistance and suggests that interventions of this kind can have a beneficial impact in the right circumstances and with sufficient resources. On the other hand, little of what international actors did was consistent with current ideas about aid effectiveness, and some of the more successful donor programs appear to have achieved their success by ignoring some of these principles.
In this Introduction I begin by briefly explaining the situation in Kosovo during the period under consideration, summarise the previous, largely negative, assessments of
2 Approximately €4 billion was provided in assistance in the period to 2010, not including the cost of the UN Mission. Details of the amounts spent by various international actors are provided in Chapter 4.
3 Chapter 1: Introduction
the outcomes of international intervention, and set out the differences between this research and previous studies of this subject. I then explain the approach I have adopted to the research, including the reasons for using Kosovo as a case study and for focusing on public finance management and civil service administration. I also describe the methodology used and the sources of data, and provide a brief outline of the structure and content of the chapters of the thesis. The thesis has been a long-term project which began before Kosovo declared independence in 2008. The main focus of the analysis is on the decade from 1999 to 2010, although some important reports and developments since 2010 have also been included.
1.2 The Setting for International Involvement
A post conflict Kosovo without some form of international assistance was always an impossibility. There was little prospect that the international community, having intervened decisively in the conflict, could have then left the territory alone. The thesis does not, therefore, consider the wisdom or necessity of the international engagement but aims to document what happened once the international actors arrived. The UN-led reconstruction mission in this small corner of the Balkans came at the end of more than a decade of conflict between ethnic Albanians in the Province of Kosovo and the government of the Republic of Serbia, which was at the time the largest remaining entity of the former Federal Republic of Yugoslavia (FRY). Conflict between ethnic Serbs and ethnic Albanians in the region has been a recurring theme through much of the twentieth century. Whether this stems from ‘ancient ethnic hatreds’ may be debatable (Malcolm, 1999b; Pavlowitch, 1999; Hehir, 2006), but it is certainly not new. Inter-ethnic tensions were kept largely under control while President Tito ruled Yugoslavia. In response to Albanian unrest, Kosovo’s autonomous local government was given extended powers in 1963, and again in 1974. Further conflict broke out during the 1980s, however, after Tito’s death, and in 1989 the Serbian government, under the leadership of Slobodan Milošević, withdrew Kosovo’s autonomy, closed Albanian language schools, and dismissed most Albanian workers and civil servants.
The initial response of the Albanian population was a program of passive resistance and the establishment of parallel government institutions including an alternative Parliament, a health service, schools and a university. In the mid-1990s, however, frustration with the apparent failure of this policy led a more militant faction to form the
4 Chapter 1: Introduction
Kosovo Liberation Army (KLA) and engage the Serb and Yugoslav authorities in armed conflict. This was the last of the series of Balkan conflicts in the 1990s which resulted in the dismantling of the Yugoslav Federation. The escalating violence and government retaliation eventually compelled outside attempts to broker a peace settlement, culminating in unsuccessful negotiations at Rambouillet in France in February 1999. Yugoslavia refused to sign the draft peace agreement, which would have restored Kosovo’s autonomy. In response to renewed conflict between the KLA and Yugoslav forces, a NATO-led international military intervention was instigated. The Yugoslav authorities responded by expelling Albanian civilians from Kosovo. In June 1999, Milošević, now President of the Yugoslav Federation, agreed to withdraw his forces from the territory and accepted a UN peacekeeping mission (UNMIK) and a NATO peacekeeping force (KFOR). UN Security Council Resolution 1244, approved on 10 June 1999, opened the way for international actors to begin the work of rebuilding, and transforming, Kosovo.3
Several months earlier, the international powers had expected that a peace settlement in Kosovo would simply involve the orderly handover of existing institutions from the Serbian authorities to an autonomous Kosovo, as had been proposed at Rambouillet (US Department of State, 1999). In fact the UN Mission found itself responsible for setting up and controlling all the normal functions of government, from raising revenue to road maintenance and garbage collection. Although a provisional Kosovo government was established in early 2002, the UN continued to manage important government functions for a considerable period. The task was shared with several international actors including the EU, the Organisation for Security Cooperation in Europe (OSCE), and large numbers of other donors, international financial institutions and NGOs. After unsuccessful UN-sponsored negotiations with Serbia on ‘final status’ of the territory during 2006 and 2007, Kosovo’s provisional government unilaterally declared independence in 2008. The UN subsequently ‘reconfigured’ its presence and withdrew from direct involvement in public administration issues, but the international involvement in Kosovo’s development continues and donor-funded technical advisers still have a significant presence in many government organisations.
3 For more detailed accounts of this period of Kosovo history and the conflict see Glenny (1996), Weller (1999), Garton Ash (2000), Judah (2000), Buckley and Cummings (2001) and Bellamy (2002).
5 Chapter 1: Introduction
1.3 Research Question
The purpose of this thesis is to assess the effectiveness of development assistance in Kosovo over the period since June 1999 by examining activities aimed at institution building and capacity development in public finance and public administration, and to identify the factors that contributed to the success or failure of these activities. Most previous academic assessments of the performance of the international presence in Kosovo have suggested that the outcomes have been much less than they should have been. King and Mason, for example, review political events up to 2005 and conclude that ‘Kosovo’s development under UNMIK must be judged a severe disappointment’ (King and Mason, 2006:23). They criticise the UN and the international community in general for failing to transform Kosovo into a law abiding, multiethnic, public spirited democracy, and attribute this failure to the international administration’s inadequate understanding of the true nature of the Serb-Albanian conflict, its ideologically based reluctance to compel or persuade Kosovars to change their attitudes or behaviour, the lack of unity and clear purpose of the UN Mission, the shortcomings of the UN’s organisational culture, its inability to enforce laws and sanctions, and its failure to allow enough time for institution building (ibid:135-136). Sorensen is similarly critical of the activities of the major international participants, noting UNMIK’s inconsistent policies, lack of coherence and direction and contradictory messages, the ambiguities of EU conditionality and rewards, and deficiencies in the political system established in the post conflict period (Sorensen, 2009). Other writers have criticised the performance of international actors in general, and the UN in particular, in specific fields including municipal administration (Holohan, 2005; Magalachvili, 2005), justice and the rule of law (Miller, A. J., 2004; Villmoare, 2004; Bernabeu, 2007; Wolfgram, 2008; Bono, 2010) and media regulation (Di Lellio, 2005). The assessments of the major international organisations themselves are also often quite negative. Reports to the UN Security Council by the Secretary General, for example, provide a sombre account of the state of inter-ethnic relations, the rule of law and human rights (UNSC, 2012, 2013), and annual progress reports by the European Commission list numerous ways in which the country fails to meet expectations (European Commission, 2010b, 2011b). These reports all contribute to the general impression of failure and disappointment found in most of the literature on conditions in Kosovo today.
6 Chapter 1: Introduction
These discouraging assessments derive largely from the high and probably unrealistic expectations these studies set for international intervention, as well as the particular sectors that they choose to examine. Most assessments use an ideal future state to be achieved as their benchmark and then focus on the fields in which these ideals have not been met. Looking at the situation in reverse, however, and measuring from the past, gives a much more positive picture. Compared with the situation immediately after the conflict, the current functioning of the Kosovo government suggests there have in fact been many positive outcomes from the international engagement. From a territory with no recognised government and few established public institutions in mid-1999, Kosovo is now, after more than a decade of external intervention, a self-governing entity with an elected parliament, government ministries, a civil service, a budget, a public revenue raising regime, and a body of enacted legislation. Using the start point of the exercise as the reference point, the thesis examines the processes through which these new institutions were established, the different international actors involved, their objectives and motivations, the methods they used, and how their combined efforts contributed to present day outcomes for the Kosovo administration.
1.4 Research Strategy
The approach to evaluating international involvement in Kosovo in this thesis differs from previous accounts in several respects. It considers Kosovo as an example of development assistance and discusses it in the context of broader practices of development aid rather than under the separate heading of post conflict reconstruction. Unlike much of the literature on Kosovo, which tends to treat UNMIK or the ‘international community’ as a single easily defined entity with shared goals and interests, the thesis analyses the multiple interests of participants, the interactions between them, and how these affected outcomes. It also takes a relatively long-term view compared to many previous studies, and measures success or failure in terms of the goals set by international actors at the time. The thesis also considers fields of activity in which there are both recognised successes and acknowledged failures rather than focusing only on examples of poor outcomes. These features of the approach to the topic are explained in more detail in the following paragraphs.
7 Chapter 1: Introduction
1.4.1 Development assistance
A considerable amount of the academic discussion about Kosovo has been conducted in the context of studies of the policies and strategies of post conflict reconstruction and peacebuilding (Chesterman, 2001, 2004; Paris, 2004; Caplan, 2005; Covey, Dziedzic et al., 2005; Herrero, 2005; Knudsen, T. B. and Laustsen, 2006:del Castillo, 2008). The thesis argues that many of the institutional development activities implemented under the umbrella of the UN peacekeeping mission were essentially the same as the activities of international actors in any other developing country context. Most of the least developed economies have experienced internal or external conflict in the recent past, or suffer from continuing political instability and insecurity. Conflict is both a cause of economic disadvantage and a consequence. Development assistance in these countries thus often extends to support for security services, the rule of law, political system development and improved ethnic relations. The main difference between development assistance in the immediate post conflict period and any other developing country is its intensity: the range of issues that may need to be addressed, their urgency, the volume of assistance, the number of international actors and the level of public attention are all much greater. Several writers have criticised the tendency for international actors to treat post conflict situations as ‘development as usual’ (del Castillo, 2008:3), arguing that the complex post-war environment requires different policies and strategies. The reality is, however, that at an operational level most of the reconstruction programs in Kosovo were based on the same policies, had essentially the same long-term development goals, used much the same methods, were largely implemented by the same organisations and personnel, and drew on the same sources of funding as development assistance programs elsewhere. Current ideas and theories from the development assistance literature provided the conceptual basis for donor programs and influenced the ideas and assumptions of the international personnel involved in the process. These theoretical underpinnings in the development literature, and debates about the methods and effectiveness of development assistance, are explored in Chapter 2. Although some aspects of the situation in Kosovo were unique, in many ways it was not unlike any other lower-middle income developing country and the observations on donor performance and the factors influencing outcomes in this case are relevant to all developing country contexts, not only to those defined as post conflict or fragile.
8 Chapter 1: Introduction
1.4.2 Multiple actors
Another common feature of much of the literature, both official and academic, is a tendency to treat the international presence in Kosovo as a single entity to which responsibility for all successes and failures should be attributed. Many writers refer to the ‘international community’ or ‘UNMIK’ as if they are clearly defined and have uniform motivations and interests. In fact the international presence in Kosovo was made up of a collection of actors and their diverse objectives and interests had an influence on what happened. Relatively few writers consider the internal workings of the international mission in any detail. The thesis examines the different motivations, strategies, methods and achievements of the main international actors, the relationships between them, and their relative impacts on the development of Kosovo’s institutions for public administration.
1.4.3 Extended timeframe
Many of the significant accounts of events in Kosovo were produced during the early period of the international administration and judge success and failure on the basis of the first few years of reconstruction and development. Other documents, such as the European Commission’s progress reports, only consider recent progress towards an ideal future situation, rather than comparing the current environment with what existed in the past. This thesis takes a longer term perspective, considering developments over more than a decade since the start of the exercise, rather than just the first few years, and documents the gradual evolution and ongoing functioning of Kosovo’s new institutions and their eventual sustainability.
1.4.4 The definition of success
In general, as is evident from the examples given previously, there is a bias in most of the literature towards pessimistic assessments of the external intervention due to a tendency to set very high expectations of what should have been achieved, failing to recognise progress made in the past, and focusing only on those areas in which there are recognised ongoing problems. The thesis defines success as the extent to which donors and other international actors achieved what they explicitly set out to achieve in their specific fields of activity, rather than setting global benchmarks based on ideal outcomes. It also measures retrospectively, taking the start of the exercise as the baseline, and considers not only those fields where the international engagement 9 Chapter 1: Introduction
appears to have failed but also areas where the development program is judged to have been relatively successful. It thus uses relative rather than absolute measures of success or failure and compares different areas of activity instead of focusing on just one sector or on the entire exercise. Kosovo’s institutions for the management of public finances, for example, including the revenue agencies, the budget department, central bank and expenditure management systems, are considered to be performing satisfactorily, and are therefore rarely discussed in detail, while other functions, such as the management of the civil service, its performance in delivering services to the public, and the conduct of public procurement activities, are repeatedly cited as major problems needing further development assistance and reform. By comparing progress made in different fields it is possible to identify the factors that appear to have influenced outcomes either positively or negatively.
1.5 Approach and Methodology
This section of the Introduction explains the approach adopted by the thesis including the justification for using Kosovo as a case study, the reasons for focusing on public finance management and civil service administration, and the approach to measuring and explaining outcomes in these areas. It also identifies the main contribution made by the thesis to the study of Kosovo and to the understanding of development assistance, and explains the research methods used, the sources of data and the process of conducting interviews, as well as noting some limitations of the work.
1.5.1 Kosovo reconstruction as a case study
Kosovo provides an interesting and perhaps unique case study of development assistance. While the activities of international actors can be readily identified as standard development assistance programs, the environment in which they were implemented had features which make it easier to examine questions about effectiveness and outcomes. In most developing country contexts the effects of any single aid intervention are difficult to measure. The scale of activities is usually relatively small, the impacts are diffused, and measurement is confused by the impacts of previous or subsequent projects. In Kosovo many of these variables are controlled. There is a relatively clear ‘before’ benchmark, and a precise start point for most
10 Chapter 1: Introduction
international activity.4 All donors and international organisations were working in the same environment and started work at around the same time. All programs faced more or less the same contextual, political, historical and cultural challenges. There was also a very large amount of assistance. The international intervention was, at the time, one of the largest and most comprehensive development programs ever implemented. Around €4 billion was provided in assistance in the period to 2010, in addition to the cost of the UN Mission itself. There is thus a large amount of development assistance activity to study and some of the largest and most influential development actors were involved in the exercise. This account of the real world implementation of development assistance projects by these organisations provides an opportunity to compare the rhetoric of donors in their publications and reports with the actual experience of development in practice.
1.5.2 The focus on public finance and the civil service
The reconstruction and development efforts of donors were spread across all aspects of Kosovo society, economy and politics and included projects in agriculture, infrastructure, health, education, justice, security, political institution building and civil society development. This research focuses on two aspects of institution building that are common targets for external assistance in all developing countries: the establishment of institutions and processes for the management of public finances; and the management of the civil service. These fields have received relatively little attention in other studies of Kosovo’s development which tend to be dominated by questions of security, the rule of law and ethnic relations. Both public finance management and public administration development, however, are of long-term importance for economic development and social stability. Public finance management (PFM), in particular, receives considerable attention from organisations such as the IMF and the World Bank, as a consequence of their concern for economic stability and growth. It also receives attention from other donors because of its importance for the sound management of their donated funds. Public administration reform (PAR), including civil service development, also attracts attention from donors, although somewhat less than public
4 Kosovo had received some World Bank assistance in the past, when it was part of the former socialist Yugoslav Republic, and donors had provided humanitarian aid during the conflict, but institution building and public administration development activities started in 1999.
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finance. Public administration effectiveness is a central element of the concept of governance, and sound public management is considered essential for achieving other government objectives, including implementing economic development programs. The nature of these two fields of public administration and the contentious issues that they may generate is discussed in the chapters on public finance (Chapter 5) and civil service development (Chapter 6).
Kosovo, as part of Yugoslavia, had been a socialist country for many decades and the systems of public finance and civil service management introduced by international experts were significantly different from what had existed previously. The international organisations saw their task not simply as reform and incremental development of existing institutions but the construction of completely new organisations, structures and processes modelled on their ideas about ‘best practice’. The purpose of this thesis is to examine what actually happened in Kosovo when a group of important international actors attempted to implement their ideas about the type of public finance and civil service institutions that would be best for Kosovo.
1.5.3 Measuring and explaining outcomes
Measuring the objective results of any specific development activity is extremely difficult and always largely subjective. Donors and advisers frequently claim success for their own efforts while at the same time identifying serious continuing deficiencies that justify further work. Kosovo has been the subject of repeated reviews, assessments and evaluations of the progress made in achieving development goals. These include quarterly UN reports to the Security Council, annual EU progress reviews, periodic World Bank and IMF reports, and special inquiries prepared for the UN. The Kosovo Government has itself conducted several assessments of its administrative capacities and development needs (Government of Kosovo, 2007a, 2007b, 2009). These reports provide considerable information on the evolution of Kosovo’s institutions and government performance over the period. They often fail, however, to recognise progress achieved, or make only cursory references to previous successes.
By studying developments since the start it is clear that there are examples of relatively good results in some fields, as well as areas where serious problems are consistently identified. The thesis explores several possible explanations that emerge from the case study data for the uneven results achieved in different areas. These include the different
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methods and resources used by international organisations, the political and cultural context in Kosovo, and the nature, size and complexity of the institutions themselves. The successful outcomes in most areas of public finance, and the less positive results in civil service development, for example, appear to be associated to a significant extent with the relative level of attention, urgency and resources applied to the two sectors, and the power and influence of the major actors involved. The US, the EU Pillar of UNMIK, the World Bank and the IMF directed considerable energy towards establishing PFM institutions and, at least initially, there was a high level of agreement between them on the objectives of the exercise. The creation of the civil service, on the other hand, was left largely to the UN’s civil administration component of the international Mission and achievements in this area suffered as a result of the many shortcomings in the UN’s structure and management, the limited resources it was able to apply, and its approach to the exercise.
The context in Kosovo had both positive and negative features that potentially affected the outcomes achieved by donors. On the one hand, international actors had much more scope to exercise authority and implement institutional changes during the ‘window of opportunity’ immediately after the conflict than they do in most developing country contexts, and the Albanian Kosovars were, on the whole, ready to comply with whatever donors recommended if this would ensure their independence from Serbia. It is more common in donor reports and fieldwork interviews, however, to see the cultural and political context in a negative light and to explain poor outcomes in terms of the traditional culture and attitudes of Kosovars, and the ‘lack of political will’ of their politicians. This is consistent with ideas in the development literature, discussed in Chapter 2, which identify local institutions, culture and lack of capacity as the core development problems that need to be addressed through development assistance programs. All donors and international organisations, however, were working in the same environment, whether positive or negative, so context is not a sufficient explanation for the different outcomes achieved in different areas.
Another possible reason for variability in results may simply be that some functions of government and some institutions are more difficult to influence than others due to their size, their history, and the existing vested interests of participants. In the area of public finance, for example, there were no existing equivalent institutions or staff and therefore few people with pre-existing assumptions about how things should be done. Some of
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these public finance management institutions are also quite small and it may be relatively easier to insulate them from adverse influences. The civil service on the other hand evolved in a rather ad hoc manner from the bureaucratic structures of the previous Kosovo provincial government and the parallel administration of the 1990s, and so local customs and assumptions about acceptable bureaucratic behaviour were well entrenched and have proven difficult to change. The civil service also involves a large number of people spread across the country in different institutions and levels of government creating a much more challenging management task.
The thesis assesses the relative importance of these three factors in explaining outcomes. All appear to be relevant to some extent, but the evidence suggests that the level of resources made available and the organisational competence of the lead actors were the most important. The failures of the UN civil administration have been identified by many previous writers as the cause of poor outcomes in public administration. This analysis shows that these initial failures had long-term consequences for contemporary Kosovo. On the other hand, focused early intervention by some actors has, it appears, produced better long-term results in other areas.
1.5.4 Originality of the thesis
The thesis claims a contribution to two distinct areas of academic inquiry: the history of the international engagement in Kosovo since 1999; and the debate on the performance of international development assistance.
Contribution to the study of Kosovo Numerous academic publications have dealt with aspects of external intervention in Kosovo. They include studies of its implications for international law and international relations (Chesterman, 2001; Matheson, 2001; Yannis, 2004; Bellamy, 2009), security and justice issues (Strohmeyer, 2001; Miller, A. J., 2004; Villmoare, 2004; Wilson, 2006; Arifagic and Sabovic, 2007; Bernabeu, 2007; Hehir, 2007; Strazzari, 2008; Wolfgram, 2008; Bono, 2010), economic policies (Korovilas, 2002; Milenkovic and Knezevic, 2004; Bartlett, 2006), and broad discussions about peacekeeping and the performance of the UN in international administration (Wedgwood and Jacobson, 2001; Newman and Schnabel, 2002; Chesterman, 2004; Caplan, 2005; Zaum, 2006, 2007; Sorensen, 2009). A number of accounts of the international administration have been written by people who were directly involved in some capacity (Bache and Taylor,
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2003; Campbell, Percival et al., 2003; Pula, 2003; Hysa, 2004; Yannis, 2004; Di Lellio, 2005; Magalachvili, 2005; Sommers and Buckland, 2005; Covey, Dziedzic et al., 2005;King and Mason, 2006; Buwa and Vuori, 2007; Goddard, 2007; del Castillo, 2008). Although some authors make reference to public finance institutions, none deal in any detail with this subject, and relatively little has been written in the academic sphere about civil service development and the steps taken to establish public administration institutions. Donors and international organisations, on the other hand, have produced considerable volumes of material on their own efforts to establish public administration functions in Kosovo, assessments of the performance of the public administration, and proposals for further reform and assistance. They include regular EU progress reports, World Bank assessments and reviews, and the project proposals, reports and evaluations of bilateral donors.
The main contribution of this thesis to the field is a comprehensive analysis and synthesis of the official and academic documents to present an integrated account of the various efforts by the main international actors to establish or reform important public sector institutions in Kosovo, over an extended period, and to assess and explain the eventual outcomes. The thesis documents what the external donors attempted to do in Kosovo to create these new institutions of public administration, their motivations and objectives, the methods they used, the challenges they encountered, and how the cumulative impact of their combined activities produced the reality seen in Kosovo today. The research also includes original interviews with a number of technical advisers, donor representatives and Kosovo government officials who describe their experiences of the international engagement and provide their personal views on the successes and failures of the exercise. Around half the people interviewed were Kosovars and their assessments of the work of international advisers and of the current performance of Kosovo‘s administration provide an important contribution to the research.
Contribution to understanding of development assistance and aid effectiveness This detailed examination of the implementation of development assistance and the use of technical assistance in Kosovo to a significant extent corroborates the findings of previous studies of similar activities in other contexts. It identifies multiple problems in the implementation of international aid including inefficiencies, delay and excessive bureaucracy in the design and delivery of aid projects, failures of coordination, and
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conflict and competition between donors. However it also shows that external assistance can have positive impacts in the right circumstances. The approach differs from many studies of development by attempting to compare the outcomes of different donors and projects operating in the same place at the same time, sometimes on the same issues, in order to identify the impact of donor organisation, processes, and resources. The study provides input to debates about aid effectiveness and the need for, and the possibility of, reform of aid implementation systems and practices.
1.5.5 Methodology
The research uses a case study approach based on a detailed survey of official documents produced by international bodies and bilateral donors, the available academic literature, and interviews with people who were involved in the institution building efforts in public administration at various times. The following sections provide an overview of the sources and type of material used to construct the Kosovo case study and the arrangements for the conduct of interviews.
Documentation on Kosovo The main sources of factual information on developments in Kosovo during the period under consideration include regular reports by the UN Secretary General to the Security Council about the Mission in Kosovo and annual budget reports to the General Assembly, daily news summaries produced by the UN Mission from 1999 until 2010, independent assessments produced by the International Crisis Group (ICG), and quarterly ‘Early Warning Reports’, now called ‘Public Pulse’ reports, produced since 2002 by an independent Kosovo research group. The Early Warning/Public Pulse documents are significant because they provide data on the opinions of the Kosovo population as well as information on significant developments seen from a Kosovar perspective. Other important sources include World Bank assessments, EU progress reports, and the multiyear planning documents and ‘project fiches’ produced by the European Commission. Some donor offices provided me with access to internal files and several individuals interviewed during fieldwork provided private documents.
The thesis considers all relevant documents available in English published between 1999 and 2010, including the outputs of major international organisations, such as the UN, the World Bank, and the EU, and the most significant bilateral contributors in the fields of public finance and civil service development, as well as some more recent
16 Chapter 1: Introduction
material. The thesis focuses on events from June 1999 up to the time period of fieldwork in Kosovo in October 2010, however significant recent developments have been included where relevant.
Fieldwork interviews
The interviews conducted with technical advisers and local officials in Kosovo supplement the official view of events by providing insights into the experiences of those who were closely involved at the time and the issues that were of importance to them. In total around 44 people were interviewed: 20 Kosovars and 24 international officials and advisers. Most interviews were conducted during a fieldwork visit to Pristina over four weeks in October 2010. Interview subjects were identified through a ‘snowball’ sampling method based on formal contact with Kosovo government entities and major donors, suggestions from colleagues, and referrals from other interviewees. This method is not statistically robust and there is a possibility that the sample is skewed in some way, but I achieved a reasonable balance between international and local subjects and managed to include a range of perspectives including senior government officials and donor representatives, technical advisers, UN staff, and middle ranking civil servants. Table 1.1 provides information on the number of interviewees in each category.
Table 1 .1 Interview numbers and categories
International Kosovar UN or Donor Organisation 7 6 Technical Adviser 17 3 Government 0 11 Total 24 20
Many aid donors and international organisations rely heavily on Kosovar staff to manage their activities, so many of the interviews with international organisations were in fact conducted with national personnel. Some of the consultants engaged on technical assistance projects were also Kosovars. These interviewees were thus able to discuss both their employers’ policies and activities, and their own views as Kosovars. Many of the international personnel interviewed in 2010 had been working in Kosovo for many years, some since the start of the international Mission, or had made repeated visits, so
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the interview group includes people with experience of all phases of the post conflict period. Most interviews were recorded; if subjects did not wish to be recorded I took extensive notes. While most Kosovar interviewees spoke reasonably fluent English, an experienced interpreter was used for some of the interviews. Most people were very willing to participate and, once the purpose of the research had been explained, needed little prompting or questioning to produce comments on the issues being investigated.
Interviewees were asked to describe their own involvement in Kosovo’s post conflict phase, who they had worked for, what the experience had been like, whether they felt that the work they had been doing had been successful, and what factors had contributed to its success or failure. They were also asked about what was done to develop local skills and to hand responsibility to Kosovars, the performance of the different donor bodies and international organisations, based on their experience, and their views on the future prospects for public administration and public finance management in Kosovo. In accordance with the UNSW ethics approval procedures, all interviewees were told that their comments would be anonymous and no information would be provided that would allow them to be identified. This was particularly important in relation to some public officials and donor representatives who were quite frank in their comments about their employers or colleagues. Quotes from interviews are therefore identified by a code which provides basic information on whether they are Kosovar or international, and whether they are a government official, a donor representative, a UN employee, or a technical adviser. An explanation of the codes is provided in Annex A.
1.5.6 Limitations of the thesis
The bulk of the primary research was conducted between 2008 and 2010. Only the most significant publications and sources appearing since 2010 have been included in the final thesis. A significant amount of the material included in the research was sourced on the internet. Some international bodies provide copious information on their activities and access to documents through their websites, however, online publication policies vary considerably between organisations, and over time, which has had an impact on the amount of detailed information available on some issues. The thesis does not deal with many of the most controversial issues in Kosovo today and in particular it takes no position on the circumstances of the Kosovo conflict and the actions of NATO, or the issue of the status of Kosovo as an independent country. By discussing the development and performance of the current government administration however it 18 Chapter 1: Introduction
necessarily accepts the present reality of Kosovo’s political separation from Serbia. It also largely avoids the question of the role of Serb Kosovars in the administration and the issue of ethnic relations. The UN and other organisations have vigorously pursued the idea of a harmonious multi-ethnic Kosovo but the actual involvement of Serbs in central government administration has been relatively limited.
1.5.7 Note on terminology
The thesis generally adopts the terminology used in the official documents of major international organisations. It thus uses ‘Kosovo’ rather than ‘Kosova’ for the name of the country, and ‘Kosovar’ rather than ‘Kosovan’ to refer to the people of Kosovo. In most instances in this thesis ‘Kosovar’ can be assumed to refer to Albanian Kosovars: ethnic Albanians are the dominant local actors in the events described. Where it is necessary to make a distinction on the basis of ethnicity I use the terms ‘Albanian’ or ‘Serb’ to refer to Albanian Kosovars or Serb Kosovars respectively, unless otherwise specified. Given the political evolution from the Federal Republic of Yugoslavia to the Republic of Serbia over the period, a reference to Yugoslavia can generally be taken as a reference to Serbia and vice versa. The term ‘international actors’ is used to refer to both international organisations and bilateral donor agencies and to the international personnel who work for them, or on their behalf.
1.6 Structure of the Thesis
The remainder of the thesis is presented in five main chapters followed by a brief conclusion.
Chapter 2 reviews the literature on international development assistance and post conflict reconstruction relevant to understanding events in Kosovo. The chapter first identifies the dominant theories, assumptions and terminology relating to development. The analysis notes the underlying similarities between the goals and activities of development assistance programs and the objectives of post conflict reconstruction, as well as programs to support transition from socialism, and current programs aimed at EU enlargement. All have as one of their main goals to generate significant change in existing institutions and behaviours. The chapter then examines the practical ways in which donors and international actors attempt to intervene in other countries in order to achieve their ideas about development, the limitations that have been identified in these
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methods, and the various attempts to reform aid implementation, including recent ‘aid effectiveness’ agreements and declarations.
Chapter 3 describes the setting for the sector case studies. It begins by showing how international development actors expanded the interpretation of the Security Council resolution that established the UN Mission into a mandate for an intense and ambitious program of development assistance. It then provides an overview of the political, economic and cultural conditions that international actors found in Kosovo in 1999, and describes the events immediately after the end of the conflict which set the scene for the start of the international involvement and significantly changed some of the initial assumptions about how the exercise would be undertaken.
Chapters 4, 5 and 6 contain the Kosovo case study data. Chapter 4 identifies the main actors in the fields of public finance and civil service development, their motivations and approaches to the tasks, the organisational challenges they faced and the relations between them. Chapter 5 provides a detailed account of the steps taken to establish each of the major public finance management functions in Kosovo, reviews the evidence on successes and failures in this area, and explores explanations for these outcomes. Chapter 6 deals with the same issues in relation to the process of establishing the Kosovo Civil Service, the steps taken, the results achieved and the factors that explain these outcomes. Chapter 7 draws together the evidence from the case study chapters to provide an analytical summary of the argument and a brief discussion of several other issues that emerge from the data.
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2 The Theory and Practice of Development Assistance
The organisations that began work in Kosovo after the peace agreement, and the people who worked for them, all arrived with pre-existing assumptions about the nature of the project and how it should be pursued. These were derived from their own previous activities elsewhere, and from ideas current in the aid literature and discourse among development actors. A vast amount of writing on the topic of development assistance has been produced since its origins at the end of the Second World War as academics and aid organisations have struggled with questions about the best way to achieve development and how development itself should be defined. This chapter reviews the academic literature on international development and the statements and publications of donor organisations that are relevant to understanding the motivations and methods of the international engagement in Kosovo. The literature relevant to Kosovo also includes, in addition to discussions of development assistance programs, writings on peacekeeping and post conflict reconstruction, fragile states, post-socialist transition and the process of ‘EU-isation’ in countries seeking European Union membership.
Each of these subsets deals with different contexts and different initial conditions, but the proposed endpoint of international involvement they describe is more or less the same. They all have as their primary objective a major and relatively rapid transformation of the economy and society of the territory in question. They also, in general, assume that significant external assistance will be required, and that this will, if properly implemented, be effective in achieving the transformation goals of the international actors. While some authors dispute the underlying assumptions of the development concept and its Western cultural origins, most consider international development assistance to be a good thing with potentially positive benefits for people in the less developed world. In practice, however, the methods available to donors and other bodies to pursue these ambitious objectives are relatively limited. They focus on aid ‘projects’ and rely heavily on the use of technical assistance, deploying experts from more developed countries to transfer knowledge and develop ‘capacity’. Over the years there has been considerable criticism of the methods of development assistance and the
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practices of donor organisations in delivering their assistance. Concerns about donor inefficiency and the potential adverse impacts of their activities have led to the formulation of various guidelines and agreements on good practices for ‘aid effectiveness’. To date however progress on achieving reform of the system of aid delivery has been limited, raising questions about whether such changes are either feasible, or necessary.
Two categories of writing are considered in this chapter: ‘academic literature’ and ‘donor literature’. ‘Academic literature’ consists of published books and journal articles which are assumed to represent rigorous independent analysis and thought. ‘Donor literature’ refers to documents, reports or other material written or published by multilateral aid bodies, bilateral donor agencies and non-government organisations. These are sometimes authored by academics and based on research, but their main purpose is to explain or promote the policies of the sponsoring authority. While these documents sometimes lack rigorous data, and often tend to be verbose and repetitive, they can be taken to express the currently accepted framework for development assistance and the thinking of aid organisations and the staff who are responsible for initiating and managing development interventions.
2.1 Ideas and theories
2.1.1 Economic development
Kosovo was, and still is, one of the most economically underdeveloped parts of the Balkan region and international participants in the post conflict reconstruction exercise generally agreed that economic development and increased prosperity would be the best way to prevent future conflict. Accepted ideas about how such economic advancement occurs, and how it can be influenced by external agents, have varied over the decades since the end of the Second World War. Development was initially understood largely in terms of industrialisation and the concept of ‘modernisation’. Transfers of capital and technology to developing countries were expected to enable them to ‘catch up’ with the West, and it was assumed there would be a significant role for national governments in steering the development process through national development plans (Rostow, 1960; Latham, 2000:3-4; Rapley, 2002:21-25; Willis, 2005:39-46). Some significant failures in this government-led development model, and the rise of neo-liberal economic ideas in Western economies in the 1970s and 1980s, redirected aid policies towards the idea 22 Chapter 2: Theory and Practice of Development Assistance
of market-led development and the imposition of structural adjustment programs (Toye, 1993; Rapley, 2002:63-75; Chang, 2003b:46-52; Willis, 2005:47-54). Unlike previous ideas, these ‘neo-liberal’ policies tended to portray government as an obstacle to development rather than its sponsor (Stiglitz, 2002:14). The successful economic development of a number of mostly East Asian economies, on the other hand, appeared to challenge the idea that governments should leave economic development to market forces and generated the concept of the ‘developmental state’ (Amsden, 1989; Wade, 1990; Johnson, 1995; Campos and Root, 1996; Rowen, 1998; Woo-Cumings, 1999; Leftwich, 2000). The previously firm economic prescriptions of neo-liberal development theory have thus softened in recent decades with an increased focus on the role played by the state and state institutions in supporting economic change (World Bank, 1997) as well as a stronger focus on reducing poverty and promoting equality (World Bank, 2000a, 2006a). However, the economic development policies currently promoted by major developed country donors such as the US government, the World Bank and the IMF, continue to focus on a more or less neo-liberal agenda of market-led development through macroeconomic stability, fiscal discipline, privatisation of state owned enterprises, low taxes, trade liberalisation and foreign investment, with the role of government limited to regulating economic activity and implementing fiscal policies conducive to private sector growth. This was the primary economic development model promoted by the most influential donors in Kosovo and it was this set of priorities that caused them to focus attention on public finance institutions and economic governance as necessary instruments for achieving other policy goals. However, the idea of government planning for development, as promoted previously under state-led development models, has never been completely abandoned and now takes the form of Poverty Reduction Strategy Papers (PRSPs) and similar comprehensive planning exercises (Dijkstra, 2005; Driscoll and Evans, 2005). Attempts to implement such planning processes were also part of the development agenda in Kosovo.
2.1.2 Social and cultural transformation
The activities of development actors are not confined to introducing the right economic policies. They also aim to change the political and social environment. The idea of economic development has always implied the need for, and the inevitability of, social, political and cultural change. Rostow’s analysis of the process of modernisation, for example, identifies changes in social and political structures, ideas, values and ways of
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thinking as essential preconditions for economic ‘take off’ after which 'In a decade or two both the basic structure of the economy and the social and political structure of the society are transformed ...' (Rostow, 1960:8). Various formulations of ideas about the role of human motives and aspirations in generating economic change have appeared in economic and policy literature. They include the concepts of ‘capital absorptive capacity’ (Stevens, 1971), ‘social capability’ (Lal, 1991; Abramovitz, 1995; Temple and Johnson, 1998), ‘culture’ (Harrison, 1985; Harrison and Kagan, 2006) and ‘social capital’ (Collier, 1998; Grootaert, 1998; Feldman and Assaf, 1999; Gugerty and Kremer, 2000; Seligson, 2006). Several related and somewhat overlapping concepts of this kind dominate current discussions of development. North’s work on the role of ‘institutions’ has been particularly influential (North, 1990; Rapley, 2002:117-118; Rodrik, 2003; Brautigam and Knack, 2004; Birdsall, 2007). Institutions are defined broadly as the rules and conventions that human beings devise to shape human interaction (North, 1990:3) although, when expressed in this way, the difference between the concept of ‘institutions’ and similar ideas about social capital or culture do not appear significant. The term ‘governance’ has also become a major topic in the literature on development (Rapley, 2002:157-158; USAID, 2002a:6-10; Chang, 2003a:499; Fukuyama, 2004; World Bank, 2006b). In World Bank documents governance is defined as ‘the set of traditions and institutions by which authority in a country is exercised’ (World Bank, 2007a:7). Again, this is not dissimilar to the definition of ‘institutions’, and to other formulations of ideas about the non-economic preconditions for development.
The notion of ‘capacity development’, or ‘capacity building’5 is also frequently used, and has similar connotations. A lack of ‘capacity’ on the part of developing country governments or communities is increasingly regarded as the major obstacle to the successful implementation of economic development policies and thus ‘capacity development’ is has become a primary objective of development assistance programs. A large amount of donor literature has been produced on this idea in recent decades (UNDP, 1997, 2005b, 2009; CIDA, 2000; Browne, 2002; Fukuda-Parr, Lopes et al., 2002; Boesen and Therkildsen, 2004; AusAID, 2006; USAID, 2009, 2011; NEPAD,
5 While some writers have made a distinction between ‘capacity development’ and ‘capacity building’ (Kuhl, 2004; Weaver, 2004) they have the same general meaning in most of the literature. ‘Capacity development’ is used here to cover both terms.
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2010; OECD, 2011b, 2012; Asian Development Bank, 2013). The definitions of capacity implied in this literature vary considerably in scope from a relatively narrow focus on skill development or organisation reform, to expansive ideas about developing institutions, reforming political and legal systems and stimulating social and political transformation. The literature on capacity development also assumes that these complex social changes can be supported or engineered by donor-funded capacity development programs. The major development organisations have produced numerous frameworks, guidelines, manuals and diagrams on how this can be achieved (OECD, 2006a; UNDP, 2008; World Bank Institute, 2009).
The essential idea behind concepts such as ‘institutions’, ‘governance’ and ‘capacity’ is that a large part of the task of development is to change the existing social, political and cultural conditions to pave the way for the required economic changes. They locate the source of economic development, and the obstacles to achieving it, within the social and political context in each community, as much as in the conventional economic variables of land, labour and capital. Development assistance programs are therefore oriented towards creating the political and social conditions considered necessary to sustain growth. These are, in general, more or less the institutions, values and practices that now exist in the developed economies and include democratic political systems, a sound legal framework and an independent judiciary, property rights, a free press, a meritocratic bureaucracy and appropriate economic policies and laws.
2.1.3 Peacekeeping, post conflict reconstruction and state building
Since the end of the cold war in the late 1980s, international peacekeeping missions in countries affected by conflict have become a major activity of international actors. These missions have in turn generated a considerable volume of literature aimed at defining, analysing and sometimes critiquing the practice of international peacebuilding and post conflict reconstruction (Crocker, Hampson et al., 2001; Newman and Schnabel, 2002; Stedman, Rothchild et al., 2002; Chesterman, 2004; Orr, 2004; Caplan, 2005; Covey, Dziedzic et al., 2005; Junne and Verkoren, 2005; Boyce and O'Donnell, 2007; Coyne, 2008; del Castillo, 2008; Jarstad and Sisk, 2008; Paris and Sisk, 2008; Addison and Bruck, 2009; MacGinty and Williams, 2009). A variation of the post conflict reconstruction literature extends similar ideas to ‘fragile states’: countries that are considered to be at risk of falling into or returning to conflict and share many of the characteristic of post conflict environments including weak institutions, ethnic 25 Chapter 2: Theory and Practice of Development Assistance
divisions, unstable political processes and economic disadvantage (Lancaster, 2006; Ghani and Lockhart, 2008; Kaplan, 2008; Overseas Development Institute, 2009a; DFID, 2010c).
As Paris points out, most peacebuilding missions in recent decades have been based on a similar, although often unstated, strategy of rapid democratisation and market liberalization to achieve and sustain conditions for a ‘liberal peace’ (Paris, 2004). These ‘state building’ aspects of post conflict reconstruction activity have much in common with economic development activities elsewhere. They encompass not just physical rebuilding but efforts to create new political institutions, a more effective public administration, and market-oriented economic policies and institutions. Many of the leading development actors are closely involved in funding, implementing or advising on programs of post conflict reconstruction and have produced discussion papers and policy briefs setting out their preferred policies for post conflict situations (World Bank, 1998a, 2002c; IMF, 2004; USAID, 2006a; Overseas Development Institute, 2009b; DFID, 2010a, 2010c; UNDP, 2010). The main difference between ‘normal’ development assistance and post conflict reconstruction is that the environment in which these policies are implemented is significantly more complex. International actors in post conflict situations face multiple, urgent and sometimes conflicting priorities including displaced populations, returning refugees, damaged infrastructure and competition between political leaders for power and legitimacy, as well as the need to create new political and administrative institutions.
On the other hand, the post conflict environment is seen by many aid donors as a ‘window of opportunity’, while the influence of donors is high and the power and organisation of opposition is low, to implement reforms and institutional changes that would be politically or administratively more difficult in other contexts (IMF, 2004:para 26; USAID, 2006a:13). This often gives rise to debates and disagreement among international participants over policy choices: between achieving short-term objectives or ensuring long-term economic development; and between pragmatic solutions or ‘best practice’ models. Paris, for example, argues that democratic elections and market-based reform of the economy should be delayed or implemented gradually so as to limit the potential disruptive effects of political competition and economic change (Paris, 2004). This option is generally, however, overruled by the desire of donors to entrench new policies while they have the opportunity, the need to establish the legitimacy of local
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political leaders through elections, and the intention of international actors to limit their cost and time commitments. The potential for conflict between short-term and long- term objectives is particularly significant in matters of economic policy. International actors often have different views on the importance of imposing fiscal discipline, controlling inflation, introducing new taxes and privatizing public enterprises (IMF, 2004; Addison, Chowdhury et al., 2005; Caplan, 2005:Chapter 6) relative to the need to deliver a ‘peace dividend’, place former combatants in public employment, or provide short-term stimulus to the economy (Woodward, 2002; Herrero, 2005; Kamphuis, 2005; Turner and Pugh, 2006; del Castillo, 2008:Chap 4). As the case studies of international intervention in Kosovo in the following chapters show, all these issues arose in the early post conflict period in Kosovo. International actors were confronted with multiple urgent problems and frequently disagreed on the solutions and priorities. Most, however, except some in the UN itself, saw the post conflict situation as an opportunity to implement significant changes which would transform Kosovo.
2.1.4 Democratic transition and EU-isation
The collapse of the Soviet Union in the late 1980s generated international intervention in former socialist countries to assist them to become Western-style democracies and free market economies. Kosovo, as a former entity of socialist Yugoslavia, was also sometimes categorised as one of the last transition countries. Policies and reforms implemented under the umbrella of democratisation and economic transition in Eastern and Central Europe and Central Asia included the creation of new political institutions, political parties, electoral systems, civil society organisations and a free press, and market-oriented economic reforms to reduce government involvement in the economy, encourage private activity, remove subsidies, and privatise state owned businesses (Carothers, 1999; Stiglitz, 2002:136-145). These are much the same policies commonly implemented by aid donors through programs of development assistance and post conflict state building. The transition programs in Eastern Europe and Central Asia are perceived to have been successful, based on the accession of many former socialist entities to the EU soon after, but some academic literature on the transition from socialism to capitalism suggests that implementing these significant changes in political and economic institutions has proven more difficult than initially envisaged and has often produced disappointing results (Carothers, 1999; Goetz, 2001; Agh, 2003). One problem has been the tendency for donors to replace socialist practices with institutional
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models and legislative frameworks that resemble their own. The US, for example, has promoted legislative, judicial and electoral systems based on US models, while other donors replicated their own institutions: the British Westminster system, the German social market model, or the Dutch cooperative multiparty system (Carothers, 1999:97- 98). It has also been argued that changes implemented in response to external pressure and conditionality have resulted in shallow reform and a significant gap between the formal legislative frameworks and actual administrative practices (Goetz, 2001:1039).
During their transition from socialism and central planning, many Central and Eastern European countries were also engaged in endeavouring to meet the requirements of membership of the EU by adopting EU compliant policies and institutional models (Goetz, 2001; Dimitrova, 2002; Lendvai, 2007:35-40). The EU promotes its preferred public policies among members and would-be members through explicit political and financial incentives and mechanisms, including aid, technical assistance and advice. Since 1999 this process of ‘EU-isation’ has been extended to countries in the Western Balkans, but it has been argued that existing institutions in these places may be more fragile and unstable than in other transition economies, and the transfer of EU models involves not merely modifications to existing legislation, as was the case for most Western European member states, but the creation of new policies and institutions, and perhaps new political and social actors (Lendvai, 2007:25), a much more challenging task. In these cases EU assistance to achieve EU norms and standards takes on many of the features of development assistance: its objective is significant social, political and sometimes cultural change, and it suffers from the same challenges and practical difficulties. Divergent policies and institutional forms in different EU members can also generate confusion and competition between alternative policy and legislative models, and the conditional nature of EU assistance creates the risk that new rules and norms adopted under EU pressure may be disregarded, contested or changed once EU membership is achieved, resulting in ‘shallow Europeanization’ and weak institutions (Dimitrova, 2002; Lendvai, 2007:25).
2.1.5 Development as social engineering
There is significant overlap between the activities of development assistance programs and the policies pursued under programs of post conflict reconstruction, post socialist transition, democratisation and EU-ization. They each deal with variations of much the same problem: how to generate the social and economic changes that are considered 28 Chapter 2: Theory and Practice of Development Assistance
necessary to ensure political stability and to improve economic and social welfare. Whatever the situation, from decades of socialism in Eastern Europe, to decades of war in Afghanistan, or simply decades of poverty and economic disadvantage, the package of measures recommended in each case is remarkably similar. Developing countries and those emerging from conflict or socialism need a democratic government and regular free elections, an active parliament, an independent, incorruptible judiciary, an effective, merit-based government bureaucracy, transparent, policy-based budgets, efficient taxes, well regulated markets, a free press, sound labour market policies, established property rights, efficient social welfare programs, active civil society organisations, an anti-corruption strategy, and new government agencies to implement them. Along with these institutions comes a set of values that the society is expected to embrace including, for example, the idea that individual merit should take precedence over kinship, clan or political allegiance in public employment, that government should serve the needs of the population as a whole, rather than just the ruling party or group, that women are as entitled to education, employment, civil rights and justice as men, or that people of different faiths or different ethnic or racial backgrounds also have a right to participate in society. Most people would agree that these are worthwhile goals, but in many cases such policy prescriptions amount to an ambitious and complex transformation of the existing society and culture. Much of the development literature assumes, however, that these transformations can and should be facilitated or accelerated through external intervention in the form of development assistance programs, foreign technical assistance, and carefully formulated capacity development projects. In spite of frequent rejection of the ideas of modernisation reflected in statements that ‘one size doesn’t fit all’ and the need to consider context and avoid Western blueprints, there is an underlying assumption that the necessary institutional requirements for development are similar in all economies (Pritchett, Woolcock et al., 2010:3). Current aid practice has thus been described as ‘accelerated modernisation via transplanted best practices’ (Pritchett, Woolcock et al., 2010:6).
A number of authors have pointed out that these donor expectations have generated an increasingly complex, demanding, unrealistic and sometimes internally contradictory agenda for change in developing countries (Ottaway, 2002; Dijkstra, 2005; Rondinelli and Montgomery, 2005; Pritchett and de Weijer, 2010). Brinkerhoff suggests that in many cases the reform agenda ‘constitutes an overwhelming smorgasbord of changes
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deemed necessary to assure government effectiveness’ (Brinkerhoff, 2005:7). Ottaway argues that the prescriptions proposed by donors in post conflict situations are so complicated that they defy implementation, or common sense, and that countries are overwhelmed by donors’ demands (Ottaway, 2002:1006). Del Castillo is similarly critical of the unnecessary complexity of some post conflict interventions arguing that ‘it is unrealistic and certainly counterproductive to create a framework that is too sophisticated for the country and requires resources that it does not have, and that may not exist for a long time’ (del Castillo, 2008: 47).
2.1.6 Critical responses and alternatives to development
These assumptions about the need for economic and social transformation, and the benefits of promoting it through aid activities, have been challenged from a number of perspectives. Some critics believe there must be alternative, more culturally acceptable paths to development than those promoted by conventional development programs. Rist, for example, argues that ‘there are numerous ways of living the good life, and it is up to each society to invent its own’ (Rist, 1997:241). Marglin argues that the modernisation process pursued by Western development policies coerces transformation and undermines traditional social cohesion while predominantly benefiting the wealthy and has closed off possible alternative paths to development and autonomous transformation of non-Western cultures (Marglin, 1990). Mehmet also rejects the idea that Western norms and institutions are the only path to development (Mehmet, 1999). Such concerns about the impact of progress and industrial development are not new. Essentially the same debates about the social disruption of capitalist economic development, the hardships it causes for some groups in society, and the loss of traditional values of community life, have recurred since the industrial revolution itself, whenever traditional societies face economic change (Kitching, 1982), and a realistic alternative path to achieving the benefits of development, as suggested by these authors, has not been demonstrated.
Other criticisms are explicitly based on opposition to capitalism, industrialisation and globalised economic relations and consequently reject theories of development that intend to spread these systems further. They identify problems in the capitalist economic model, such as industrial alienation, environmental deterioration and social dysfunction, and question the value of the 'scientific' approach to knowledge and the supposed superiority of the values, institutions and achievements of Western societies 30 Chapter 2: Theory and Practice of Development Assistance
(Banuri, 1990). Many of these critics see the development activities of international actors as a form of Western or liberal imperialism that seeks to exploit or subjugate fragile or post conflict societies, undermine local institutions and create relations of dependency (Ilcan and Phillips, 2006:4). From this point of view any new activity of international development bodies is seen as yet another tool for controlling or dominating developing country populations, including the idea of capacity development (Phillips and Ilcan, 2004; Hameiri, 2009), as well as the formulation of Poverty Reduction Strategy Papers which ‘involve specific technologies of global liberal governance which help produce modern, self disciplined citizens and states that can be trusted to govern themselves according to liberal democratic norms’ (Abrahamsen, 2004:1454). Peacebuilding and post conflict reconstruction are also identified as part of a larger hegemonic project whose ideological purpose is to spread the values and norms of dominant powers, not unlike colonialism or imperialism (Moore, 2000; Duffield, 2002; Klein, 2004; Bello, 2006; Chandler, 2006). These authors argue that post conflict and post disaster crises are used by supporters of laissez faire economics as an opportunity to implement policies that would not be acceptable to the population in other circumstances, evidenced for example by the market-friendly economic policies promoted by the US government in post-war Iraq (Klein, 2004). The ‘Europeanization’ policies of the EU have also been portrayed as a process of neo-liberal restructuring which reflects the interests of transnational capital (Bohle, 2006). Most practitioners of development assistance, however, take as a given that the primary objective of development is to bring developing countries into economic relations with the developed world, and therefore promoting liberal democratic and capitalist market forms of social and economic organisation is the explicit and unquestioned intention of most aid programs.
Another challenge to dominant concepts in development theory questions the causal relationship between modern institutions, values or capacities and the positive economic and social outcomes they are assumed to generate. It has been pointed out, for example, that many successful developing countries have achieved growth, and equity, without necessarily having in place the governance institutions recommended by donors. Most of the successful ‘developmental states’, for example, would have failed the institution and governance tests now set for developing country governments (Leftwich, 2000:130; Khan, 2002:165). Western nations themselves did not have these ideal institutions in
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place at the time of their most rapid economic development, and many of the practices that development projects work hard to eradicate, such as nepotism, sinecures, tax farming, unaccountable public officials, and political appointments to government posts, were features of public life in Europe and the US until quite recently. Modern institutions generally developed much later and quite slowly, more as an outcome of economic prosperity and increased political stability rather than as their cause (Chang, 2003a:501-515). A recent study of the divergent economic histories of Britain and India since the 17th century challenges the assumption that Europe’s economic success derived from advantages in institutions, knowledge and economic practices, as has frequently been argued (Rostow, 1960; Bernstein, 2004; Appleby, 2010; Ferguson, 2011), but instead attributes it to specific competitive pressures, input constraints and aggressive government intervention (Parthasarathi, 2011). Other data suggest that it is in fact the expansion of the middle class in developing countries as a result of economic growth that generates progressive social policies, improved quality of governance, reduced official corruption, and more support for market-oriented economic policy (Loayza, Rigolini et al., 2012). These findings imply that much of the money and effort directed by donors to creating these institutions may be misplaced, or at least premature, and developed countries may be imposing institutions on developing countries that they don't need and can't afford (Chang, 2003a:515).
2.1.7 The development agenda in Kosovo
In spite of the varied challenges to the idea of aid as transformation and modernisation, most discussions of development assistance accept the premise that, in a globalised economy, engaging with the rest of the world and adopting at least a minimal set of institutions and practices that meet the needs and expectations of foreign interests is increasingly unavoidable for any developing economy. The debate on development thus becomes about which institutions and cultural changes are necessary and how they can best be supported by external agents. Grindle argues the case for ‘good enough governance’, a minimally acceptable level of government performance that at least does not hinder economic and political development and that enables poverty reduction initiatives to be implemented (Grindle, 2004). A more realistic reform agenda, she argues, would set priorities among reforms, giving precedence to those that are essential over those that are less so, and those that are relatively easy to implement in the short- term over those that are more difficult and more long-term. While this sounds sensible,
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it’s implementation in aid practice inevitably gives rise to differences of view on what constitutes an essential reform, and which institutions or policies will have most impact on poverty reduction, as various donors and policy entrepreneurs lobby on behalf of their particular field of interest. It is difficult for any donor or developing country government to explicitly choose between, for example, an effective civil service, a high quality education system, affordable health care, efficient business regulation, a transparent system of justice, measures to fight corruption, gender equity, human rights protection, labour regulation and workplace safety. These are just some of the many issues it is considered necessary for a developing country government to address.
This difficulty was reflected in the policy proposals and assistance programs put forward by development actors in post conflict Kosovo. Most arrived with the assumption that almost everything would need to change, and it would need to change immediately. In addition to preventing conflict, achieving political stability, and restarting economic activity, large enough tasks on their own, international actors in Kosovo also saw a need to completely reorganise the education system (Sommers and Buckland, 2005), restructure higher education (Bache and Taylor, 2003), transform the delivery of health services (Campbell, Percival et al., 2003; Buwa and Vuori, 2007), regulate the media (Di Lellio, 2005) and promote the concepts of gender equity and ethnic harmony (Corrin, 2002; Abdela, 2003; Corrin, 2003; Simonsen, 2004; Hehir, 2006). Many in the UN had initially seen the peacekeeping task in Kosovo simply as a holding exercise, preventing conflict pending a political resolution (King and Mason, 2006:73), but the situation in Kosovo by the time they arrived, and the expectations of development actors, expanded the agenda and put pressure on the UN to take on tasks it had not envisaged and was not mandated or resourced to implement.
2.2 Development Assistance in Practice
2.2.1 The aid project model and technical assistance
The transformation and modernisation conception of development sets ambitious, even utopian, aims for development assistance programs. The means available for achieving these goals, however, are actually quite limited. The most common use of donor resources to achieve change is the implementation of targeted projects involving technical assistance and foreign advisers. The project model for the delivery of aid and the use of foreign experts have both been features of development assistance for many 33 Chapter 2: Theory and Practice of Development Assistance
decades, and both have been the subject of considerable criticism. They nevertheless continue to be a significant part of donor activity. Almost all the major donors in Kosovo implemented ‘projects’ in some form, and all engaged external experts to perform functions and provide advice and training.
The engineering project model of aid delivery is derived from early aid programs which focused on transfers of capital and technology. The organisation of development assistance still tends to be based on much the same approach. Carefully formulated, complex development plans, based on theory, informed by sound analysis of political, economic and cultural conditions, and agreed with the national government, are subsequently broken down into a sequence of smaller, manageable projects which more easily fit within the budget cycles and legal parameters of donor organisations, and which can be separately explained, approved, funded, reported on, and accounted for. The use of this ‘project model’ for development assistance has been widely and frequently criticised (Porter, Allen et al., 1991:xv; Berg, 1993:153; Carothers, 1999:270; Dichter, 2003:130; Conyers and Mellors, 2005). Projects, it is argued, make it difficult to take account of the wider context, past history or previous efforts, are inflexible, with fixed objectives that are difficult to change if they are not working, and tend to be dominated by officials or advisers from the donor country. Carothers argues that ‘projects are still designed and implemented to fit the needs, habits and demands of the funding agencies as much as to fit the local realities’ (Carothers, 1999:270). Other long-identified deficiencies in the project model include problems in design, duration and funding levels, inadequate supervision, poor quality advisers, and lack of coordination between separate projects (Caldwell, 1959; Glick, 1959; Seers, 1962; Gow and Morss, 1988).
The alternatives to this arrangement for providing assistance are not particularly obvious, however, and may have their own drawbacks. It can be argued, for example, that the contractual nature of a project binds participants to outcomes and ensures flexibility by making it easy to back away if the project is not working. A longer term, less focused ‘program’ approach may lose sight of the objectives and mask lack of activity (Honadle and Rosengard, 1983). All aid interventions, whether classed as projects, programs or some other label, necessarily have a beginning and an end, specifications and expected outcomes, and a budget that must be accounted for, and they are ultimately controlled by the donor, no matter how much national government
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engagement is achieved, so many of the problems that have been identified with ‘projects’ are simply the problems of aid in general.
To build institutions and capacity, donor-funded projects invariably rely on the work of technical advisers. ‘Technical assistance’, also sometimes called ‘technical cooperation’,6 is the provision of advice and the transfer of technical knowledge, abilities and attitudes by experts from more developed countries to people and institutions in developing countries. Technical assistance has always been a major component of development assistance. The US government initiated a major program to provide advisers to work abroad in 1949 (Task Force on Overseas Economic Operations, 1955) and heavy investment in technical advice and expertise continues to be a feature of US aid programs.7 The UN, the World Bank and other bilateral and multilateral donors established technical cooperation and training programs at around the same time (World Bank, 1954; Maddison, 1965; Murphy, 2006). Today technical assistance absorbs a significant share of official development assistance funds.8
Opinions on the value of technical assistance as a form of development intervention vary widely. Recipient governments and critics of development frequently query the relative costs and benefits of technical assistance noting the high fee rates of advisers and that very little of the money paid to consultants remains in the local economy (Morgan, 2002:7; OECD, 2006b:122; Aid/Watch, no date). The cost of technical assistance is easily identified in aid budgets but the actual benefits advisers provide are generally less visible than tangible outputs such as roads or schools and there is a tendency, therefore, to assume that the benefits of technical assistance are low or non- existent. Critics also argue that technical assistance can have negative impacts: the presence of foreign advisers is said to erode ownership and create dependence,
6 The terms ‘technical assistance’ and ‘technical cooperation’ are both used in donor literature and academic works. While some authors give them separate meanings, in many contexts they are largely interchangeable.
7 In 2005, US spending on technical assistance amounted to around US$8.9 billion (OECD International Development Statistics Online, www.oecd.org/dac/stats/data, accessed 3 May 2007).
8 The proportion of technical cooperation in ODA peaked at 24.8 per cent in 1973, and continued to represent around 20 per cent of all official development aid. In 2005 this was worth around US$21.6 billion (OECD International Development Statistics Online, www.oecd.org/dac/stats/data, accessed 3 May 2007).
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undermine the capabilities of local staff, and encourage adoption of policies that are too complex, misguided or unsustainable, while failing to transfer skills to local counterparts (Morgan, 2002; OECD, 2006b:117-120). Many countries have received generous amounts of technical assistance but have failed to achieve economic growth. In fact, statistical analysis suggests that there is, if anything, a slight negative correlation between growth and aid-funded technical assistance (OECD, 2006b). However there are also cases where technical assistance and expert advice appears to have played a role in successful economic development. Taiwan, for example, received significant amounts of technical assistance from the US government during its early industrial development (Jacoby, 1967), and economic advice from a UN technical mission in 1960 contributed to Singapore’s subsequent economic growth policies (Quah, 1998:106).
In spite of the many discouraging evaluations and critiques of technical assistance, donors continue to use foreign experts to deliver their projects, in part because of the lack of viable alternative methods, but also because technical advisers can have a number of subsidiary benefits rarely referred to in project specifications. They often function as financial controllers and monitors, information gatherers and commercial ambassadors on behalf of the donor country (Morgan, 2002:12; Land, 2007:15). The reports submitted by advisers provide donors with information on the workings of the government, the performance of senior government personnel, and the rate of progress in implementing policies recommended by donors. International consultants can also, usually, be relied on to account accurately for the use of donor funds, to curtail opportunities for mismanagement and misappropriation, and to pursue the donors’ political, economic or commercial interests.
Technical assistance for institution building and capacity development is generally delivered by private sector consulting firms, or non-profit NGOs, under commercial contracting arrangements. There are crucial differences, however, between normal private sector consulting in business and government and the engagement of technical advisers to deliver aid projects (Huddleston, 1999:153-154; Land, 2007:vii). Most of the cost of the technical assistance project is borne by the donor rather than the beneficiary government so the assistance provided by advisers may be regarded by the beneficiaries as a ‘free’ good and, like most free commodities, may be overused, misused or ignored (Ajayi and Jerome, 2002). Moreover, development consultants are often required not only to provide specialist professional services and advice, but to instruct others in
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performing the same work with a view to making their services unnecessary in future. In many circumstances, these two roles – service delivery and skills transfer – are clearly in conflict. The competitive market for technical assistance assignments tends to push advisers in the direction of taking ultimate responsibility themselves for producing the outputs required by the project, rather than delegating to local staff, because poor quality outputs will reflect badly on the ability or competence of the adviser, and their firm; the experience that would be gained by local counterparts in doing it less perfectly themselves is not readily visible. The literature on the implementation of development assistance thus raises many questions about whether aid projects and foreign technical assistance have positive benefits for developing country governments.
2.2.2 Development assistance effectiveness: does aid work?
Over the years a succession of reviews, inquiries and assessments of efforts to support development have been commissioned by international organisations and bilateral donors (US International Development Advisory Board, 1951; Task Force on Overseas Economic Operations, 1955; Pearson, 1969; Cassen, 1986; AusAID, 2011). Many academics have also addressed the issue of the effectiveness of development assistance (Tarp, 2000; Browne, 2006; Easterly, 2006b; Collier, 2007; Riddell, 2007). There is, however, no unambiguous conclusion on whether development aid is effective in achieving what donors expect it to, or what types of aid produce the greatest benefits. The most positive conclusion appears to be that aid in general has many benefits, and may have some success in achieving economic development goals (Pearson, 1969:12; Cassen, 1986:11-13; Collier, 2007:100; Riddell, 2007:253). Collier, for example, argues that aid has been, on balance, beneficial: it has increased the rate of growth in poor countries slightly, or at least prevented them from going backwards (Collier, 2007:100). However it is mostly only helpful if the political context is favourable (Levy, 2007), and where governments and national elites have already initiated the right policies (Browne, 2006:11; Kenny, 2006:6-7; Lancaster, 2006:288). The more pessimistic assessments suggest that aid often produces negative effects. It can cause state failure by creating incentives for officials to pursue aid rather than being productive (Lancaster, 2006:297) and large amounts of assistance has negative marginal benefit and increases aid dependency (Collier, 2007:100; Schabbel, 2007:221).
Most reviews of development assistance are certain, however, that aid could be effective if it was implemented correctly. Thus when aid programs do not achieve the results 37 Chapter 2: Theory and Practice of Development Assistance
envisaged, poor implementation, and the inefficiencies of aid bodies, are usually considered to be one of the primary causes. It has been argued, for example, that development assistance activities are overly complex and hurriedly designed due to pressure to achieve short-term goals, and that donor organisations suffer from a lack of institutional memory and high staff turnover (Berg, 1993); donor staff often have limited experience of the countries they are dealing with and prior experience is rarely captured or shared (Browne, 2006); aid bureaucracies are not accountable or responsible to poor people, lack competitive pressure, and tend to focus on outputs that are visible rather than intangible and long-term (Easterly, 2002); and they lack the resources or processes to manage projects effectively (Conyers and Mellors, 2005). The multiplicity of donors operating in each country and the lack of coordination between them produces duplication, overlap and inefficiency, and increases the administrative burden on the national government. While each donor’s policies may appear rational from the donor’s perspective, the sum total of donor policies rarely presents a rational whole (Chesterman, 2004:191). The dynamics of the search for funding and legitimacy generates competition between different aid organisations and NGOs and limits the scope for cooperation or coordination. Even the various UN development organisations are divided by rivalries, turf wars and competition for funding, in spite of nominally operating under the UN umbrella (Miller, R. J., 2005:5; del Castillo, 2008:74).
These concerns about the problems of aid implementation have led some critics to question the idea that developed countries are able to assist economic development in other nations through the application of aid. Dichter, for example, concludes that ‘development assistance cannot really accomplish what we have hoped it could, no matter how it might be restructured or re-engineered’ blaming the complexity of the problem and the structural distortions and contradictions in the aid industry (Dichter, 2003:xi). Moyo also argues that aid does not help poor nations achieve sustainable long- term growth but instead causes political instability, undermines civil society and increases corruption (Moyo, 2009). Both Dichter and Moyo thus propose a radical reduction in official development assistance. However, although there is some agreement that there are problems in development aid, there is also strong support for the idea of development assistance, both on the part of donor governments and international organisations, and in popular opinion, which suggests that the proposed dismantling of existing aid institutions is unlikely to be achievable.
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2.2.3 The aid effectiveness agenda
Reports and studies of the problems of development assistance have, instead, exhorted donors to change their aid delivery practices to address these criticisms (Pearson, 1969; Cassen, 1986; OECD, 1992; Berg, 1993; Jaycox, 1993; OECD, 2003; Birdsall, 2004). The impacts of these recommendations have, however, been limited, and similar complaints about donor deficiencies and inefficiencies are repeated throughout the literature. In 2005, a formal effort to improve aid management procedures resulted in the endorsement by a large group of donors and recipient governments of the ‘Paris Declaration on Aid Effectiveness’ (OECD, 2005). By signing the Paris Declaration, donor governments agreed to modify their aid implementation practices in ways considered to make aid more effective. Donors should, for example, base their aid programs on the recipient country’s development strategies, coordinate their aid programs with each other to minimise overheads and transaction costs, harmonise their procedures for reporting, procurement and disbursements, and set targets for the results to be achieved. Aid recipients also committed themselves to changing their own practices by taking more responsibility for their development programs and reforming their financial management and procurement systems to meet donors’ needs for accountability and transparency. The Declaration contains measurable indicators of progress, with targets which were to be achieved by 2010. The results of the final 2011 Survey on Monitoring the Paris Declaration, however, were described by the OECD as ‘sobering’ (OECD, 2011a:15). Only one out of the 13 targets established for 2010 had been met, by a narrow margin, although it was judged that considerable progress had been made towards many of the remaining targets. Donors have thus pushed ahead on efforts to achieve these aid effectiveness ideals at several more high level conferences, signing the ‘Accra Agenda’ in 2008 (3rd High Level Forum on Aid Effectiveness, 2008), and the ‘Busan Partnership’ in 2011 (4th High Level Forum on Aid
Effectiveness, 2011).
These aid effectiveness initiatives raise two questions: firstly, are the proposed changes in aid practices feasible, and secondly, if they were to be implemented, would they in fact improve the impact of development assistance on economic growth and poverty reduction? There are several reasons for doubting that the proposed changes in donor behaviours and policies are achievable. Most of the reform measures set out in the aid effectiveness agenda are by no means new. Ideas like country ownership and donor
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coordination appear throughout the literature on development assistance produced over the past 60 years and most have long been seen as best practice in aid administration (US International Development Advisory Board, 1951:15; World Bank, 1954: 45; Task Force on Overseas Economic Operations, 1955:25; Pearson, 1969:17; Mikesell, 1972:88). Improved coordination, harmonisation and alignment are also hampered by the fact that bilateral aid is primarily an instrument of donor country foreign policy (Harris, 1950; Montgomery, 1962; Cassen, 1986:11; USAID, 2002a). Development aid has many and often conflicting objectives which include serving national interests through improved security, trade, national prestige and expanded spheres of interest, the ability to project national values, and the potential to limit the flow of economic migrants. As Montgomery has observed,
International politics lies at the heart of foreign aid and, indeed are the very reason for its existence (Montgomery, 1962:4).
Multilateral organisations are also not free of political motivations as their policies tend to reflect the political, economic and ideological objectives of their most influential members (Mikesell, 1972:83; Wade, 2002). Donors are thus under pressure to provide the assistance that most suits their needs, ahead of the preferences of recipients, and alignment with recipient country plans is only likely to be achieved when the recipients’ plans are aligned with those of the donors. Beneficiary governments also have their own objectives related to domestic political power, personal status, opportunities for rent seeking, or playing donor countries off against each other (Larmour, 2002; Morgan, 2002:9) and may not welcome greater unity or efficiency among donors. Moreover, the very capacity deficiencies that aid programs are intended to address, such as institutional weakness, corruption, government incompetence, patronage and politicisation, present the largest obstacles to the achievement of aid effectiveness reforms. Given all these factors, the real prospect of significant change in development assistance practices seems slight. There is also no conclusive evidence that the Paris Declaration approach will, in fact, reduce transaction costs, or that any savings achieved will translate into better development outcomes or reduced poverty (Rogerson, 2005). Indeed, some measures intended to address problems of donor coordination may generate equally complex and time consuming procedures, more stringent conditions, higher costs and more extensive use of foreign consultants (Hilderbrand, 2002; Conyers and Mellors, 2005; Dijkstra, 2005). The procedures put in place to monitor the
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achievement of the Paris Declaration targets, for example, have themselves imposed an additional reporting burden on both donors and recipients (OECD, 2007, 2008, 2011a).
The aid effectiveness reform agenda relies heavily on the concept of ‘ownership’. Donors should support country-owned, country-led strategies and base their programming on them (OECD, 2003). There appears, however, to be an internal inconsistency in this concept. While donors argue that development programs must be ‘owned’ and controlled by the recipients, at the same time much of the aid literature identifies local institutions, culture, behaviour and lack of capacity or social capital as the primary impediments to development. The unequal financial relationship between donors and recipients also calls into question the concept of ownership ‘where one party is in possession of the purse, and the other the begging bowl’ (Abrahamsen, 2004:1454). In most cases, it has been suggested, ownership in reality means ‘their’ ownership of ‘our’ ideas (Suhrke, 2007:1292). In a post conflict environment such as Kosovo, the nature of the relationship between international and national actors undermines the possibility of meaningful ownership because the international presence exists precisely in order to transform existing political institutions (Chesterman, 2004:19; Narten, 2008), and international organisations, under pressure to achieve results quickly, prefer to do things themselves rather than losing time in consultation and negotiation (Caplan, 2005:87).
2.3 Summary
Although there is considerable debate about how ‘development’ can be achieved, there is a broad understanding that external assistance should play a role and should be effective. This chapter has identified the dominant ideas and debates around this issue that informed the international actors operating in Kosovo. The policies of most of the international organisations, donor agencies and consultants who worked in Kosovo, although implemented under the umbrella of a peacekeeping mission, were firmly oriented towards the goals of market-based economic reform and social, institutional, political and cultural transformation. International actors came to Kosovo with plans for an ambitious program of change, addressing many different areas of economic and political reform all at once, in the rush to take advantage of a ‘window of opportunity’ to create the right kind of institutions, administrative practices and laws, to influence the policies and behaviour of a future government, and to transform many other aspects of
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social and political life. Not all the international participants shared this goal, however, at least to begin with. In particular, the UN, which had overall leadership of the international exercise, and responsibility for a large share of the administrative institutions that donors intended to reform, had much more limited aims in this respect, and this generated a degree of conflict with other actors over the pace and direction of the international effort. It was only some years into the post conflict period that the UN also began to discuss the task in Kosovo clearly in terms of building governance institutions and developing capacity.
In June 1999, Kosovo was typical of the post conflict environments described in the literature on reconstruction and peacekeeping, with multiple problems needing urgent attention and a contested political landscape. The large volume of assistance and the multiplicity of international actors involved added to the complexity and generated considerable scope for conflict over issues of priority and emphasis, the new arrangements that should be put in place, and the speed at which they should be introduced. The numerous economic development, institution building, governance and capacity development objectives pursued by the various international bodies resulted in a significant burden for the UN Mission, and later for the emerging Kosovo government.
The methods used by the international actors to achieve their goals in Kosovo were also typical of the methods of development assistance programs elsewhere. In particular much of the assistance was based on defined projects using contracted technical advisers and consultants. Although UN and some EU staff were not recruited specifically as technical advisers, and may not have seen themselves in that role, their responsibilities in Kosovo’s administrative departments and Ministries were essentially the same as those of the technical consultants working in other parts of the Mission. The second part of this chapter demonstrated that the high ambitions of development assistance theories contrast starkly with the actual performance of aid programs in achieving these objectives. The project model of aid delivery, the use of technical advisers, the weight of donor bureaucracies and the lack of cooperation between donors have been the subject of serious and consistent criticism. These criticisms have not, apparently, produced significant change in the methods of aid donors, despite intense recent efforts to promote ‘aid effectiveness’ reforms. The examination of the activities of the lead development actors in Kosovo in the following chapters shows that
42 Chapter 2: Theory and Practice of Development Assistance
conflicting objectives, deficiencies in planning, management and resourcing, and competition and disagreement between donors sometimes played a significant role in determining the outcomes they achieved. The experience in Kosovo also highlights the tension in post conflict environments between the desire to take advantage of a ‘window of opportunity’ to achieve rapid change, and the ideal of local ‘ownership’; a tension that also exists in more conventional development assistance contexts when donors attempt to reconcile their determination to ensure that their preferred policies are adopted, while trying to achieve requirements for local participation and ownership.
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3 The Context
The post conflict phase in Kosovo opened a new opportunity for international actors to apply the ideas, theories and practices described in the previous chapter. A range of international organisations and bilateral donors raced to stake a claim on the reconstruction and development agenda. As the conflict of early 1999 was reaching a climax, Kosovo moved quickly from being a security issue and a diplomatic exercise to become the subject of a very large program of development assistance involving all the major international development organisations. This chapter describes the process by which major aid donors, as a group, became involved in Kosovo and the objectives they set for their intervention, as expressed in their published reports and their statements at early donor conferences. It also describes the historical, cultural and economic context that these actors found in Kosovo, and the developments in the short time between the end of the conflict and the mobilisation of the international mission that overturned many of their assumptions about what would be done and how they would do it.
3.1 How Kosovo became an aid project
On 2 April 1999, shortly after the start of the NATO military action against Yugoslavia, the World Bank and the IMF held an emergency informal donor meeting to discuss the impact of the conflict on the region (IMF/World Bank, 1999a: para 14). This was followed a few weeks later, on 27 April, by a high level meeting of international financial institutions and donor countries, convened to discuss their responses to the conflict (IMF/World Bank, 1999b). The subject matter of these meetings, however, went well beyond the immediate humanitarian crisis and included an exchange of views ‘on a medium to long-term approach for economic reconstruction and recovery, growth and progress in reaching social stability in the region once peace is achieved’ (IMF/World Bank, 1999b: para 3). A significant outcome of these discussions was an expanded role for the EU in the region. In May, a joint World Bank/EU office was set up in Brussels to coordinate aid in South East Europe, including Kosovo, with the goal of implementing a comprehensive regional framework for economic development. A
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high level steering group of donor country ministers was created to oversee its work (World Bank/European Commission, 1999e). In addition, in June 1999, G8 leaders endorsed the EU’s proposal for a ‘Stability Pact’ which would provide a political framework for Balkan countries to integrate into ‘the Euro Atlantic Structures’ and draw the countries of South Eastern Europe ‘closer to the perspective of full integration’ into the EU, including eventual full membership (Stability Pact for South East Europe, 2008). So even before the conflict had formally ended, and while a large part of the Kosovo population were scattered across the region in refugee camps, the major international powers and donor institutions were drawing up plans for a long-term economic development program in Kosovo and putting it on the path to EU membership.
3.1.1 From peacekeeping to development
Security Council Resolution 1244, which authorised the international post conflict Mission, focused on the peace settlement, making only passing reference to economic prosperity and no reference at all to markets or the private sector. However, donors and international bodies, led by the World Bank and IMF, soon established economic development, through a market economy, as the main priority for external assistance. The inaugural meeting of a High Level Steering Group on Kosovo Reconstruction, on 13 July 1999, comprising ministerial level representatives of the major donor countries and the lead international organisations, discussed the strategic direction for economic reconstruction, stabilisation, reform and development in the region, including social and institutional dimensions and private sector development (World Bank/European Commission, 1999c). A donor conference to mobilise aid resources, hosted jointly by the European Commission and the World Bank, was held on 28 July in Brussels, attended by over 100 donor countries and international bodies (World Bank/European Commission, 1999d). A World Bank paper on ‘Strategic Directions for Economic Recovery’ was the main background document (World Bank, 1999e). More than US$2 billion of assistance was pledged by donors during the meeting and it was agreed that UNMIK, the European Commission, the IMF and the World Bank would work together to develop a comprehensive development and reconstruction strategy (World Bank/European Commission, 1999a). A second donor conference was held in November 1999, also in Brussels, and was attended by senior UNMIK officials, who reported on the progress that had been made in establishing economic institutions
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(World Bank/European Commission, 1999b). Again the major background reports for the meeting were prepared largely by the World Bank (World Bank, 1999a, 1999b, 1999c). The reports defined the main policy tasks facing the interim administration, concentrating on economic policies, establishing economic institutions, strengthening the public administration, rapid transition to a market economy, and reforms in the education, health and social protection systems. At the conclusion of the conference, the joint chairmen reported broad agreement with this proposed program as well as unanimous support for private sector-led development. They also noted that ‘Kosovo cannot be reconstructed in a vacuum’ and recommended similar action in other parts of the region (World Bank/European Commission, 1999b: para 30).
The only legal authority for any international organisation or national government to act in Kosovo, without the agreement of the Federal Republic of Yugoslavia (FRY), was UN Security Council Resolution 1244, so the statements of international and bilateral donors made it clear that their activities could in some way be linked to or justified by reference to that document. This required a certain amount of expansive interpretation of the wording of the resolution. The function of the UN civilian presence authorised by the Security Council was simply to provide:
an interim administration for Kosovo under which the people of Kosovo can enjoy substantial autonomy within the Federal Republic of Yugoslavia, and which will provide transitional administration while establishing and overseeing the development of provisional democratic self governing institutions to ensure conditions for a peaceful and normal life for all inhabitants of Kosovo (UNSCR 1244: para10).
The World Bank’s reports and other documents produced by donors and IFIs linked ‘a peaceful and normal life’ in Kosovo with economic reform and development and thus cited UNSCR 1244 as the authority to implement development programs beyond immediate humanitarian assistance and physical repairs. In July 1999, for example, the World Bank argued that 'economic growth and prosperity in Kosovo is clearly a pre- requisite to its stability’ (World Bank, 1999f: para 15) and the theme of economic development as the key to peace is repeated often in the documents and speeches of donors. James Dobbins, the US representative at the first donor conference, for example, argued that the UN’s mandate was to restore stability and ‘that stability will depend in large measure on creating prosperity in Kosovo’ (Dobbins, 1999: para 2).
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UNSCR 1244 calls for establishment of ‘substantial autonomy and meaningful self-administration for Kosovo’. To achieve the goals of a sound market economy, democratic governance, and a just social order, the United States encourages the Special Representative of the Secretary-General to draw upon the full authority at his disposal to carry out the will of the international community. (Dobbins, 1999: para 10)
At the first donor conference, the World Bank’s Johannes Linn argued that ‘our efforts to help rebuild Kosovo must be comprehensive and not limited to the reconstruction of damaged economic assets’ (Linn, 1999: para 7) and a paper presented to the conference by the EU-appointed Head of Pillar IV, Joly Dixon, boldly stated that:
UNMIK’s mission is to turn Kosovo into a multiethnic democracy with a well functioning economy firmly based on market principles and the rule of law (Dixon, 1999a: para 1).
In his remarks to the conference he added ‘the idea of just putting the thing back as it was before is not very attractive. We must have a higher aspiration than that’ (Dixon, 1999b: para 5).
These aspirations for Kosovo, it was clear, would require the application of large amounts of donor funds. The World Bank and the EU envisaged a large aid exercise in Kosovo, and in the Balkan region more generally. At the first donor conference, the Bank argued that:
assistance must go beyond meeting urgent humanitarian needs. A large multiyear assistance program of reconstruction and economic recovery will be needed for Kosovo to get on the path of sustained economic and social development (World Bank, 1999e: para 3).
The joint World Bank/European Commission report to the second donor conference also argued for a comprehensive reconstruction and recovery framework over a period of four to five years at an estimated cost of US$2.3 billion (World Bank/European Commission, 1999g:3). It was agreed that this would be a complex exercise.
Implementing such a large reconstruction and recovery program is ambitious and will only be possible through a major, concerted effort, involving Kosovars, UNMIK, and donors, as well as NGOs and the private sector (World Bank/European Commission, 1999g:33). 47 Chapter3: Context
The World Bank and the European Commission envisaged playing an important role in managing the program, through their Joint Office in Brussels. They would help the ‘Kosovo authorities’, in other words UNMIK, to mobilise funds and to assess progress on the ground, organize donor conferences, and keep comprehensive records of donor pledges (World Bank/European Commission, 1999g). The World Bank also foresaw a need for substantial technical assistance in all sectors including expert advice on education, health, utilities management, infrastructure, and on restarting state owned enterprises.
A large scale program of both technical assistance and professional training is needed for a number of years to fill these gaps (World Bank, 1999e:3).
While the development of economic institutions dominated the discussions, the range of issues of concern to some other donors and non-government bodies was broader and rapidly expanding. A report on donor activities implemented during 1999 and 2000 describes initiatives in numerous sectors including agriculture, education, social welfare, the environment, sport, media, the repair of historical monuments, and road safety education (UNMIK, 2001). While some of these activities were restoring or restarting institutions and facilities that had existed before the conflict, most had wider objectives of modernising, restructuring, reforming or establishing for the first time major components of daily life in Kosovo. There was therefore significant ‘mission creep’ almost before the Mission started, and a significant gap between the initial peacekeeping concept encapsulated in UNSCR 1244 and what donors wanted to see done.
There were other ways in which donor’s ideas about the program in Kosovo deviated from the words negotiated in the Security Council. As well as extending the scope of the UN’s task in Kosovo, the main donors, such as the EU and the World Bank, showed little hesitation in their reports and press conferences in discussing Kosovo as a separate entity from Yugoslavia or Serbia, in spite of the wording of UNSCR 1244 which emphasised that Kosovo’s autonomy would be ‘within the FRY’ (para 10). In this respect there is a significant difference in tone and approach between the carefully negotiated, neutral stance of the Resolution and other UN documents, and the pro-active and decisive approach adopted by many donors in their statements. Although World Bank reports occasionally refer to the status of Kosovo as an entity within Serbia, and note the need to cooperate with Serbia and Yugoslavia on the degree to which
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‘substantial autonomy’ will be exercised, they also note that UNMIK and KFOR are responsible for relations with Yugoslavia and leave these issues to them to resolve, while pressing on with calls for significant reform (World Bank, 1999e:4; 1999b:3). The intransigence of the Milošević regime in Yugoslavia at the time, and Serbia’s poor image in international affairs following the conflicts in Bosnia and then Kosovo, made it easy for donors to take this position on Kosovo’s assumed separation from Serbia. Had the Yugoslav authorities been prepared to cooperate more actively with the UN and encouraged Serbs in Kosovo to participate in the interim administration, things may have been different. However, in effect Kosovo was generally treated by the major international aid bodies as an independent entity from the start. The UN Mission, operating under the constraints of UNSCR 1244, and subject to scrutiny by the Security Council, was obliged to take a more balanced position on this question. The extent of institutional change that should be pursued and the degree of autonomy that should be allowed to Kosovo’s administration has thus, at times, been a major source of contention between the major actors within the Mission.
3.1.2 The‘blankslate’,the‘lostdecade’,andthe‘windowofopportunity’
The reports produced by the World Bank, the IMF and the European Commission for the first and second donor conferences, and other donor-originated documents, express a set of ideas about the situation in Kosovo that influenced the views of donors and advisers who had limited alternative sources of information about the place they were about to encounter. Although all these accounts are factually based, they present a relatively selective view of Kosovo’s long history and the situation at the end of the conflict. A common theme is the idea of Kosovo as a ‘blank slate’ more or less devoid of political and economic institutions and ready to be reformed along lines favoured by donors. It was argued that Kosovo had no existing institutions, policies or administrative capacity, or what it did have was not what was needed. The World Bank’s special representative to South East Europe, Rory O’Sullivan, at a press conference in July 1999 said that:
The problem in Kosovo is that there is nothing there. There is no administration. There is no civil administration which comes from the local people, if you like. … Imagine the difficulty of setting up a totally new administration, a totally new country (World Bank, 1999d:para 17).
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Another World Bank report argued that,
The removal of Kosovo’s autonomy and the consequent centralization of financial management functions in Belgrade … have created an institutional vacuum for the public administration in Kosovo … Essential functions of any public administration system … either do not exist or exist in a rudimentary form that does not ensure adequate effectiveness and transparency in the use of resources (World Bank, 1999b:20).
The importance of the ‘blank slate’ and ‘institutional vacuum’ concepts was that they gave donors scope to create new, ideal institutions from the ground up. The World Bank analysis argued that two special features of the situation in Kosovo would allow an unusual opportunity ‘to construct a rational level of administrative provision’.
The first is the abrupt break with the past, which has in many sectors downsized the numbers of eligible or existing employees. The second is the existence of an apolitical interim administration that should be better able to grasp this opportunity (World Bank, 1999b:17).
These donor statements thus identify the situation in Kosovo as a ‘window of opportunity’ to implement rapid and substantial social and economic reform.
The cause of this blank slate was generally identified as the ‘lost decade’ resulting from the actions of Serbia and the consequent conflict, and the decline and neglect of the 1990s. The World Bank’s paper on strategic directions for recovery in July 1999, for example, describes at length the loss of managerial and technical expertise, looting of assets, and pervasive neglect of maintenance over the decade, as a result of the dismantling of Kosovo’s autonomous structures in 1989 and the dismissal of Albanian staff (World Bank, 1999b:3-6). The terms ‘lost decade’ and ‘decade of neglect’ appear in many subsequent World Bank documents as well as the documents of other donors. While events in the 1990s contributed to Kosovo’s economic problems, these statements largely ignore Kosovo’s long history of economic disadvantage and other contributions to economic decline such as sanctions and the general effects of socialism and economic mismanagement, including by Kosovar officials in the autonomous administration (Glenny, 1996:66-67; Judah, 2000:46). They also, incidentally, attribute blame for the economic situation largely to the Serb population. Albanian Kosovars, not unexpectedly, supported and promoted this interpretation of the events of the 1990s.
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The statement by Ajri Begu, a Kosovo Albanian member of UNMIK’s Economic Policy Advisory Board, transmitted to the second donor conference, for example, argued that the economy of Kosovo had been completely destroyed by the war and ‘by ten years of savage usage done by the Serb occupier’.
During a full decade there have only been the smallest investments. Naturally, this was their purpose. Technology has been morally and physically depreciated. Financial capital is non-existent; banks have been robbed (Begu, 1999: para 5).
The actions of the Serb authorities under the Milošević regime of the 1990s certainly had an adverse impact on the Kosovo economy, as well as on the civil rights and well being of the Albanian population, and few people in the immediate aftermath of the conflict were willing to absolve the Serb government of blame. However, these statements certainly did little to encourage future ethnic reconciliation.
3.1.3 Economicdevelopmentandthequestionof‘ownership’
The lead donors were agreed on the type of institutions that would be essential for successful reconstruction and development. The most important were the institutions needed for a market-based economy. Almost all documents emphasise the role of the market in ensuring economic growth, the importance of the private sector, and the need to ensure a transition in Kosovo from a socialist to a market-oriented economy on the model already applied in other countries of Eastern and Central Europe. The World Bank’s first strategy paper on Kosovo argued that:
A new market-based economic system has to be developed, to replace the highly ineffective combination of an official Yugoslav-style socialism and a proliferation of parallel economic structures and activities (World Bank, 1999e:4) .
At each meeting of the World Bank/European Commission High Level Group overseeing regional aid during 1999, references are made to the need to create ‘an environment in which private sector activity can flourish’ and ‘laying the foundation for a sound market economy’. The group encouraged UNMIK ‘to create the right business conditions to attract private investment and, more broadly, accelerate the process of transforming Kosovo into a modern market economy’ (World Bank/European Commission, 1999e). The new EU ‘Stability Pact’ also assumed that the goal for all Balkan countries was a successful transition to a market-based economic system. 51 Chapter3: Context
As other Central and Eastern European countries, Kosovo will have to address the challenge of transition to a market-driven economy. In this process, the foundations of the economy are likely to shift from large, publicly owned enterprises to small and medium private companies, from heavy industry to services, and from essentially traditional agriculture … to more modern, less labour intensive agriculture. … Efforts should therefore not be aimed at re- establishing what existed, but at supporting the development of those activities that will most contribute to sustainable growth, both in rural and urban areas (World Bank/European Commission, 1999g:6-7).
These statements would give ample ammunition to those critics who see post conflict reconstruction as a means of spreading neo-liberal economic policies in fragile states without the democratically demonstrated concurrence of the population (Klein, 2004; Bello, 2006). However, most donor documents also made reference to the importance of local participation in developing and implementing the reconstruction program. The World Bank’s ‘Strategic Directions’ paper in July 1999, for example, argued that:
Kosovo’s people should be responsible for the economic and social recovery of their region. Expatriates should assist, rather than substitute themselves to local authorities in the identification of needs and priorities. Donors should empower and support Kosovo’s emerging authorities for the successful implementation of the Priority Recovery Program (World Bank, 1999e: para 46).
The UN Secretary General’s first report to the Security Council argued that
it is clearly an essential requirement for the success of UNMIK that the people of Kosovo be included fully and effectively in its work, particularly that of the interim administration, so that the transition to self-governing institutions is both smooth and timely (UNSC, 1999b: para 16).
At the first donor’s conference, the IMF and the World Bank noted:
The long-term viability of the recovery program will depend on us empowering local institutions and representatives to fulfill this task of recovery (IMF/World Bank, 1999c: para 8).
The World Bank/European Commission joint report for the second donor conference reiterated the point:
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Kosovars should be closely involved early on in the further design and implementation of the program, since the eventual success of the economic recovery rests with them. Donors should do as much as possible to ensure that Kosovars, both at the central and at local level, are associated with the preparation and implementation of the projects they finance, in a decision making capacity whenever possible (World Bank/European Commission, 1999g:5).
However, although the major donors expressed good intentions in relation to involving the local population in setting priorities and coordinating development programs, the opportunities to achieve this, in the absence of a recognised local government, were limited, and donors appear to have applied a more or less standard set of economic policy recommendations with, at this early stage, apparently limited consultation with Kosovo’s leaders or people. A World Bank/European Commission report acknowledged that ‘in view of the tight timetable, involving Kosovars to the extent desirable in the preparation of the emergency projects may be difficult’ (World Bank/European Commission, 1999g:33). USAID claimed that it had consulted closely with Kosovar community leaders on its programs, including through a ‘Democracy and Governance retreat’ in November 1999 and through local ‘Community Improvement Councils’ (USAID, 2000c:9). The purpose of these meetings was not, however, to seek the views of local representatives and develop policies and projects based on their preferences, but to ensure ‘strong buy-in to, and support for the type of economic policy and institutional reforms being pursued’ (USAID, 2000c:10). USAID noted that ‘tradeoffs between rapid donor-led reform and more time-consuming consultative approaches loom large as donors attempt to accomplish as much as possible while funding levels and the international presence remain large’ (USAID, 2001:4).
It is not clear, however, that a more active involvement of Kosovo’s political leaders in developing economic policy would have made a significant difference to its direction. Certainly there was no overt opposition, at that time, to market-based reforms, and Kosovar representatives and officials occasionally made public statements of support (AFP, 21 September 1999; Begu, 1999; Hajrizi, 2001). Donor statements generally asserted that Kosovo’s political leaders were committed to the economic reform policies being proposed. A World Bank paper, for example, reported that the local political leadership supported a private market-based economy with open trade and investment
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regimes and integration with the other economies of Europe (World Bank, 1999b:2-3). However, a significant proportion of the wider Kosovar population supported a return to the socialist era of state controlled production. The World Bank reported this difficulty at the second donor’s conference in November 1999:
... there is a long way to go before local opinion moves away from a simple wish to recreate economic life as it existed before the abrogation of Kosovo’s autonomy towards modern economic and social policies, with high government standards (World Bank, 1999a: para 3).
Popular opinion was not, however, to drive policies in the territory. The World Bank argued that:
the articulation of a clear vision and the path of transition that Kosovo must follow are tasks that the political leadership must now address … A major task for UNMIK and the international institutions will be to help develop viable transition strategies and institutions, and build public support for them (World Bank, 1999b:2-3).
3.2 Kosovo in June 1999
Few of the people who arrived in Kosovo immediately after the conflict to establish the UN Mission, or to set up the many other diplomatic offices, aid bureaus and technical assistance projects that went along with it, would have had much prior knowledge of the country, its history and its people apart from what they had learned in the media during the conflict, or had read in World Bank and UN reports. Noel Malcolm’s comprehensive ‘Short History of Kosovo’ was quickly reprinted to meet the demand for information (Malcolm, 1999a) and a large number of other books covering the recent history of Kosovo were published around this time (Weller, 1999; Cohen, 2000; Garton Ash, 2000; Judah, 2000; Buckley and Cummings, 2001; Bellamy, 2002). The particular historical and cultural background of Kosovo has often been cited as an obstacle to achievement of the objectives of international assistance. This section briefly outlines the relevant demographic, cultural and economic features of the territory and the ways in which they may have influenced the international intervention.
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3.2.1 The Albanian Kosovars
In 1999 there was no reliable data on the size or composition of the population of Kosovo. Albanian Kosovars had refused to participate in the 1991 census, conducted following the loss of autonomy. Population displacement during the subsequent decade and the months of conflict made earlier data unreliable. The ICG in 1998 estimated the population at 2.1 million inhabitants, of which more than 90 per cent were thought to be ethnic Albanian, the remainder mainly ethnic Serbs (ICG, 1998:3). Other sources gave similar estimates.9 The disproportionate ratio of Albanians to Serbs in the province made the actions of Serb and Yugoslav authorities towards the Albanian population particularly inexcusable in the eyes of some international personnel and helped to convince them of the impossibility of a return to Serbian sovereignty.
Although most ethnic Albanians in Kosovo identify themselves as Muslim, religion was not a major factor in the inter-ethnic conflict.10 It was, however, to some extent about differences in culture and lifestyle. Historical accounts of both Kosovo and Albania describe a traditional Albanian culture based on strong patrilineal clans or extended family groups and customary legal codes which set out the essential rules of social relationships (Malcolm, 1999a:17-21). These traditional laws were based on the principles of personal honour and the equality of persons (in this case meaning only males) and implied the freedom of each to act in accordance with his own honour, within the limits of traditional law, without being subject to another’s command. Ways of dishonouring a man included calling him a liar in front of other men, insulting his wife, or taking his weapons, and an offence to honour was to be paid for by the spilling of blood creating a tradition of blood feuds and honour killings. However, this strict system of law applied only to other Albanians or even more narrowly within the clan group. Stealing from outsiders, for example, might not necessarily be seen as a crime.
9 https://www.cia.gov/library/publications/the-world-factbook/geos/kv.html, accessed 4 April 2012. An official census was eventually conducted by the Kosovo statistics office in 2011, which recorded a total population of 1.7 million, however data was not collected in predominantly Serb areas (Statistics Office of Kosovo, 2011).
10 In common with other places in the Balkans, Kosovars practice a moderate form of Islam (Balkan Insight, 17 August 2012): few women wear headscarves, for example, and alcohol is readily available, widely consumed and produced locally.
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Traditional Albanian society was also very patriarchal with women having limited contact with the world outside the family.
Clearly these attitudes and values, if they were still influential, would be in conflict with many of the ideas subscribed to by the international actors engaged in the post conflict reconstruction exercise. In particular, gender equity, modern legal codes, equality before the law, and the state’s monopoly on the use of power and punishment are likely to be difficult to reconcile with a patriarchal, hierarchical, and independent traditional culture. Many of the reports produced by donors imply that these traditions are still relevant (DFID, 2001b:4; European Agency for Reconstruction, 2008d:3). Kosovo is a mostly rural, agricultural society and it is generally assumed that traditional values remain important. News reports of the persistence of blood feuds and honour killings support these perceptions (AFP, 12 July 2011; Jennings, 23 April 2005; IWPR, 2005), and media coverage of organised crime, political assassinations and illegal behaviour by some political leaders and businessmen have also been interpreted as confirming the stereotype of the lawless and violent Albanian.11 A UNDP report in 2003 estimated there were up to 460,000 unregistered and uncontrolled firearms in civilian hands in Kosovo (Early Warning Report, 2003b:35). A reluctance to pay taxes or electricity bills, which is particularly evident in some rural communities, could also be seen as indicating the persistence of traditional attitudes to external authority (Early Warning Report, 2005c:17; 2006a:43). One journalist suggested that ‘despite a huge influx of foreign funds and advisers Kosovo is a place mostly untouched by the mechanisms of formal government, and controlled beneath the surface by a system of patronage and understandings outside of the law’ (Langewiesche, 2008:232).
11 For example, a number of political figures were assassinated during 2001, an Assembly member and a local mayor were murdered and a car bomb exploded in Pristina during 2002, in 2004 a bomb injured the Environment Minister and a grenade exploded outside President Rugova’s house, in 2006 a local deputy mayor was killed and a bomb exploded under the car of the Minister of Internal Affairs. Incidents such as these continue to occur: a Pristina local government official was shot and killed in his office in October 2011. Several key witnesses in war crimes trials against prominent politicians have also died in mysterious circumstances. Sources: UNMIK News Archives; Early Warning Reports; www.balkaninsight.com; King and Mason (2006).
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3.2.2 The other Kosovars: ethnic relations
The UN Security Council’s aspiration, expressed in UNSCR 1244, was that Kosovo would be a multiethnic society and that there would be a role for Serbs and other non- Albanians in the new administration. For the Serb residents of Kosovo, however, this represented a major reversal of fortune. Before June 1999 they had been members of the majority population of the Federal Republic of Yugoslavia, fluent in the dominant language and with privileged access to jobs and opportunities. They now found themselves reduced to being just one of several ‘minority’ groups in an Albanian- speaking majority. Although the provincial administration had also been dominated by Albanian Kosovars during the period of Kosovo’s autonomy in the 1970s and 80s, Serbs had at that time comprised more than 18 per cent of the population, Kosovo’s educated Albanians had spoken Serbo-Croatian and participated in Serb and Yugoslav politics, and Kosovo’s communist government had looked to Belgrade for its authority and financial support (Judah, 2000:13). Now these links with Serbia were severed. Moreover, in many official accounts of the situation in Kosovo, Serbia and the Serbs as a group were attributed with responsibility both for the conflict and for the current underdeveloped state of the Kosovo economy. In these circumstances, their reluctance to accept with any enthusiasm the reality of the changed circumstances and to participate in the new administration is perhaps not surprising. The fact that ethnically motivated violence and harassment against Kosovo’s ethnic Serb population was rife immediately after the conflict and remained a threat provided a further powerful disincentive for peaceful coexistence. Donors’ statements arguing for a complete break with the Yugoslav past, a new set of institutions and laws, and a new economic framework for an autonomous Kosovo could also be said to be inconsistent with calls for active Serb participation in the administration. Some commentators were pessimistic from the start about the prospects for achieving the goal of ethnic harmony. In 1999 Samantha Power reported,
The United Nations remains nobly but anachronistically committed to the idea of getting Serbs and Albanians to live together even as each group still harbors hopes of pushing the other out of power – or out of Kosovo altogether (Power, 1999:20).
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Later USAID noted
Ethnic enmity makes the hope of a tolerant, multi-ethnic society a distant goal (USAID, 2000c:9).
Thus, although equal opportunity, ethnic cooperation and bilingualism were official policies of the UN Mission, the reality was that most of the day to day activities of the majority of international actors, particularly those involved in the civil administration, were almost entirely conducted with Albanian Kosovars. It proved difficult to recruit Serbs to public sector jobs, and very few donors routinely produced working documents in both official languages. While there have been some examples of Serb Kosovars participating in Kosovo politics (Balkan Insight, 15 November 2009), the estimated 120,000 Serbs still living in Kosovo, and in particular those concentrated in the northern border region of Mitrovica, refused to deal with the authorities in Pristina, leaving the central institutions of public administration almost entirely in the hands of Albanian Kosovars.12 The remainder of this thesis is thus concerned largely with the creation of an Albanian Kosovar public administration and does not consider in any depth the role of Serb Kosovars in this process.
3.2.3 Economic conditions
When the international actors arrived after the conflict, the need for economic development was obvious. Despite having mineral resources and fertile agricultural land, Kosovo’s economy had always been less developed than the rest of socialist Yugoslavia (World Bank, 1999b:1). During the 1970s, as an autonomous province, Kosovo received development funds from the Yugoslav government for industrial development, housing, education and cultural facilities. The new industries never became self sustaining, however, and Kosovo remained the poorest part of the Federation with an average per capita income less than a third the national average. Much of the aid provided to Kosovo, it has been claimed, was spent on ‘white elephant’ industrial projects and public buildings and there were suggestions that development
12 Under the Ahtisaari plan for supervised independence (UNSC, 2007b) a policy of decentralisation of government functions to municipalities and the creation of new municipalities to represent ethnic enclaves was implemented in an effort to engage Serbs in local government administration. Recent EU sponsored negotiations between Kosovo and Serbia have also increased Serb participation in Kosovo’s administrative structures.
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money ended up in the bank accounts of the local Albanian communist party leaders (Glenny, 1996:66-67; Judah, 2000:46). Kosovo had also been affected by the economic distortions of the Yugoslav system of ‘self management socialism’ which often generated inefficient and economically unviable investments (Nove, 2003), as well as by the general economic decline across Yugoslavia during the 1980s.
Kosovo’s economy was therefore starting from a low base even before the discriminatory measures, economic sanctions and economic stagnation of the 1990s which resulted in a dramatic deterioration in living standards and the dilapidation of public and private infrastructure. The Serb government centralised major administrative functions in Belgrade and merged local state owned companies and utilities with their Serbian equivalents, shifting economic control and profits out of the territory. Large numbers of Albanians became unemployed and most normal economic activities came to a standstill. Kosovo was also affected, along with the rest of Yugoslavia, by UN sanctions imposed during the conflict in Bosnia and by the Yugoslav government’s inflationary monetary policy which caused hyperinflation, wiping out the value of individual savings (Gligorov, 2000; ICG, 2000; IMF, 2001b, 2001c; World Bank, 2001b; ESI, 2002; Bartlett, 2006). The conflict in the first half of 1999 made the already difficult situation much worse. More than 120,000 houses were damaged, entire villages destroyed, electricity, water and telephone services ceased functioning, and land mines made farm land unusable. Conditions for most Kosovars at the end of the conflict were thus extremely difficult. Even two years later, in 2001, a World Bank survey estimated that 50 per cent of the population were living in poverty and 12 per cent were in extreme poverty (World Bank, 2001b). Kosovo would have been an obvious target for development assistance in any circumstances: the peacekeeping mission significantly expanded the scope for donor involvement.
Kosovo could also be classified as an economy in transition from socialism, similar to other former socialist states in Eastern Europe in the 1990s. As a province within the Socialist Federal Republic of Yugoslavia, Kosovo’s society and economy had been heavily influenced by a socialist administration based on extreme centralisation and hierarchical control, the absence of independent civil society organisations, and economic policies which included controlled food prices, below cost utilities, expansive staffing of state owned enterprises and generous pensions for employees (Arandarenko and Golicin, 2007). However, in a number of ways Yugoslavia had been different from
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other socialist countries in Eastern Europe. Centralised economic planning had been replaced with a more decentralised market-based system incorporating worker self- management, the country had been open to Western markets, and most trade had been with the West (Bartlett, 2006). Yugoslavia had also introduced a post communist transition program, the ‘Markovic’ reforms, in 1988-1990 which had legalized joint stock and limited liability companies and other forms of private enterprise, liberalised international trade, permitted foreign investment and privatised some socially owned enterprises (Bartlett, 2006). However, events following the loss of autonomy in 1989 had stalled the social and economic liberalisation process in Kosovo. Secession had become the main preoccupation rather than political or economic reform (Pula, 2003:202). On the other hand, exclusion from the state controlled economy during the 1990s had forced many Albanian Kosovars into the private enterprise sector to set up numerous small businesses, and a significant proportion of the workforce had sought employment abroad, mainly in Western Europe, where they became familiar with the ways of the market economy.
3.3 The First Months
On 9 June 1999, a military-technical agreement was signed between NATO and the Governments of the Federal Republic of Yugoslavia and the Republic of Serbia on terms for the withdrawal of Yugoslav army and Serbian police forces from Kosovo. The next day UN Security Council Resolution 1244 (UNSCR 1244) was passed and the UN began preparations for a large scale peacekeeping mission which would include taking responsibility for civil administration functions in the territory. Many of those engaged in the peace negotiations may not have fully grasped the magnitude and difficulty of the UN’s task, and events unfolding on the ground from the moment the agreement was signed rapidly made the job much harder. The Security Council debate on Resolution 1244 made few references to the implementation arrangements for the peace agreement. Only the US delegate noted that ‘This is a task of great magnitude to which all Member States will need to contribute’ (UNSC, 1999f:14). The initial concept for the Mission, presented to the Security Council by the Secretary General Kofi Annan two days later, on 12 June 1999, clearly underestimated its complexity. The general assumption seemed to be that all parties – Serb and Albanian - would return to the status quo of three months earlier and the UN would simply take over from the Belgrade government in
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overseeing the administration while starting to re-engage Albanians in the public sector. The UN appeared to be still working on the basis of the model proposed in the Rambouillet Agreement in February 1999, and in other draft plans for a settlement of the conflict, which had envisaged an orderly transfer of responsibility from the Serb government to local autonomous entities. There were several reasons, however, why this approach would not now be possible. The first was the chaos and lawlessness that followed the departure of Yugoslav military forces and Serb police and the flight of most of the Serb officials who had previously administered the territory. The time between the departure of the Yugoslav authorities and the arrival of KFOR troops and UN police also provided an opportunity for manoeuvring by various Albanian political factions to gain control of public resources. These developments made the UN’s civil administration task much more difficult than had been anticipated. Another major reason why the Rambouillet model would not work now, however, was the fact that Albanians, after the ordeal of the past few months, did not want simply to go back to the way things were in March 1999, under Serbian administration. They wanted to reset the clock to March 1989, the eve of the loss of Kosovo’s former status as an autonomous region of the former Yugoslavia and the closest they had been to complete independence.
3.3.1 Serb exodus
At the end of earlier Balkan conflicts of the 1990s, the return of refugees to their former multiethnic neighbourhoods had been slow. The Albanian Kosovars, however, mostly living in tents just across the border in Macedonia or Albania, returned to their homes in a matter of days, taking the international community by surprise. Just as promptly, a large proportion of the Serb population fled. The likelihood of a mass departure of the Kosovo Serb population at the end of the conflict had been identified by a number of people well beforehand. The International Crisis Group, in May 1999, reported that Serbs ‘are very likely to withdraw into Serbia proper as foreign forces move into Kosovo ... any Serbs who remain or return may need to be protected from armed Albanians – this must be a task for KFOR …’ (ICG, 1999a:14) and the UN’s Sergio Viera de Mello, who led a UN ‘Interagency Needs Assessment Mission’ in late May 1999, also noted that the return of Kosovo Albanian refugees could cause the departure of Serb residents from Kosovo and that every effort must be made to assure their security (UNSC, 1999a:6). Nevertheless, the NATO military forces which made up
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KFOR were either not aware of this problem or unable to do anything about it. KFOR’s presence was focused simply on making sure the Yugoslav army left and did not return. The plans rapidly drawn up for the UN Mission included a force of civilian police to keep order, but most of these only arrived much later.13 The ferocity of the revenge attacks on Serbs that followed the departure of Yugoslav forces seemed to come as a surprise to both the UN and KFOR.
young Kosovars manifest a thirst for revenge that sickens not just foreigners but also many among the older generation of Kosovars who still have memories of peaceful coexistence. Ethnic cleansing has been carried out under the very noses and tank barrels of more than 40,000 international troops (Garton Ash, 2000:446).
The daily UNMIK news releases at this time provide a graphic picture of the post conflict situation of Serb Kosovars. In many areas Serbs were living under KFOR guard and in the capital, Pristina, the Serb population was systematically harassed, with one Serb on average killed every night and elderly Serbs evicted from their homes (UNMIK, 1999 ). The violence was successful in persuading many Kosovo Serbs who had thought of staying to leave. By mid August it was estimated that no more than 2,000 Serbs remained in Pristina, which previously had a Serb population of at least 20,000 (UNMIK, 1999). The UN had been instructed to ensure a multiethnic society in Kosovo but several months after the arrival of the UN Mission, Garton Ash concluded:
It is now entirely clear that our intervention had decisively resolved, in favour of the Albanians, a Serb Albanian struggle for control of this territory that goes back at least one hundred and twenty years. This was neither the stated nor the real intention of Western policymakers (Garton Ash, 2000).
The sudden departure of the people who had until then been in charge of almost all public administration functions left a large gap in the workforce and was a serious problem for the UN civil administration. In his first progress report on the Mission, on 12 July, the Secretary General noted that the continuing departure of Serb professionals and managers due to intimidation and a lack of confidence could undermine the work of
13 Only 758 of an expected 3000 UN police had arrived in the first six weeks, some transferred from Bosnia. By early 2000, 1800 UN civilian police were operating in the territory compared to an estimated requirement of 6000.
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the civil administration (UNSC, 1999d). The ongoing antagonism between the Western powers and Yugoslavia exacerbated this situation and precluded any meaningful cooperation between Belgrade and the international administration which would have allowed the orderly transition envisaged in UN documents.
3.3.2 Albanian political factions
Setting up a new government administrative structure in Kosovo may have been easier if there had been a stable and united government-in-waiting. However, this was not the case. The high probability of conflict between the various factions within the Albanian political community had also been widely predicted. During the early 1990s, Albanian Kosovars had largely been united behind their elected unofficial President, Ibrahim Rugova, and the Democratic League of Kosovo (LDK). Later, however, dissatisfaction with Rugova’s non-violent policies led to the creation of the Kosovo Liberation Army (KLA) and other militia groups. The LDK leadership also started to splinter. Diplomats who sponsored efforts to end the conflict found dealing with the Kosovo Albanian side difficult because they appeared to spend more time attacking one another than concentrating on forming a negotiating team and uniting behind a common position (Judah, 2000:170-171). The group that had assembled at Rambouillet in February 1999 included people who ‘had hated each other for years and some of whom had recently been making death threats against the others’ (Judah, 2000:200).
Once NATO’s actions had removed the Serb threat, the factions turned to fighting each other and the outbreak of civil war appeared a real possibility. During the first days and weeks, each claimed authority over local administrative structures. Various branches of the KLA seized effective power over municipal administration and a 'provisional government', led by the KLA’s Hashim Thaci, established offices in Pristina. The parallel government of Rugova’s ‘Republic of Kosovo’ still existed and former LDK Prime Minister, Bujar Bukoshi, who had fallen out with President Rugova but retained control of large amounts of the administration’s funds, returned from exile in Germany still claiming to lead the government (ICG, 1999e:1; Judah, 2000:298-299). Kosovo thus soon had several putative governments, including multiple police forces. In the municipalities it controlled, the KLA collected taxes and customs payments and issued car registration plates. It was also involved in the expanding ‘grey’ economy, trading in oil, cigarettes and alcohol (ICG, 1999e:9; Cohen, 2000:120). These developments were considered to pose a serious threat to UN authority in the early days of the Mission 63 Chapter3: Context
(Hirsh and Terzieff, 30 August 1999). The UN felt it could not be seen to be taking sides with any one of these political factions and did not regard any of their administrative structures as a suitable base on which to build a new government.
3.3.3 Nostalgia for 1989
The 1970s and 1980s, when the province had been a self-governing autonomous region of Serbia, had seemed to many Kosovo Albanians to be the best of times. It had its own Assembly, police force, university and national bank, and power had been primarily in the hands of Albanians (Judah, 2000:44). The hardships of the Milosovic era led many Kosovo Albanians to believe that life would be good again if everything returned to the way it was before 1989 (World Bank, 1999b:4). Reflecting these attitudes, Albanians made it clear that the continuation of the Serbian government’s administrative institutions and laws that existed in the 1990s would not be acceptable. Albanian judges appointed by the UN judicial affairs office, for example, refused to recognize the legal framework that applied in 1999 and instead applied whatever laws were current in 1989, forcing the UN to formally change its policy on applicable law (UNMIK/REG/1999/24, 12 December 1999). Workers who had lost their jobs in former state owned enterprises and government departments in 1989 returned to their offices and reinstated the system of socialist self-management that had applied 10 years earlier. In November 1999 the World Bank noted that, although the local political leadership supported the development of a market-based economy, there was a widespread view that government institutions, utilities and enterprises ought to be restored to what they were, with the guaranteed employment that went with it (World Bank, 1999a:para3; 1999b:4).
3.3.4 The challenge of civil administration
The flight of Serb government officials and workers, the political contests between Albanian factions, and the rejection of Serbian government institutions by the Albanian population meant that the UN could not simply take control of an existing functioning public administration. Neither did it feel able to recognize any of the alternative administrative structures, such as the LDK’s parallel administration or the new ‘provisional government’, without prejudging the political future of the territory. The task facing the various components of the UN Mission was thus much larger than may have initially been envisaged. Rather than simply overseeing a transfer of authority over existing institutions the UN would need to create a completely new civil administration.
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The Secretary General’s report in mid July, after one month of work by the Mission, indicated the extent of the problems facing the civil administration component.
The public service structures of Kosovo are largely inoperative due to a combination of neglect, war damage and the departure of trained staff. The municipalities are functioning inadequately or not at all. While water and electricity are usually available, the telephone lines are down, schools are not open and there is practically no public transport service (UNSC, 1999d:4).
As Timothy Garton Ash noted ‘If you occasionally wonder why we need a state at all, you should visit a place like Kosovo that has none’ (Garton Ash, 2000:435). He described Kosovo as a state of anarchy with unregistered cars and unpoliced drivers, organised crime and up to 22 murders a week. The subsequent ‘Brahimi report’ on UN peacekeeping spelt out the scope of the activities required by a UN Mission in such circumstances. Civil administration operations:
must set and enforce the law, establish customs services and regulations, set and collect business and personal taxes, attract foreign investment, adjudicate property disputes and liabilities for war damage, reconstruct and operate all public utilities, create a banking system, run schools and pay teachers and collect the garbage … (UN General Assembly, 2000b:13).
If this was not demanding enough, others soon arrived with their own ideas about how these tasks should be performed. International organisations, national governments, charities and special interest groups, meeting at donor conferences, set new objectives for the Mission. The goal was soon not simply establishing peace, rebuilding infrastructure and restoring normal living conditions, but also establishing modern institutions, creating a democratic political system, supporting local civil society organisations, building local capacity, promoting gender equality, and ensuring long- term economic development.
3.4 Summary
This chapter has described the background against which the construction of new government institutions took place. Kosovo’s poverty and economic distress were obvious and donors thus readily equated the task of post conflict reconstruction with economic development. Increased material prosperity for all ethnic groups was seen as
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the path to peace. Based on their shared ideas about development, the lead donors assumed that economic advancement would require the adoption of a free market, an open economy, democratic politics, and the creation of new public institutions, laws and processes, and that these changes could be achieved through external assistance and a sufficient amount of funding. However, the situation they found in Kosovo when they arrived presented several significant obstacles to their development plans. There was a complex political and security situation with competing groups claiming to be the legitimate government and a population keen to return to their previous way of life rather than to embrace radical transformation. Donors accustomed to implementing programs of public administration reform found there were no functioning institutions to reform. Although in their statements all donors emphasised the need for local involvement and ownership of the reconstruction program by the people of Kosovo, they saw little possibility of waiting until the people had had a formal opportunity to express their views through elections. In fact they were keen to take advantage of the chance to implement far reaching change with minimal opposition.
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4 International Actors: Donors, Projects and Participants
Many accounts of post conflict reconstruction in Kosovo, and most official reports on the UN Mission, refer to ‘UNMIK’, or more vaguely ‘the international community’, as if it was a single, monolithic entity. UNMIK was, however, comprised of a number of separate organisations, and the wider international presence included hundreds of international bodies, bilateral donors and non-government organisations. Although most of these actors were broadly agreed on the overall goals of the international intervention, as expressed at donor conferences and in World Bank, EU and IMF reports, each had their own motives and objectives, as well as their own ways of working and their own funding limitations and organisational challenges. On the ground in Kosovo, their work, and the relations between them were sometimes influenced by completely unrelated events in other places or at other times. This chapter identifies the main international actors in the fields of public finance management and civil service development in Kosovo after June 1999. It describes their stated objectives, the policies they promoted, their organisation, staffing and procedures, and how these affected their performance in the tasks they set themselves. It also discusses the relationships between the different organisations and groups and how this influenced the outcomes achieved. The role of the Kosovars themselves and the ambivalent relationships between Kosovars and the international actors is also explored.
All international actors in Kosovo were nominally under the overall authority of the UN and many of the perceived failures of the international Mission have been attributed to failures of UN organisation. The first part of the chapter therefore examines the role of the UN in Kosovo over the period, the many criticisms of its organisation and management, and its successes in managing Kosovo’s political evolution. The UN was also primarily responsible, through the civil administration component of the Mission, known as ‘Pillar II’, for establishing public administration management procedures, rules and standards. Pillar II suffered from the same administrative deficiencies that hampered the effectiveness of the UN more broadly, but the civil administration task presented particular challenges, largely due to the lack of the necessary expertise and
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experience among UN personnel and the absence of clear objectives for this role. The EU has been a significant actor in its own right, and was also involved in Kosovo through several separate entities, the two most important being UNMIK’s ‘Pillar IV’ and the European Agency for Reconstruction (EAR). Although these were both EU agencies they were quite distinct in their funding, organisation, staffing and activities. The US government was a significant donor, in spite of the intention of the US Congress to limit US spending on Kosovo’s reconstruction, and the US Agency for International Development (USAID) was particularly important in the development of public finance management. Through its ability to deploy significant funding and large numbers of technical experts quickly it was able to become the lead actor in this field. The UK aid agency, DFID, the World Bank and the IMF also played important roles. The matrix in Figure 4.1 illustrates the involvement of these organisations in public finance and civil service development.14 Their specific activities in these two sectors are examined in detail in the subsequent chapters.
Figure 4 .1 The main actors in public finance and civil service development Public Finance Civil Service
Management Management UNMIK Pillar II EU Pillar IV EAR/ECLO USAID DFID World Bank IMF
14 A number of other organisations also provided advice and financial assistance in these fields, but their contributions were relatively minor and are not discussed in detail. In public finance, for example, the US Treasury Department, the Canadian and Swedish aid bodies (CIDA and SIDA), and the Norwegian government provided a number of technical experts and financial management software. The SIGMA program of the OECD, financed by the EU, has provided advice on aspects of public administration and prepared assessment reports for the European Commission. The OSCE established an Institute for Civil Administration (ICA) which provided training to municipal government employees and later became the Kosovo Institute for Public Administration (KIPA). The UN Development Program (UNDP) also contributed to the establishment of KIPA and since 2004 has supported a ‘Capacity Building Facility’ which funds small scale on-the-job assistance for senior civil servants.
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4.1 The United Nations Mission in Kosovo (UNMIK)
4.1.1 The establishment of UN administration
The Mission in Kosovo was a departure in peacekeeping activities for the UN. During the Cold War, most UN peacekeeping missions had been relatively limited in scope, largely involving ceasefire monitoring activities (UN General Assembly, 2000b:3). None had involved significant democracy promotion or institution building elements (Dobbins, 2004:83). The relatively successful UN Mission in Cambodia in the early 1990s was the first in which the UN had been nominally responsible for civil administration functions, but actual UN authority over the Cambodian government administration had been limited (Dobbins, 2004:83). The UN’s reputation in peacekeeping operations declined significantly during the 1990s as a consequence of failures in Somalia and Bosnia-Herzegovina where poorly resourced UN forces had been unable to impose peace (Dobbins, 2004:81). Criticisms of previous UN performance, such as its slowness to deploy and the uneven quality of its police and civil administration personnel, have been acknowledged by the Panel on United Nations Peace Operations (UN General Assembly, 2000b). Similar deficiencies in UN performance, and under-funding relative to the agreed mandate, have been a constant feature of UN peacekeeping exercises over several decades (Dobbins, 2004:100).
It was against this background that the international community began planning for the post conflict period in Kosovo. It was by no means inevitable that the UN would take the lead role in this exercise. In the complex negotiations between NATO and the Federal Republic of Yugoslavia leading up to the peace agreement, the idea that the UN should be responsible for administering Kosovo emerged more or less at the last minute. The wording of the agreement was the culmination of more than twelve months of diplomatic negotiations on the situation in Kosovo. Beginning with discussions led by Richard Holbrooke in early 1989, and continuing through the ‘Hill process’ in late 1989 and the Rambouillet Conference in February 1999, numerous peace proposals had been drafted and debated, each involving some form of civilian implementation mission, but none involving the United Nations (Weller, 1999). A number of international implementation missions had already been sent to Kosovo during that time including the Kosovo Diplomatic Observer Mission (KDOM) in mid 1998 and the Kosovo Verification Mission (KVM), established under the auspices of OSCE, in October 1998 (Judah, 2000; Bellamy, 2002).
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In February 1999, the detailed peace settlement proposal developed at the Rambouillet Conference in France, which was rejected by the Yugoslav government, did not envisage a role for the UN, or for any international civil administration. It assumed that all existing laws and institutions would remain in place and an OSCE appointed Civil Implementation Mission, working with a Serb-Albanian Joint Commission, would oversee an orderly transition to an autonomous Kosovo government and administrative structure (US Department of State, 1999). The Rambouillet concept was developed at a time when both the Serb government and Albanian parallel administration were in place and relatively stable and it would obviously only have been effective with the cooperation of the Serbian authorities and both the Serb and Albanian populations in Kosovo. By the time the final peace agreement was signed, however, the situation in Kosovo had changed considerably, so this approach was no longer feasible. An ICG report published in May, during the negotiations on the peace agreement, recommended that there should be a single lead agency for the post conflict international presence but suggested that the OSCE should be given this role arguing that ‘the UN has too often failed to provide decisive leadership in troubled times in the Balkans’ (ICG, 1999a:7). The OSCE itself supported this proposition and the struggle between the OSCE and the UN prior to the peace agreement over who should lead the post conflict administration generated strained relations between the two bodies subsequently (Jones, 2002:102; Covey, 2005a:80).
The diplomatic alliance that had supported NATO military involvement had avoided raising the Kosovo conflict in the UN Security Council because Russia and China would certainly veto any resolution authorising action against Yugoslavia (Albright, 2003:385). A deterioration in the relationship between the Clinton administration and the UN at that time has also been suggested as a factor that kept the UN out of the negotiation process (Hirsh, 1999:5; Jones, 2002:103). However, as the hostilities escalated, the Yugoslav army indicated a willingness to agree to a settlement that involved a UN Mission (Judah, 2000:278; Bellamy, 2002:190). Madeline Albright has suggested that Milošević was too ‘stubborn and emotional’ to give in to NATO but would find it less humiliating to negotiate with the UN (Albright, 2003:420). UN involvement was also necessary to secure Russia’s agreement to the post conflict arrangement (Bellamy, 2002:200; Jones, 2002:102-103; Albright, 2003:420). It was thus the UN’s advantages in terms of international legitimacy and perceived impartiality
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that gave it the edge over other contenders to become the lead institution in the post conflict phase rather than considerations of administrative competence. Another benefit of UN Security Council involvement was that neither the Belgrade government nor any of the Albanian Kosovar leaders had to agree the text of the agreement (ICG, 1999b:1). The reference to international civil and security presences ‘endorsed and adopted by the United Nations’ was formally incorporated into a draft document at a G8 meeting in early May 1999, and this text formed the basis of the agreement with Yugoslavia and the drafting of Security Council Resolution 1244 in June which included authorisation for a civil administration presence under UN auspices (Bellamy 2002:198, Judah 2000:276).
4.1.2 UNMIK structure and organisation
Like many other aspects of the international response to the Kosovo crisis, the provisions of UNSCR 1244 were influenced by the experience in Bosnia where it was considered that the implementation arrangements for the Dayton Agreement had suffered from ‘diffusion of responsibilities between implementing agencies who have too often been rivals rather than partners’ (ICG, 1999b:4-5). The UN Mission in Kosovo (UNMIK) was thus set up, in June 1999, with four ‘Pillars’, each led by a different international body, but all reporting to the UN appointed Special Representative of the Secretary General (SRSG). The Pillar structure and the concentration of civilian powers under the UN, it was suggested, would make the Mission ‘less vulnerable to rivalries among organisations and conflicts of institutional dignity’ (ICG, 1999b:4-5). The four Pillars were thus designed more to address concerns about the institutional ‘turf’ of the multilateral organisations than to create a clear division of labour (DANIDA, 2004:71). The division of responsibilities between the OSCE, the UN and the EU was decided through high-level political negotiations in European capitals, rather than on the capabilities of each organisation (Jones, 2002:103). Appointments to senior positions in the Mission were also based on achieving national representation, with the SRSG role, until recently, always being assigned to someone from Europe, while the Principal Deputy SRSG was nominated by the US.
The UN was responsible for overall management of the Mission. Its responsibilities were extensive and included diplomatic relations with Yugoslavia and security and human rights issues as well as civil administration functions. The budget presented to the General Assembly in October 1999 proposed a UN contingent of 1,269 international
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officials, more than 3,500 local personnel and 4,700 civilian police (UN General Assembly, 1999b). The Office of the SRSG, with 138 international staff, would deal with all the functions appropriate for the UN’s senior diplomatic representative including political affairs, military and regional liaison, planning and coordination, legal advice, public information and an office of gender affairs. More than 2,000 people, around 40 per cent of the UN staff, were dedicated to providing administrative and technical services to the Mission, including budget and cost control, human resource management, payroll, procurement, language services, property control, registry and archives, contract management, medical services, engineering services, information technology, communications and transport. These administrative staff supported another 2,700 personnel who were assigned to provide more or less the same services for the civil administration of Kosovo (UN General Assembly, 1999a:3). The budget proposal also revealed some overlap and boundary vagueness between the functions of the different institutional Pillars of the Mission which became a difficulty during the first few months of the international presence.
During preparation for the Mission, an ICG report warned that ‘UNMIK, OSCE, and other international officials should remain mindful that their mission is not to establish a colonial administration but rather to help the people of Kosovo get what they need to run their own territory’ (ICG, 1999c:16). Nevertheless, the organisation of the Mission did resemble a colonial administration. Foreigners were placed in positions of authority to make policy and perform administrative functions, municipal and regional UN administrators were appointed to oversee and sometimes veto the activities of local administrations, and Kosovar political leaders were co-opted onto advisory councils which had, at least initially, limited real decision-making power.15 A succession of SRSGs have been responsible for leading the Mission since its inception, each with their own style of management and their own ideas about how the territory should be handled. Until the appointment in 2011 of Farid Zarif, an Afghan national and career UN diplomat, all SRSGs were from Europe. Most served for around 18 months, although Hans Haekkerup and Harri Holkeri both left before the end of their term, and Soren Jessen-Petersen, arguably the most successful SRSG, served for two years. There
15 UN officials themselves strongly rejected this characterisation of their role as colonial, however, and were very sensitive to such accusations (Mason, 2006)[IU3].
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were significant changes in policy and direction with each change of SRSG, particularly with regard to relations between UNMIK and the local population.
Figure 4 .2 UN Special Representatives in Kosovo since 1999 July 1999 to January 2001 Bernard Kouchner, France January to December 2001 Hans Haekkerup, Denmark February 2002 to July 2003 Michael Steiner, Germany August 2003 to June 2004 Harri Hermani Holkeri, Finland August 2004 to June 2006 Soren Jessen-Petersen, Denmark September 2006 to June 2008 Joachim Rucker, Germany June 2008 to July 2011 Lamberto Zannier, Italy August 2011 to present Farid Zarif, Afghanistan
4.1.3 UN performance
The UN encountered serious organisational and logistical difficulties from the start of the Mission. These were essentially the same problems encountered by previous UN peacekeeping efforts (Dobbins, 2004:100). While other international bodies, such as UNHCR and the OSCE, had been active in Kosovo before the conflict and therefore already had significant in-country resources and on-the-ground experience, the UN had to mobilise its Mission with limited prior planning in a very short period of time. A month and a half after the end of the conflict, only around one third of the expected UN civilian administrators were in place (Hirsh and Terzieff, 30 August 1999:27), three months after the conflict UNMIK did not have a presence in all of the municipalities, and a year into the Mission the UN had deployed just 292 professional staff out of an authorised strength of 435 (King and Mason, 2006:55). Although the situation improved subsequently, the ICG noted that staffing was a constant problem, largely due to cumbersome UN personnel policies which kept UNMIK from filling more than about 60 per cent of its authorised positions (ICG, 2000:3). The number of international UN staff engaged in the Mission peaked in the second year, declining progressively each year thereafter until the ‘reconfiguration’ in 2008 which reduced the UN to a minimum residual presence. The chart below shows the total numbers of international and local civilian UN staff, not including UNMIK police, over the period from 1999 to 2010.
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Figure 4 .3 Total International and Locally Engaged UN Staff, 1999-2010 (excluding Police)
4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 - 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
International civilian staff Local staff
Source: UN General Assembly annual reports on the Budget for UNMIK, 2001-2011
In addition to the initial mobilisation problems, the administrative traditions of the UN bureaucracy have been frequently identified as an obstacle to the Mission’s effectiveness. Magalachvili, who worked with UNMIK as a Municipal Administrator, accuses UNMIK of ‘unimaginative, pedantic and self serving bureaucratic management’ and is critical of the UN’s ‘Byzantine’ personnel system and its failure to prepare staff for missions (Magalachvili, 2005:122). Other accounts of the early phases of UNMIK are equally scathing in their criticisms of UN performance in this regard (Cohen, 2000; Pula, 2003; Hysa, 2004; Yannis, 2004). The fact that the UN bureaucracy is required to reflect the interests of all members of the General Assembly has been identified as a particular problem. Wedgwood and Jacobson, argue that:
The jealousies of member countries have led to a centralized model of administration and a reluctance to delegate financial decisions to UN mission chiefs, which does not favour the real time delivery of public goods in distant locales … The overlay of redundant officials, the rate-limiting pace of the most laggard political process, the ability to play one agency against the other, and the absence of singular responsibility for the mission, all conspire to hobble the project of reconstruction (Wedgwood and Jacobson, 2001:2).
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Holohan, who also worked in UNMIK’s municipal administration bureaucracy, suggests that
Many of the operations of UN agencies are hostage to special interest international politics and are ransomed to whims of the member states that provide financial support (Holohan, 2005:128).
As a result ‘the UN civil administration was poorly equipped to function in an environment like Kosovo’ (Holohan, 2005:128). Organisational problems she identifies include a hierarchical structure in which the priorities of the centre were often far removed from the reality on the ground, highly centralised bureaucratic procedures, slow decision making, and limited leeway for officers in the field to show initiative. She also notes a perception that people were hired through contacts or inside information rather than on merit, and that national representation in staffing often took precedence over merit.
People come to the mission not based on their individual skill and ability but based on the fact that they’re from a certain country (Holohan, 2005:130).
These views on UN staffing and competence were repeated in many fieldwork interviews, including a suggestion that some of the people seconded by national governments had been sent to Kosovo because they posed a problem at home [IA16]. A number of interviewees, both internationals and Kosovars, expressed the view that some UN officials were corrupt [IA16, IA7, KD4, KG3].16
4.1.4 Political achievements
In spite of the many administrative shortcomings noted repeatedly in accounts of the Kosovo Mission, UNMIK nevertheless had some positive achievements, particularly in the sphere of political development. Since June 1999 Kosovo has passed through several distinct phases of political evolution marking a progressive transfer of responsibility from the UN Mission to local authorities. Understanding these political developments is relevant for assessing the extent to which donors and foreign advisers can claim responsibility, or should be held accountable, for the successes and failures of
16 A few UN officials have indeed been prosecuted for fraud and misappropriation, but so have staff of other international organisations working in Kosovo. Most accusations of corruption have never been tested in court and may be based on rumour or misunderstanding rather than fact.
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the post conflict period, and to what extent local actors had opportunities to influence policies and outcomes. The following brief account of these developments draws on information from a range of sources including the Secretary General’s reports on the Kosovo Mission to the UN Security Council,17 UNMIK News Archives,18 the donor sponsored ‘Early Warning Reports’ on political and economic developments,19 and ICG reports and online news sources. A more detailed timeline of significant events and developments is provided in Annex 2.
The first six months (July-December 1999) In spite of the slow arrival of the bulk of UN personnel, a great deal was achieved in the first few months of the Mission. A small team of UN officials arrived on 13 June, within three days of the passage of UNSCR 1244, and during June and July they liaised with Albanian and Yugoslav politicians, established regional and municipal administrations, appointed local judges and prosecutors, and re-established local radio broadcasts, as well as dealing with the numerous international organisations, NGOs and journalists who also arrived in the province at that time. Bernard Kouchner took up the job of SRSG in July 1999. The major preoccupations of the Mission during this period were the humanitarian needs of returning refugees, preventing inter-ethnic retribution, and dealing with the emerging political violence between Albanian factions. The SRSG also had to find time for important visitors including US Secretary of State, Madeleine Albright, British Prime Minister, Tony Blair, and the Foreign Ministers of France and Germany, who all arrived during July and August.
The most significant political initiative during this phase was the establishment of a Kosovo Transition Council (KTC), a consultative body intended to allow participation of the people of Kosovo in the decisions and actions of UNMIK. The KTC was to comprise representatives of Kosovo’s major political factions, however, at this time relations between the newly arrived international presence and the Kosovar provisional government were described as ‘unstable, unfriendly and insecure’ (ICG, 1999e:9). Several meetings of the KTC were held, but it was not until August that the two major
17 Available from http://www.unmikonline.org/Pages/UNMIK%20Key%20documents.aspx, and also http://www.un.org/Docs/sc/, accessed 28 July 2012.
18 www.unmikonline.org, accessed May 2008
19 http://www.ks.undp.org/?cid=2,169, accessed 28 July 2012
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contenders for political leadership, the LDK’s Ibrahim Rugova, and Hashim Thaci, now leader of the Democratic Party of Kosovo (PDK), joined the Council (ICG, 1999e:8). This was regarded as a major step forward by UN officials (Covey, 2005b:112). Demobilisation of the Kosovo Liberation Army and its reconstitution as the non- military Kosovo Protection Corps was completed in September.
The Joint Interim Administrative Structure (January 2000 to March 2002) In December 1999, the UN Mission reached agreement with Kosovar representatives to set up a Joint Interim Administrative Structure (JIAS) (UNMIK Regulation 2000/1) which enlarged the KTC consultative body to represent a wider range of political and community interests, and set up an eight member Interim Administrative Council (IAC) consisting of four representatives from UNMIK and four Kosovars, all to be appointed by the SRSG, which would make recommendations on regulations and policy guidelines. In addition, a number of Administrative Departments were created, to be jointly led by appointed Co-Heads, one Kosovar and one international. In exchange for positions in the new administrative structure, local political leaders were expected to give up their existing parallel governments, including the PDK-dominated ‘Provisional Government’ and the LDK ‘Republic of Kosovo’ (UNMIK/REG/2000/1, 14 January 2000, para 1). The JIAS brought some order and chain of command into what had appeared in initial UN plans to be a confused allocation of responsibilities. The KTC, IAC and Administrative Departments in effect created an unelected interim government with a parliament, a cabinet and an executive administration. Kosovars were, however, outnumbered by internationals in all these bodies.
Provisional Institutions of Self Government (February 2002 to February 2008) In 2000, SRSG Kouchner proposed a contract or ‘pact’ for provisional self government including an interim constitution and an interim elected government. This continued the idea of granting greater self government and autonomy in exchange for good behaviour on the part of Albanian Kosovars which had been initiated with the JIAS agreement and has been a continuing theme in the international community’s relations with Kosovo’s political leaders. In May 2001, Kouchner’s successor, Hans Haekkerup, concluded negotiations on a ‘Constitutional Framework’ and ‘Provisional Institutions for Self Government’ (PISG). Kosovo-wide elections for a Parliamentary Assembly were held in November 2001. Under the proportional representation system developed for the territory by the OSCE, no single party won enough seats to form a government. After
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three months of negotiations, a coalition was formed comprising the three major parties, the LDK, PDK, and the Alliance for the Future of Kosovo (AAK). Ministerial responsibilities and senior positions in the new administration were divided between the parties just as they had been in the JIAS. Ibrahim Rugova, leader of the LDK, became President, and Bajram Rexhepi, from the PDK, was appointed Prime Minister. The JIAS administrative departments became PISG Ministries.
The new government commenced work in February 2002 but was not initially very effective. Few of the members of the Assembly had any previous experience in public administration and, after ten years of resisting Serb authority, they were more familiar with the politics of opposition than constructive government (King and Mason, 2006:165). Moreover, most of the areas of policy that the Albanian politicians considered important – defence, security, policing, external affairs, justice, and many aspects of economic policy – were reserved for UNMIK which operated as a parallel government and had final authority over PISG legislation. In 2002, the next SRSG, Michael Steiner, established the concept of ‘Standards before Status’. The ‘Standards’ set out eight policy areas against which progress in Kosovo was to be measured as a precondition for talks on resolving Kosovo’s ‘final status’.
The crisis of March 2004 In March 2004, a sudden outbreak of violence against Serb Kosovars, which spread to attacks on international forces, stimulated a review of strategy. Kai Eide, a Norwegian diplomat, was commissioned to report on changes required to UN Mission policies. Eide’s report questioned the ‘Standards before Status’ policy, suggesting that it had led to frustration and stagnation and recommended overall reform of UNMIK including setting a clear goal for the Mission, accelerating the transfer of competencies to the PISG, and increased international effort to improve local capacity for governance (UNSC, 2005). This was one of the first significant discussions by the UN of the need for capacity building. Relations between UNMIK and the Kosovo government improved considerably in the period following the implementation of Eide’s recommendations. Another general election was held in October 2004. This time the coalition government that resulted comprised only two of the three main political parties, the LDK and AAK, leaving Thaci’s PDK to form an opposition, a role it pursued with enthusiasm (Early Warning Report, 2005b, 2005c). A third general election was held in late 2007. This time the coalition was formed by the LDK and the
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PDK with the AAK in opposition. PDK leader Hashim Thaci became Prime Minister. A joint LDK/PDK government must be seen as a significant improvement on the situation in 1999 when members of the two parties were reportedly reluctant to be in same room with each other.
Supervised Independence (February 2008 to September 2012) In October 2005, the UN Security Council agreed to sponsor talks between Serbia and Kosovo on the question of the final status of the territory, coordinated by Maarti Ahtisaari, a Finnish politician. After a year of discussion, however, the parties failed to reach an agreement. The Albanians refused to accept anything less than full independence: Serbia would accept almost anything but independence. In March 2007, Ahtisaari reported back to the Security Council that agreement was impossible and proposed a ‘supervised independence’ arrangement, the ‘Ahtisaari Plan’, under which the EU would take over from the UN in ensuring the rule of law, protection of minorities, human rights, and preservation of cultural and religious heritage in an independent Kosovo (UNSC, 2007b). Security Council Resolution 1244 had affirmed the sovereignty and territorial integrity of the Federal Republic of Yugoslavia, of which Serbia was the successor state (UNSCR 1244, 10 June 1999, preamble page 2), and a new resolution would be necessary to implement the plan. The Kosovo government was prepared to accept this compromise but Serbia was not and had the support of Russia in the Security Council, thus ensuring that no UN resolution to implement the Ahtisaari plan would be approved and UNSCR 1244 remained in effect.
On February 17, 2008, the Government of Kosovo unilaterally declared independence but nevertheless committed itself to implementing the supervised independence arrangement. This step had been widely anticipated and a number of major powers immediately recognized the new country, most notably the US, Germany and France. The UN Mission remained in place, but in November 2008 the Security Council adopted the Secretary General’s proposal to significantly reduce UNMIK’s size and scope of operations and to transfer many of its functions to the EU law and justice mission (EULEX). An International Steering Group, representing 24 European states and the US, and an International Civilian Office (ICO), were established to oversee implementation of the Ahtisaari Plan. The reconfigured UN Mission was reduced to 146 international staff and several hundred local personnel engaged primarily in monitoring political developments and minority community welfare. The exact number of countries
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that have so far recognised Kosovo’s sovereignty is unclear but has gradually increased.20 Kosovo has also been accepted as a member of the IMF and the World Bank. The International Steering Group formally ended the period of supervised independence in September 2012 (Balkan Insight, 2 July 2012).
From a political perspective, therefore, UN supervision of Kosovo following the conflict can be seen as a success. Peace has been maintained, elections are held regularly, and relations between Serb and Albanian Kosovars have been stabilized, although not resolved. The UN has withdrawn most of its personnel and no longer has close involvement in the governance of the territory. On the other hand, it can also be argued that some of the patterns of behaviour established by the UN Mission in pursuit of these outcomes continue to influence political attitudes and events in Kosovo. The distribution of Ministries and positions in the newly formed administrative organs between political parties under the JIAS, and later the PISG, for example, and the UN’s own weak human resource management performance, set precedents for the Kosovo administration that continue to challenge efforts to establish the concepts of merit appointment and apolitical administration. The electoral system adopted under international administration to share power between political factions has, as the discussion of public administration in Chapter 6 shows, contributed to making government ministries into political territories, hampering policy implementation and further undermining the idea of merit-based employment. The UN may also have perpetuated a certain level of tolerance of administrative incompetence: while many UN staff were no doubt capable and efficient, the volume of negative comments about UN bureaucracy and processes suggest significant inefficiency and ineffectiveness in the UN-led administration, which would not go unnoticed by Kosovar observers.
4.2 TheUN’sOfficeofCivilAffairs(PillarII)
4.2.1 Establishment, structure and activities
The political developments described above were the background against which international actors worked to establish new, modern and effective public administration
20 The Kosovo Ministry of Foreign Affairs reports that 96 countries have recognised Kosovo’s independence (http://www.mfa-ks.net/?page=1,33, accessed 16 January 2014) but other sources claim the total is 105 (http://www.kosovothanksyou.com/, accessed 16 January 2014).
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institutions in Kosovo. The major share of responsibility for doing this fell to the Civil Administration component of the UN Mission which was nominally responsible for most of the functions of the Kosovo public administration. However, just as it had not been inevitable that the UN would lead the post conflict intervention, the wording of UNSCR 1244 did not make it inevitable that the UN bureaucracy would itself dominate civil administration activities. There may have been other options. The OSCE already had a presence and at one stage had been expected to play the lead role after the conflict (Jones, 2002:102). The EU had committed itself to coordinating ‘reconstruction’ and could have been given a broader role (ICG, 1999a:7). However, in plans for the post conflict arrangements, the UN took the task of managing core civil administration functions. This decision had little to do with strategy about peace implementation or the comparative advantages of the participating organisations (Jones, 2002:103). Albright argues that ‘the Alliance had turned to the UN for help in an area where that organization had proven expertise – civilian reconstruction.’ It is not clear what proven expertise she is referring to (Albright, 2003:424). The ICG took a different view and argued that ‘the UN bureaucracy lacks political sophistication and is also too heavy, providing an extra layer of decision making and paperwork between the field operation and its sponsoring governments’ (ICG, 1999b:5).
The UN established an Office for Civil Affairs to manage this component of the Mission, which was designated as Pillar II, and comprised 650 international UN officials and more than 2,000 locally engaged UN staff reporting to a Deputy SRSG. The Office was to be responsible for:
overseeing and where necessary conducting a number of civil affairs functions…as well as supporting the restoration and provision in the short run of basic public services (UNSC, 1999b: para 10).
This brief description significantly understated the amount of work that would be required and the extent of the issues that would need to be addressed. Pillar II’s responsibilities encompassed public utilities, agriculture, environmental protection, industry, trade and commerce, police and judicial affairs, transport, education, social welfare, health, plus 29 Municipal Administrations and five Regional Offices. Early in the Mission a number of Joint Civilian Commissions (JCCs) were established to ‘facilitate the process of a mediated and controlled transition to integrated public institutions and to address such contentious issues as administration and staffing of
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various public facilities’ (UNSC, 1999d:4). JCCs were established for the health, education, municipalities, telecommunications, and power sectors. The description of the role of these JCCs is reminiscent of the Joint Commission envisaged in the Rambouillet proposal several months earlier and appears to assume that there would be a set of public institutions ready for ‘mediated and controlled’ transition. However, as noted previously, this was far from the actual situation by June 1999. Former public service structures were inoperative and political factions had captured many public facilities. Nevertheless, during the first six months of the Mission, the UN civil administration reopened hospitals under international management, restored post office services and rubbish collection, and opened schools at the start of the new school year (UNSC, 1999c, 1999e).
At the end of 1999, however, Garton Ash complained that ‘Six months after the world moved in the province still has nothing that could be called a proper government’ (Garton Ash, 2000:450). In fact, to some people it was not clear that the UN understood that one of its responsibilities was to establish a government. The Mission in Kosovo, and the similar exercise in East Timor several months later, were the first to involve the UN in providing comprehensive civil administration functions. In the absence of a local regime considered acceptable to the international community, this meant that the UN was, in effect, the government in these territories. To those with experience in public administration, including SRSG Bernard Kouchner, with his background in the French government, the implications of this were clear. However, the UN headquarters bureaucracy in New York appeared to many to be reluctant to accept this role, and most UN staff assigned to the Mission lacked the administrative experience to fulfil it. A former Pillar IV adviser reported that, at one point during this period, Kouchner and his East Timor equivalent, Sergio Viera de Mello, had written a joint letter to the UN Secretary General pointing out that in both places the UN was in effect the government and ‘had to be able to do the things a government does’ [IA16].
I was constantly confronted with the situation that this decision cannot be made because it is political, when clearly we were standing in loco the politicians so the political decision had to be made, and the structure was there to make that decision [IA16].
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This lack of clarity about the role of the Pillar II civil administration and its reluctance to take decisive action on policy issues goes part of the way to explaining the subsequent failures of this part of the UN’s work.
With the creation of the JIAS, at the start of 2000, UN officials in Pillar II became responsible for most of the new administrative departments, nominally sharing their authority with politically appointed Kosovar counterparts, although the extent of actual day-to-day interaction between the international Co-Heads and their Kosovar equivalents has been questioned [IA16], and international officials generally remained in control of policy [IU3]. Pillar II’s responsibilities included overall management of Kosovo’s civil service, including developing legislation and policy on civil service administration. However, as the account in Chapter 6 shows, very little civil service legislation or policy was produced during this period. In 2002, the JIAS administrative departments became Ministries of the PISG. International officials stayed on, however, as ‘Principal International Officers’, and in some cases effectively continued to run the Ministries due to the lengthy time taken to appoint permanent secretaries and other senior posts. International UN officials held management positions and played dominant roles in developing policy and legislation for several more years. Eventually, progressive reductions in the UNMIK budget led to restructuring and downsizing of the Civil Administration Pillar and accelerated the pace of the transfer of responsibility to Kosovar staff (UNSC, 2002d:para 8; UN General Assembly, 2006b). In 2006, however, UNMIK formally withdrew its staff from most Ministries and announced it would no longer perform executive governance functions. From then on responsibility for public administration policies and legislation rested with the PISG ministries, and UN staff simply monitored implementation of the ‘Standards for Kosovo’ and advocated for minority rights, women’s rights and good government through a new Central Governance Unit (UN General Assembly, 2006a). After Kosovo’s unilateral declaration of independence in February 2008, UNMIK closed its Civil Administration component and ceased having direct involvement in public administration (UNSC, 2008).
4.2.2 Pillar II performance
Pillar II suffered from the same organisational problems and administrative constraints identified in relation to the UN Mission as a whole, including highly centralised bureaucratic procedures, slow decision-making, questionable recruitment procedures and a lack of clear objectives. The UN has acknowledged that few of those recruited to
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UN peacekeeping missions had experience in public administration (UN General Assembly, 2000b:21-22). The civil administration in Kosovo was staffed by a mixture of career international officials, short-term contract staff and UN volunteers, as well as personnel seconded from UN member governments, and many were on relatively short- term contracts. On the other hand, some UN appointees remained in place for a very long time21 and, as has been noted in relation to previous UN peacekeeping missions, UN administrators sometimes showed reluctance to turn power over to local authorities (Dobbins, 2004:87). Some non-UN personnel interviewed during fieldwork had a low opinion of the competence and performance of the UN staff working in Pillar II.
They have worked in areas where process was much more important than results, where there was never any focus on results, just inputs [IA16].
They were earning pretty good salaries and I don’t think there were many performance indicators for them [IA9].
One technical adviser described senior UN staff as ‘the ones who would throw their arms around but nothing would ever get done and they’d procrastinate about everything’ [IA7]. These deficiencies in UN staff capacity and organisational competence inevitably limited what the Mission was able to achieve in the field of civil administration development.
4.3 The European Union in the Western Balkans
The EU has been the largest donor to Kosovo’s reconstruction and is today the dominant international actor. In many ways, however, its activities have been more concerned with the development of the EU than the development of Kosovo. The response to the 1999 conflict has been identified as a turning point in EU foreign policy and its relations with the region (Papadimitriou, 2001; Torbiorn, 2003:174; Shepherd, 2009; Koeth, 2010). It certainly marked a significant step in the gradual evolution of the Union from its origin as a limited free trade agreement in the 1950s to a comprehensive economic and political union, if not quite yet a formal federation (Torbiorn, 2003). The EU was not only a significant actor in its own right but also established a number of separate agencies with quite different functions, policy priorities, and administrative
21 Several UN international staff interviewed in Kosovo in 2010 had been working there continuously since 1999, however some non-UN personnel have also remained for an extended period.
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methods. Between 1999 and 2008, the EU was in charge of a major component of the UN Mission, known as Pillar IV, which was responsible for ‘economic reconstruction’. It also provided more than €1.1 billion in aid through the European Agency for Reconstruction (EAR). Since independence in 2008, the EU’s Law and Justice Mission, EULEX, has taken responsibility for some of the work previously done by UNMIK, supporting and overseeing the police, the justice sector and the customs service, despite the fact that the UN still, technically, retains responsibility for these functions under UNSCR 124422. The European Commission Liaison Office (ECLO) replaced EAR as the source of funding for technical assistance and development projects23. Table 4.1 shows the estimated total funding provided by the EU to Kosovo up to 2010 including funding through the Community Assistance for Reconstruction, Development and Stabilisation (CARDS) program, the Instrument for Pre-Accession Assistance (IPA), which replaced CARDS, support for UNMIK Pillar IV, and humanitarian assistance.
The following sections describe the activities and effectiveness of each of the main EU agencies, beginning with an overview of the EU’s internal development and the ways it has influenced the EU’s involvement in Central and Eastern Europe and in the Balkans. Details of projects in public finance and civil administration implemented by EU agencies, and their outcomes, are discussed in Chapter 5 and Chapter 6.
Table 4 .1 Estimated Total EU Support to Kosovo, 1999-2010 €million CARDS and other EC support 1,249 Support to UNMIK Pillar IV 136 Exceptional financial assistance (including budgetary support) 117 Humanitarian assistance (for the period 1999-2002) 443 IPA 2008 – 2010 258 EULEX 2009-2010 330 Total funding 2,533 Source: European Commission, 2008, Multi-annual Indicative Planning Document for Kosovo 2008-2010; http://www.eulex-kosovo.eu/docs/info/basic/Basic-ENG.jpg
22 http://www.eulex-kosovo.eu/, accessed 5 May, 2012.
23 http://www.delprn.ec.europa.eu/?cid=2,1, accessed 14 January 2009. Following entry into force of the Lisbon Treaty, the EU again reconfigured its representation in Kosovo. In late 2011, ECLO and the EU Special Representative’s office joined to become the European Union Office in Kosovo (http://eeas.europa.eu/delegations/kosovo/index_en.htm, accessed 6 July 2012).
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4.3.1 The Europeanization objective of EU assistance
EU activities in Kosovo, and in the Western Balkans more generally, need to be understood against the background of the progressive development of the EU’s ‘internal market’ as well as its prior involvement in the transition of former socialist Eastern European countries to a market economy and eventual EU membership. An important milestone in the evolution of the Union as a single market was the 1986 ‘Single Europe Act’ which intensified the process of removing all barriers to trade and commerce between EU member states and required the ‘approximation’ or harmonisation of all market-related legislation in member states (Torbiorn, 2003:60-61). In 1992, the Maastricht Treaty established the basis for monetary union and also initiated a Common Foreign and Security Policy (CFSP) which enabled the EU to act externally to promote democracy, the rule of law and human rights (Torbiorn, 2003:86- 88).
The internal market concept generated the acquis communautaire, an 80,000 page volume of EU directives which must be adopted into the legislation of each EU member. Accepting and enacting all elements of the acquis is thus a precondition for EU membership: a candidate country must translate EU legislation into national legislation and show that it is implemented and enforced effectively through the appropriate administrative and judicial structures (European Commission, 2013a). This process of EU enlargement through adoption of the EU acquis was successfully applied to newly democratic states of Central and Eastern Europe after the fall of the Berlin Wall in 1989. The EU signed ‘Europe Agreements’ with former communist countries, facilitated access to the European market for their exports, and coordinated assistance from other donors (Torbiorn, 2003:82). The EU’s engagement in these countries enabled the political, legal, administrative and economic reforms needed to comply with the acquis and ultimately their accession to the EU (Knaus and Cox, 2005).24 A similar approach is now being extended to the countries of the Western Balkans, including Kosovo, with the aim of drawing these countries ‘closer to the perspective of full integration into EU structures’ (European Commission, 1999c:1). Compliance with the
24 The Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovakia and Slovenia joined the Union in 2004. Romania and Bulgaria joined in 2007. (http://ec.europa.eu/enlargement/the-policy/from-6-to-27-members/index_en.htm, accessed 5 July 2012)
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requirements of the EU ‘acquis’ has thus come to dominate public sector policy development in Kosovo.
While some authors have praised this EU approach to state building, arguing that it has stimulated revolutionary changes in laws, policies and institutional structures in candidate and potential candidate states such as Turkey, Romania and Bulgaria (Knaus and Cox, 2005), others have criticised the asymmetrical, hierarchical and coercive relationship between the EU and enlargement candidates, and the increasingly demanding reform agenda (Dimitrova, 2002; Anastasakis, 2005:77). The Madrid Council, in 1995, introduced conditions for post-communist transition countries that had not been applied in previous enlargements. These include the ‘bureaucracy criteria’, which requires candidate countries to adjust their administrative structures to demonstrate that they have the capacity to apply the acquis (Dimitrova, 2002:178). ‘Association Agreements’ signed with each Balkan candidate country contain further specific conditions linked to financial packages and projects, such as, for example, requirements to comply with the International Criminal Tribunal for Yugoslavia (ICTY) (Anastasakis, 2005:84) and more recently the requirement for Serbia to resolve its difficulties with Kosovo (Balkan Insight, 23 April 2013; European Commission, 2013b:4-5). The EU’s policy has so far been successful in ushering Slovenia and Croatia into EU membership (Europa.eu, 2013), but doubts have been raised about the likely effectiveness of EU conditionality in the political environments of other countries of the former Yugoslavia (Papadimitriou, Petrov et al., 2007). Stabilisation and Association Agreements (SAAs) signed under the SAP, for example, contain no formal EU commitment on future accession, and are less politically and economically committed to membership than the ‘Europe Agreements’ reached with previous membership applicants in Eastern Europe (Klasnja, 2007:26).
In 1999, many of these EU policies had not yet been clearly formulated, and Kosovo was a long way from being able to comply with the requirements of the acquis communautaire, so initial institutional development under UN administration did not necessarily follow the EU’s preferred models. Once the immediate post conflict phase was over, however, the activities of international actors were increasingly influenced by the prospect of Kosovo joining the EU. The EU representative at a 2001 donor conference, for example, argued that policy and legislative frameworks put in place in Kosovo must, from the outset, be EU compatible (World Bank/European Commission,
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2001:Statement by the European Commission, para 5) and on another occasion an EU spokesperson stated that ‘Whatever the future holds for Kosovo, we are sure its destiny lies with us in Europe’ (World Bank/European Commission, 2002:1). Geography aside, the justification for Kosovo’s Europeanization is not as obvious as in other places in the region. Kosovo and neighbouring Albania were part of the Ottoman Empire until 1912 and economic, cultural and religious ties with Turkey are still strong, so the idea of ‘return to Europe’, common in many Central and Eastern European countries (Goetz, 2001:1037), has less relevance. Nevertheless, EU membership, or a vaguer concept of European integration, has been seen by many donors as the strongest incentive for institutional development in Kosovo. DFID, for example, argued that Europeanization means Kosovo ‘would have to abandon non-transparent social and political arrangements that have developed over many years and accept international norms of public administration and public life’ (DFID, 2001b:3). In November 2002 a ‘SAP Tracking Mechanism’ working group was established to monitor progress towards the goal of EU integration under the Stabilization and Association Process (SAP) (European Agency for Reconstruction, 2003:13). Since 2005 the European Commission has published annual Progress Reports monitoring Kosovo’s efforts towards conforming with the requirements of the EU in the many areas of government administration considered important for accession, which range from the procedures of the Assembly and the conduct of elections to policies on health and safety at work, transport, food standards, nuclear safety, environmental protection and climate change (European Commission, 2011b). Advancement in all these areas appears to be equally necessary for Kosovo the achieve its ‘European perspective’.
4.3.2 EU effectiveness
The idea of EU integration has been a major influence on the development of Kosovo’s public institutions. In 2006, the Kosovo government established an Office of European Integration Processes (OEIP) in the Prime Minister’s Office and drafted a Kosovo Action Plan for the Implementation of the European Partnership (European Agency for Reconstruction, 2006b). Much of the technical assistance funded by the EU through EAR and ECLO has been explicitly linked to pursuing EU accession requirements. There are questions, however, about whether the policies promoted by the EU are appropriate for a place like Kosovo and whether they address the real development needs of the country. The detailed public administration policies set out in the acquis are
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based on the historical legacies of Western Europe and are the result of negotiations over the years between existing EU member states. They may not always be suitable for countries such as Kosovo with weak economic conditions, fragile governance, and underdeveloped administrative capacities. It has been suggested, for example, that EU procurement law is excessively complex and difficult to implement efficiently [IA13], and that the EU Value Added Tax (VAT) model is not what would be recommended to a developing country in the absence of the requirement to align with EU policy [IA8]. Attempting to adopt the EU’s complex and demanding administrative policies may in fact have negative economic impacts, adding significant costs to public administration and potentially undermining the competitiveness of the productive sector (GHK/Technopolis, 2011:2-3). Keukeleire et al. suggest, moreover, that the EU’s focus on accession criteria means that inadequate assistance has been provided in those areas that would address Kosovo’s economic development (Keukeleire, Kalaja et al., 2011). Kosovo has serious economic problems, a high rate of unemployment, significant levels of poverty, and low education and health care standards (World Bank, 2010:1; European Commission, 2011b:24-27), but the distribution of EU funds under the Instrument for Pre-Accession Assistance (IPA) is weighted towards issues such as democratic institutions, law enforcement, human rights, minority rights, gender equality, and public administration reform (Council of the European Union, 2006:Article 2). Only affirmed candidate countries have been eligible for regional development, human resources development and rural development funding, which would have potential immediate impacts on economic development (GHK/Technopolis, 2011:1). EU assistance programs in the region also tend to focus on issues that are of concern to current EU members, such as combating organised crime, improving border control, regulating migration, and reducing environmental pollution (European Commission, 2011c:3-4), more than on local development needs.
EU documents rarely present an explicit argument that the comprehensive reforms required for EU integration will in themselves address economic development issues. The purpose of ‘approximation to European standards’ is to qualify Kosovo for closer trade relations with the EU, which would then be expected to bring economic benefits (European Commission, 2009b). Relative to previous accession candidates from Eastern Europe, however, Kosovo is a long way from achieving the institutional structures, capacity, and standards expected by the EU. International advisers interviewed during
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fieldwork were quite pessimistic about the likelihood of Kosovo’s current deficiencies being addressed sufficiently to meet the requirements of membership in the foreseeable future [IA7, IA3]. Moreover, factors external to Kosovo, including the unwillingness of some existing EU members to recognise Kosovo’s sovereignty, raise further doubts about the prospects of Kosovo achieving the benefits of closer relations with the EU in the near term. It remains to be seen therefore whether the EU’s enlargement strategy will have long-term benefits for Kosovo, and for other countries in the Balkan region.
4.4 The EU in UNMIK (Pillar IV)
4.4.1 History, structure and activities
The European Commission lobbied strongly during preparation for the UN Mission for control of the economic reconstruction portfolio (Wittkowsky, 2009:18) and was assigned responsibility for Pillar IV of UNMIK’s four pillar structure. The EU Pillar was to be responsible for rebuilding ‘physical, economic and social infrastructure and systems’ (UNSC, 1999b:para 14). This statement did not, however, draw a sufficiently clear distinction between the role of Pillar IV and the UN’s Civil Administration component, Pillar II. In particular, the description of Pillar II’s responsibilities included ‘economic and budgetary affairs’ (UNSC, 1999b:para 10) so it was initially unclear which of the two Pillars would be responsible for public finance policy and institutions. Although this was resolved, over the next few months, in favour of Pillar IV, there were several efforts subsequently by Pillar II to establish a budget office, in parallel with the ‘Central Fiscal Authority’ in Pillar IV, and recurring ‘turf wars’ over the division of responsibility for budget functions between Pillar II and Pillar IV which continued for several years [IA11, IA16].
Joly Dixon, an EU official, was appointed to lead the Pillar. At the donor’s conference in July 1999, he set out Pillar IV’s plans for economic development and institution building in areas such as customs and taxation, budget policy and expenditure management (Dixon, 1999a:para 21-24). However, although a handful of senior EU personnel arrived in Kosovo very promptly, the funding initially made available by the Commission proved inadequate and the EU was unable to identify the technical staff needed for economic reconstruction activities within a reasonable timeframe using EU recruitment procedures (USAID, 1999a:8; King and Mason, 2006:89; Wittkowsky,
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2009:19).25 According to most sources it was due to this delay that the US government became heavily involved in Pillar IV activities.
It dragged for about two months, I think, from when Joly [Dixon] got there, from July … to August and Joly in absolute, I think, frustration with the European Union’s inability to mobilise turned to USAID who could see that if this wasn’t done, particularly the Central Fiscal Authority and the Banking and Payments Authority, if they weren’t staffed and operational then Kosovo would go down the tubes because there was just nothing happening. So he turned to USAID and asked if they could assist. [IA1]
The EU, having fought tooth and nail to get the Pillar, then couldn’t put people in it. …. they sent Joly Dixon … Joly plus nobody really. So Joly sent off to USAID and said, can you help find people for this Pillar. [IA16]
Thus the majority of the international experts who implemented EU Pillar activities in UNMIK in the early months of the Mission were not in fact appointed or paid by the EU, but were contracted consultants engaged by an American firm on behalf of USAID. Nine months later the EU had still only filled 13 positions (King and Mason, 2006:89). The number of EU appointed staff in Pillar IV steadily increased, however, and by 2005 there were 130 international staff and a further 320 local employees (UNMIK/European Union, 2006:5). The annual EU budget for the Pillar rose to around €20 million at this time (Wittkowsky, 2009:19). Most of the EU appointed staff were recruited directly to specific jobs on the basis of technical expertise rather than being seconded from the EU or member government bureaucracies (Wittkowsky, 2009:19), [ID1]. Pillar IV staff continued, however, to work alongside a large contingent of USAID-funded experts throughout the period. There was thus a very complex staffing arrangement in the Pillar, with USAID-funded advisers sometimes required to represent the EU within UNMIK [IA16, IA1]. As in the UN-managed civil administration, before the creation of the PISG ministries many international staff in Pillar IV, including USAID contractors, held executive decision-making positions in the administration. Unlike Pillar II, however,
25 A significant reason for the European Commission’s problems in mobilising funds was the tightening of finance procedures following the resignation of the previous European Commission over financing irregularities (Fidler, 2000; Torbiorn, 2003:133). Similarly, the speed with which USAID was able to commit resources at the time is unlikely to be possible in future following subsequent controversies over contracting processes in Iraq (Center for Public Integrity, 2012).
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there was a clear policy of recruiting and training Kosovar personnel in these areas as soon as possible. Within Pillar IV there was, on the whole, a high level of cooperation between the various technical advisers and between the organisations that funded them, at least in the early years. EU and US representatives in Kosovo for the most part had very similar ideas about the policies to be adopted, largely congruent with the program set out in various reports by the World Bank and IMF. Macroeconomic stability, fiscal discipline, the development of public finance institutions, and rapid privatisation of state owned enterprises were the agreed priorities.
Development of the Kosovo Customs Service was also under the umbrella of Pillar IV but was delivered through a separate funding mechanism, using an existing program which had previously developed customs activities in Bosnia and Albania. The €3 million ‘CAM-K’ customs assistance mission comprised seconded customs officials from EU countries who provided technical training and mentoring to local recruits (TAFKO, 1999). Senior management positions in the Customs Service, however, including the post of Director-General of Customs, were filled by officials from UK Customs, funded by DFID. The role of CAM-K was later transferred to the Customs and Fiscal Assistance Office (CAFAO), a Balkan-wide EU program funded under the ‘CARDS’ program, but the UK government’s contribution of senior management staff continued until and beyond independence.
In February 2008, shortly after the Kosovo Government’s independence declaration, the European Commission took a decision to disband its component of UNMIK. This had not been anticipated by the UN, or indeed by the EU staff of the Pillar at the time, and created a number of administrative and logistical problems [IA17]. The remaining responsibilities of the organisation had to be rapidly transferred either to the Kosovo government or to UNMIK (Wittkowsky, 2009)[IA17]. The Customs Service, which was already largely Kosovarised, was handed to the government. Other functions, including management of the accumulated proceeds from the privatisation of socially owned enterprises, became a UN responsibility.
4.4.2 Pillar IV performance
Most information about the progress of Pillar IV activities was made public through UNMIK’s consolidated reports on the Mission. Pillar IV itself published only one annual report and a final ‘end of mission’ report (UNMIK/European Union, 2006,
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2008). The Pillar’s work accelerated rapidly after the arrival of USAID-funded staff in September 1999. By the end of the year it had established budget and treasury functions, created a Customs Service, set up the Kosovo Banking and Payments Authority (BPK), and started collecting customs revenue. At the start of 2000, the JIAS gave Pillar IV oversight of the Central Fiscal Authority, the Customs Service, the Department of Reconstruction, the Department of Trade and Industry and the Public Utilities Department. Two years later, with the election of the PISG government, many of these responsibilities, together with their associated international and Kosovar staff, were transferred to the new PISG Ministries.26 Other Pillar IV staff continued to work on the ‘reserved power’ functions retained by UNMIK, in particular on the administration, regulation and sale of socially owned enterprises, the Customs Service, and final authority over the Kosovo Consolidated Budget. It was around this period, in particular, that the previously harmonious relations between to two lead participants in Pillar IV began to break down. Chapter 5 provides a detailed account of the actions taken by Pillar IV to establish institutions in the field of public finance, and the results that were achieved in these areas. Pillar IV’s final report, subtitled ‘Job Done!’, identified ten major achievements during the nine years of its existence including establishing the foundations of a market economy, creating a self sustaining Kosovo budget, establishing the Customs Service and the Central Banking Authority of Kosovo (CBAK), successful privatisation of SOEs and modernisation of public utilities (UNMIK/European Union, 2008). However, while the EU had overall responsibility for these tasks, USAID could also claim a substantial share of the credit for these achievements. Separating the contributions of the two major participants is problematic.
4.5 EU Development Assistance: EAR and ECLO
4.5.1 History, structure and activities
In addition to its involvement in economic reconstruction through Pillar IV, the EU also provided substantial amounts of direct funding for rebuilding and development projects through the European Agency for Reconstruction (EAR), a body established specifically for this purpose. EAR had a different agenda from Pillar IV and a completely different
26 Pillar IV was responsible for the PISG Ministries of Finance and Economy, Trade and Industry, Transport and Communications, and Energy and Mining.
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way of working. The decision to establish a specialised agency to deliver EU aid for Kosovo, rather than using existing EU mechanisms, was intended to enhance ‘the efficiency, speed and visibility of European assistance’, as well as to improve coordination with other donors and avoid duplication of effort. It also drew on the EU’s prior experience of implementing reconstruction activities in Bosnia which had used different sets of procedures under various EU regulations (European Commission, 1999a: para 5). The Agency was initially established specifically to deal with reconstruction in Kosovo, but its mandate was subsequently expanded to include Serbia and Montenegro after the fall of the Milošević regime in late 2000, and the Former Yugoslav Republic of Macedonia (FYROM), after the inter-ethnic conflict of 2001.
It took some six months for the formalities of establishing EAR to be concluded in Brussels but in the meantime the European Commission set up a Task Force (TAFKO) to manage the funding already committed, including the continuation of €10 million of humanitarian assistance projects that had been underway in 1998 and early 1999, before the escalation of the conflict. Perhaps as a consequence of this prior involvement, TAFKO, unlike Pillar IV, was able to mobilise very quickly. The first members of the Task Force arrived on 5 July and by September 1999 it had 30 staff working in Pristina, had initiated around €50 million worth of reconstruction activities, and had begun making administrative preparations for the establishment of EAR (TAFKO, 1999). At the end of December EAR started operations with 40 international staff and 42 ‘local agents’ in Pristina and a budget of €626 million to spend on reconstruction projects (European Agency for Reconstruction, 2001). The balance between international and local staff changed considerably over the next few years and in 2004 the Kosovo office had only 19 international staff, working with 46 local employees.
Early EAR assistance was mainly directed towards repairing physical infrastructure including projects in housing, electricity generation, and de-mining. Funding for public administration functions, at this stage, consisted primarily of assistance to municipal administration through the secondment of officials from EU member governments (European Agency for Reconstruction, 1999, 2000). The focus of EAR’s work changed significantly after a few years, however, towards support for public administration development and institutional capacity building through technical assistance projects. This came to be seen as a priority when administrative responsibilities began to be transferred to the PISG ministries in 2002 and 2003 and it became clear that many of
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the laws, procedures and institutions needed by the new government were still lacking. EAR thus allocated funding for a succession of technical assistance projects in budget preparation, economic planning, internal audit, procurement, civil service development and training, and improving the functions of the Office of the Prime Minister. Although most of these projects were described as ‘Public Administration Reform’, in the majority of cases they were in fact setting up functions, laws and institutions that had not previously existed in Kosovo, such as the Prime Minister’s Office and the Office of the Auditor General, or further developing institutions that had been in existence for a few years, at most, and had been established by previous rounds of technical assistance.
Along with the shift to institution building, EAR assistance also began to focus on EU accession issues and compliance with the acquis communautaire. Most of the funds channelled through EAR were drawn from the CARDS program which was explicitly linked to the requirements of EU ‘approximation’. After 2006 the IPA, which replaced CARDS, was even more clearly focused on accession preparations and the eventual integration of recipient countries into the European Union. EAR thus contributed significant amounts to the Kosovo government’s participation in the EU’s Stabilisation and Association process by providing experts to draft laws compatible with the acquis. The EU has provided around €14.8 million for technical assistance in this field since 2003. Much of the assistance provided in other areas of public administration has also been explicitly aimed at encouraging the adoption of ‘EU best practice’ and compliance with the EU acquis.
EAR was always intended to be a temporary institution. It’s original mandate was extended several times but it was eventually wound up at the end of 2008. Responsibility for managing EU assistance to Kosovo was transferred to the European Commission Liaison Office (ECLO) which continued the implementation of projects in budget preparation, internal audit, procurement and EU integration. Table 4.2 lists relevant EAR and ECLO technical assistance contracts signed between 1999 and 2010 in the areas of civil service development and public finance, including for the coordination of EU integration activities.
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Table 4 .2 Major EAR and ECLO Projects in Public Administration Contract year €million
Public Administration
Civil Service Development 2003 Pay and Grading Review 0.568 2004 Support to central level administration 1.710 2005 Assistance to support the Department of Civil Service Administration of MPS 0.172 2005 Review of PISG ICT framework 0.158 Total Civil Service Development 2.607 European Integration 2003 Assistance to the Office for EU Integration of the Prime Minister’s Office 0.023 2004 Strengthening the PISG institutions capacity to participation in SAP 2.877 2006 Support to European integration 0.027 2006 Capacity building for European integration 3.499 2006 Assistance to the PISG and the Assembly for enhanced EU compatibility 2.999 2007 Support to European integration 2.906 2008 Support to the Agency for Co-ordination of Development and European 2.500 Integration (ACDEI) Total European Integration 14.832 Office of the Prime Minister (OPM) 2002 Support to the Prime Minister's Office 3.041 2005 Support to legal drafting 0.186 Total OPM 3.227 Kosovo Institute for Public Administration (KIPA) 2002 Training Needs Assessment of central level public administration 0.137 2004 Support to the Kosovo Institute for Public Administration 0.579 2005 Support to the Kosovo Institute for Public Administration 0.158 Total KIPA 0.875 Total Public Administration 21.541
Public Finance Ministry of Finance and Economy (MFE)
2003 Supply and implementation of Budget Development and Management System 0.437 2005 Support to the Ministry of Finance and Economy for preparation of a Public 1.949 Investment Program (PIP Phase I) 2007 Support to the Ministry of Economy and Finance in implementing a Public 1.000 Investment Program (PIP Phase II) 2008 Licence for Budget Development and Management System (BDMS) 0.112 2008 Review and update of BDMS 0.148 2008 Further support to the Budget Development Management System (BDMS) 0.146 2008 Improving the quality of public investments in Kosovo and preparing the ground 3.310 for EU funds (PIP Phase III) Total MFE 7.101 Customs and Taxation
2007 Technical assistance for conducting an IT needs assessment in Tax 0.078 Administration 2008 Preparation of Fiscal and Customs Blueprint exercise in Tax and Customs 0.111 Administrations of Kosovo 2008 Preparation of IT project in Tax Administration 0.039 2008 Support to Customs and Taxation Administrations (EUCTA) 2.640 2008 Tax and Customs Technical Assistance (TACTA) 2.000 Total Customs and Taxation 4.868 Procurement
2002 Support to the Public Procurement Regulatory Body in CFA 0.054 2004 Support to the establishment of a Public Procurement system. 0.892 2005 Reform to the Public Procurement System in Kosovo 1.387 2007 Support to Public Procurement Reform 1.912 Total Procurement 4.245
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Contract year €million Audit and Financial Control
2003 Support to creation and establishment of Supreme Audit Institution 1.854 2005 TA to support Internal Audit Department of the MFE 0.196 2007 Office of the Auditor General audits 0.200 2007 Further support to Public Internal Financial Control and Internal Audit 1.500 2007 Further support to the Office of the Auditor General 1.498 2008 Support to the Office of the Auditor General of Kosovo to meet EU standards 1.000 2008 Support to the process of improving Public Management Control and 1.420 Accountability in Kosovo Total Audit 7.666 Kosovo Development Strategy
2004 Support to the Economic Strategy and Project Identification Group (ESPIG) 0.192 2006 Study of Kosovo’s Financial Sector: Kosovo Development Plan 0.170 2006 Environment Strategy: Kosovo Development Plan 0.114 2007 Technical Assistance to Kosovo Development Plan 1.490 Total KDSP 1.966 Total Public Finance 25.883 Grand Total of EAR and ECLO contracts 47.424
Sources: EAR: http://ec.europa.eu/enlargement/archives/ear/agency/28-ContractListWeb/kos/kos.htm; ECLO: http://www.delprn.ec.europa.eu/?cid=2,94; accessed August 2011. (The table does not include capacity development assistance provided to municipalities or the Kosovo Assembly or to specific sectors or ministries.)
4.5.2 EAR/ECLO performance
Internal assessments of the impact of EAR’s work were largely positive. An evaluation of capacity building assistance in Kosovo, for example, found that EAR support had been important in the establishment of democratic governance structures and to a substantial upgrading of human resources (European Agency for Reconstruction, 2008d). However, interviews with current and former international advisers, as well as local observers, generated considerable criticism of the implementation procedures of EAR and ECLO assistance. EU assistance activities have been in the form of a succession of relatively small and relatively short-term technical assistance projects, implemented through contracts with a variety of European consulting firms. Problems identified in implementation procedures included the long lead times for planning new projects, the short timeframe for implementing each activity, inadequate financial resources, excessive administrative overheads and the inadequate skills of EU project management staff. The significant level of criticism of EU projects arising in fieldwork interviews may partly reflect the fact that the EU is now the most active donor and most of the advisers interviewed were or had been involved in EU projects, however, several interviewees specifically compared the EU adversely with other donors they have worked with in Kosovo and elsewhere.
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The planning processes for projects funded under CARDS and IPA involve lengthy preparation procedures. Funding intentions are first established in a three-year Multi Annual Indicative Planning Document (MIPD) (European Commission, 2011a). The ‘project cycle’ for developing specific activities requires about six months to prepare a project concept note, referred to as a ‘project fiche’, and a further six months to develop detailed terms of reference. Tendering the project to select an implementing firm may take a further six months so the total time required to establish a new activity can be up to 18 months [KA3]. Technical advisers complained that the lengthy time required for project preparation meant that the terms of reference may not be relevant by the time the project starts.
It takes about a year, year and a half from the project idea to the start of the project which is a long period, and considering it is a very dynamic environment in Kosovo, so from the time you start the idea to the time the project starts things develop very quickly and quite a lot of things are actually already out of date. [KA3]
The average project duration of one or two years was also considered insufficient to deliver the expected outputs.
The bureaucracy of the thing is such that it probably takes up to six months to get to implementation which means that there’s probably only a year to get it done before you are starting to wrap it up if you’re a two year project … If you are trying to introduce new systems and structures and get them embedded you really need longer. [IA5]
Short projects also generate higher transaction costs, interruptions while tender processes are underway, and the negative effects of ‘the tap being turned on and turned off’ [IA5].
If you suddenly stop what you’re doing there is an assumption that this rather cash strapped government can take it over, and even if there’s a will to do that I have examples where they don’t and the thing just stops. [IA5]
EU projects were also said to be under-resourced relative to what was required, and funding levels appeared arbitrary, apparently based on a formula of ‘one year: one million Euros,’ without a clear view of what that sum could actually buy. Reporting requirements were also regarded as onerous, bureaucratic and unproductive.
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Under the EU system there is so much bloody bureaucratic paperwork, it bogs you down. You have to report according to all these different things. They have all these benchmarks, not really related to the project. Also I found that the benchmarks for the project were set 18 months ahead and when I got there they weren’t really relevant. [IA7]
They look minutely at everything. We have to agree everything we do with them. I don’t like it. All EU consultants complain. This process doesn’t produce better results … There are lots of reports with very defined formats, not what you think you need to report on. [IA10]
EU staff were considered to lack the technical expertise or authority required to manage the projects effectively. Although ECLO inherited many former staff of EAR, some interviewees suggested that the level of expertise in project management had declined since the handover. EAR had directly recruited staff on contract specifically to work on its development programs and considered it was able to engage ‘world class’ professionals and specialists (European Agency for Reconstruction, 2004b:3), whereas current international staff are often part of the larger EU bureaucracy and thus on an EU career path [IA14].
The capacity within the EC itself is extremely limited in the technical areas. … certainly on the ground here in Kosovo there is definitely not the sector expertise that one might assume would be needed to oversee the process from writing the terms of reference through to guiding the project through, and there are issues that develop as the project goes on where quite frankly the task manager and others in the ECLO have no relevant capacity to judge the merits of what is going on except their native wits. [IA5]
It’s not run by qualified people but by administrators, and administrators in a typical administrative thing will say ‘have you produced a report?’ and ‘has the report been approved by the beneficiary?’, but never add the question, has the report been read and understood by anybody. [KA1]
Engagement with project implementation was also considered to be inconsistent and unpredictable.
I find that the ECLO, they get involved in an arbitrary fashion. .. Most of the time I don’t hear anything and now and then I make a decision, along with my
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beneficiaries, that the ECLO will regard that they should have been involved in and they will call for the decision to be unmade. [IA3]
There is a really ironic thing. They find the best [technical advisers] they can find in the world to do these jobs, maybe not the best but the best they can get, and then they don’t trust them with their judgements. They don’t trust our judgements. .. The focus is on activities rather than outcomes. [IA5]
Some of these concerns have been acknowledged by both EAR and ECLO. In 2004, for example, EAR noted that the small size and diversity of its activities, and the long development process for projects, presented challenges.
The more stages and ingredients involved in Agency projects - from identification, to donor coordination, to planning the intended achievements of the project, to finding the right contractor, to ensuring good cooperation and chemistry between contractors (often international and local in consortium), counterparts, government ministry, and Agency managers - the more potential hazards. In managing well over 1,000 different projects, most valued at between €1 million and €2 million, it is inevitable that the Agency has experienced examples of shortcomings in each category – either of its own or others’ making. (European Agency for Reconstruction, 2004a:6)
However, successive subsequent evaluations have continued to criticise EAR’s project- based management practices. An evaluation in 2007 suggested that too much emphasis had been placed on project cycle management, rather than on strategic orientation and policymaking, thus contributing to a fragmented approach and under-prioritizing outcomes in favour of short-term project completion (European Agency for Reconstruction, 2008d:3-4). A 2009 evaluation of the use of CARDS funds in Kosovo identified similar deficiencies in the way projects had been implemented: among other things, projects were too ambitious and had too many components and activities, implementation periods were too short, and project indicators were too focused on the delivery of specific outputs rather than longer term outcomes such as capacity and sustainability (European Commission, 2009c:i-iii). An IPA evaluation reported that the program was ‘heavy’ in terms of managerial resources required, that planning and implementation procedures were relatively complex, deployment of funds had been slow, and implementation had been insufficiently results-oriented (GHK/Technopolis, 2011: 28-31). The European Commission claims to have recently taken steps to improve
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IPA effectiveness by moving towards a sector-based approach to planning and by enhancing donor coordination and increasing beneficiary ownership. This follows earlier streamlining of IPA processes in 2009 with fewer, larger projects to make implementation easier to manage and to increase both effectiveness and visibility of EU funding (European Commission, 2010a:2). The proposed 2014-2020 IPA II program will incorporate further changes in implementation procedures aimed at simplification and increased flexibility (European Commission, 2011c).
4.6 The United States in Kosovo
The United States had been a major player in the events leading up to the international intervention in the conflict (Judah, 2000; Buckley and Cummings, 2001; Albright, 2003) and became a major donor to the reconstruction effort, even though Congress took the view that, because the US bore the largest military burden in the war, the EU and its member states should be the principal contributors to reconstruction. Congress therefore rejected President Clinton’s request for large supplemental appropriations to the 1999 and 2000 budgets for Kosovo reconstruction and stipulated that US funding would not exceed 15 per cent of total international spending (CRS, 2001:1-2). This was, nevertheless, still quite a large sum. The US committed US$222 million in assistance to Kosovo at the first and second donor conferences in 1999, and promised a further US$94 million in 2000 (CRS, 2001:5). The following section examines the stated rationale for US involvement, the level of US influence on developments in Kosovo, and the attitudes of other donors and the Kosovars towards the US.
4.6.1 Objectives of US assistance
For much of the period since the end of the Second World War the primary rationale for US foreign aid was the fight against communism (Nelson, 1968; CRS, 2005:3). There were different ideas, however, about how aid would best achieve this. Aid was used to support economic development as the means to promoting peace, stability and pro- American sentiment, and was also directed to security objectives, promoting political stability and US alliances, or was targeted at strengthening liberal democratic political systems (Packenham, 1973). Economic development was just one of the goals, and an interim goal at that. These ideas about what aid is for are also reflected in more recent US policy statements. USAID’s 1999 Agency Performance Review, for example, refers
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in its first paragraph to maintaining global economic, political and social stability, democratic values and promoting peace. USAID’s Budget Justification for 2001 similarly identifies peace and security, stability and democratic expansion in Europe and Eurasia as central to US national interests (USAID, 2000b:3-4). In Kosovo, rebuilding economic, political and social structures was presented as necessary to overcome the risk of renewed hostilities which would likely involve the US in further military action (USAID, 2000c:1). The overall objective of US assistance was thus ‘to stabilize and transform Kosovo into an economically viable, democratically self-governing territory’ (USAID, 2000b:312). It should be noted that this does not entirely accord with the language of UNSCR 1244 which defines Kosovo as continuing to be part of Serbia with ‘substantial autonomy’. Since 2002 the former anti-communist security objective of aid has been reframed as an anti- terrorism agenda (CRS, 2005:2) and the fact that Kosovo is a moderate Muslim society with a pro-Western orientation has been put forward as further justification for US involvement there (USAID, 2003c:45; 2004:3). The US has also always been relatively open about the national interest objectives of its foreign aid programs. Aid has been at times used to promote American business interests (Sullivan, 1996:6) and has often been criticized for placing US political and strategic objectives ahead of economic development objectives (Sullivan, 1996:2). A 2002 statement of US aid policy was in fact titled ‘Foreign Aid in the National Interest’ (USAID, 2002a).
The US government has firm ideas about what economic development involves and how it should be achieved. Largely since the Reagan administration in the 1980s, US development aid has been directed towards promoting the private sector and reforming host government policies and institutions to better support market-led development. The private sector has been seen not only as the engine of economic growth but also the path to democratisation (Sullivan, 1996:4). The ‘Washington Consensus’ between the IMF, the World Bank, and the US Treasury Department has supported this ‘neoliberal’ policy agenda for economic development. Although problems that arose in the implementation of ‘shock therapy’ market liberalization in the former USSR in the 1990smay have moderated support for these policies (Stiglitz, 2002), they remain influential and were clearly reflected in the US government’s agenda in Kosovo.
Multiple US agencies are involved in delivering foreign assistance and they do not always agree on policy. While bilateral assistance is largely the responsibility of USAID, the US Treasury Department manages relations with multilateral bodies such
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as the IMF and the World Bank, and the Department of Defence and the Department of State provide military and security related assistance (Sullivan, 1996:7). The size of the US aid program generally gives it significant influence over the aid agenda of other donors. At the same time however, the dominance of US foreign assistance, and the history of its use for national interest objectives, generates a level of tension between the US and other leading actors and suspicions about US motives. In particular relations between the UN and the EU are strained by their differing perspectives on foreign relations, and the US belief that countries such as Europe are dependent on the military strength of the US (Torbiorn, 2003:182). In Kosovo there have been a number of accusations that the US is pursuing its own political, military or commercial interests to the detriment of the reform programs supported by other donors (Capussela, 2012)[IA7, IA2]. The attitudes of other actors towards the US in Kosovo have also been influenced by the positive attitudes of Albanian Kosovars towards the US and the apparently close relationship between the US government and Kosovo’s politicians. Kosovar good will towards the US is based on perceptions of stronger US support for the cause of Kosovo’s independence compared to some other international powers.
They are extremely pro-US. … They thought they won the war. NATO had nothing to do with it. It was the US and Bill Clinton. [IA7]
There is a cultural respect that the people of Kosovo have felt over the ages and this respect goes to the US and to the UK and then all the other Europeans and all the rest because of our past historical experience with these nations over the past hundred years. But also our experience since 1912, the whole Woodrow Wilson and London Accords and all this. Germans are much more respected because we have a big diaspora there, but when it comes to French, Italian, and all the rest, not really. [KA1]
There is thus a general view today among foreigners in Kosovo, and among some Kosovars, that the Kosovo government is to some extent controlled by the US, that US diplomats intervene in government decisions, and that the Prime Minister only acts with US approval [IA14, IA15, KA3, IU3]. The ICG has also claimed that Prime Minister Thaci relies heavily on US Embassy guidance (ICG, 2008b:20) and reported that the independence declaration itself was largely written by the US State Department (ICG, 2008a:4). Given this background, the high level of cooperation that existed between USAID and the EU within Pillar IV in the first years of the Mission is significant.
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4.7 United States Agency for International Development (USAID)
On the ground in Kosovo, most US assistance was implemented by USAID, a specialised bilateral aid implementation agency established in 1961 under the Kennedy administration. The Agency is relatively low on the status hierarchy in Washington, and is sometimes in competition with other departments, including Agriculture, Commerce and Treasury, who have their own views about how US funds should be applied in developing countries. It is also subject to close scrutiny and micromanagement by Congress (Sullivan, 1996:7). At the time of the start of the Kosovo Mission, under the Clinton administration, USAID’s stated objective was the promotion of ‘sustainable development’”, with six subsidiary goals including economic growth, sustainable democracy, and human capital development through education and health (CRS, 2005:3). Support for economic growth took the form of activities to strengthen private markets through improved government policy, legal and regulatory frameworks and institutions, removing trade barriers, and privatizing state owned enterprises. USAID was at the time engaged in implementing these activities in a large number of countries around the world (USAID, 2000a:6-7). USAID personnel thus arrived in Kosovo with very clear ideas about what should be done and what they wished to achieve. One of the stated aims was to create a legal and institutional framework ‘that would be visibly hospitable to private foreign and domestic investment’ (USAID, 2003b:1). This meant that, while some other donors saw development of a sound public administration as an objective in itself, the US government viewed the development of public administration institutions mainly in terms of their contribution to the development of an effective market economy (USAID, 2001). USAID involvement in public administration was therefore narrowly targeted at implementing ‘economic governance’ policies: developing an effective public financial management regime was just one element of a broader economic reconstruction program that included private banking sector development, commercial law, property rights, privatisation of state owned businesses, and support for small and medium sized enterprises (USAID, 2000c).
4.7.1 USAID and public finance management
A USAID office was established in Pristina in July 1999 and it initiated assistance programs in a range of areas including agriculture, business development, community infrastructure projects, support for independent media, political party development and
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funding for civil society organisations and NGOs. Because Congress had specifically ruled out US funding for major infrastructure projects, the US contribution was skewed towards technical assistance and small grants. Assistance in public finance management was not, officially, part of the initial program. This responsibility had been assigned to the EU. Not everyone interviewed for this research, however, fully accepts the story that USAID became involved in Pillar IV simply at the request of the EU [IA11, IA14]. There had certainly been some prior planning for US engagement in economic reconstruction and several reports prepared by USAID during and immediately after the conflict dealt with economic reconstruction issues. The USAID ‘Strategy for the Federal Republic of Yugoslavia 1999-2000’, prepared before UNMIK was established, set out USAID’s policy priorities for economic development which included early implementation of laws and regulations favourable to private investment and enterprise development, and ‘inculcation of an overall policy and institutional framework conducive to the rapid emergence of a sustainable, productive market economy’ (USAID, 1999b:30). A research paper on lessons from previous humanitarian emergencies, commissioned during the conflict, also discussed economic issues and argued the need for a long-term development program and training for technocrats to manage post conflict economic transition, based on the assumption that reconstruction and development in Kosovo under a non-Yugoslav administration would mean transition to a new structure based on Western European economic institutions and business methods (Muscat, 1999:5). An Economic Sector Assessment report was also prepared for USAID in July 1999 (USAID, 1999a).
The speed at which USAID implemented its economic governance activities in Kosovo in late 1999 certainly suggests that some thought had already been given to US participation in this field. Once agreement was reached with the EU Pillar on USAID’s contribution, USAID was able to put its project in place very quickly. USAID procurement, based on an ‘Indefinite Quantity Contract’ procedure which limited the bidding to six pre-selected firms, was completed in record breaking time. The successful firm did not need to conduct the formal recruitment procedures required by the EU but drew on its existing pool of consultants and subcontractors, many of whom had been working on similar USAID-funded technical assistance activities elsewhere and were able to deploy very rapidly.
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To give you an idea of the lightening speed at which it worked … we were sitting in an apartment in Bangkok at whatever date it was in August and I had a fax pushed under my door which was the terms of reference issued by USAID for this assignment … Two weeks later, I got out of the car in Pristina. [IA1]
The initial USAID contract to support the UN Mission was for a period of six months at a total cost of US$6.4 million, of which around $4 million was used for international consultants. Between September 1999 and March 2000 the firm fielded around 30 specialists in various aspects of public finance and economic policy including customs, taxation, budget, treasury, procurement, banking, privatisation and commercial law. Only about half the consultants employed in Pillar IV by USAID were US citizens; experts were also recruited from the UK, Canada, Australia, Eastern Europe and elsewhere (Barents Group LLC, 1999). During the first six months, it was largely these US-funded advisers who were responsible for Pillar IV’s achievements in establishing the Central Fiscal Authority, the Tax Administration and the Banking and Payments Authority (BPK), and drafting new legislation on taxation.
At the end of the first six month period, the Head of Pillar IV requested continuation of what had been portrayed, initially, as short-term support (Dixon, 2000) and a second, 18 month project, valued at US$18 million, was contracted to the same firm (Barents Group LLC, 2000). In spite of a significant increase in the number of EU staff working in Pillar IV in subsequent years, and the later involvement of EAR and the World Bank in providing technical assistance, USAID has continued to be a major donor in this field. Between 1999 and 2010, six successive multi-year economic governance projects were implemented, at a total cost of $104.5 million (USAID, 2010a). These projects are listed in Table 4.3. It is important to note, however, that not all the funds in these projects were used for developing public finance institutions. The overall objective was private sector development, so the projects also included significant activities in commercial banking, utility regulation, commercial law, private sector accounting standards and privatisation. The exact value of the assistance provided to develop government capacity in public finance within these totals is difficult to quantify.
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Table 4 .3 USAID Projects in Economic Governance 1999-2010 Year Funding (US$ mil) 1999-2000 Government Infrastructure Support to the UN Mission in Kosovo 6.40 2000-2001 Economic Reconstruction Project 18.00 2001-2002 Economic Reconstruction Project 15.50 2003-2004 Economic Reform Support 10.80 2004-2007 Kosovo Economic Development Initiative 27.50 2007-2010 Economic Management for Stability and Growth 26.30 Total to 2010 104.50
Source: USAID Kosovo
In 2002, after the election of the PISG government, USAID reported that the priority had become ‘refining and calibrating’ the new institutions which were now considered to be under the control of elected ministers (USAID, 2006b:4). From 2003 onwards, therefore, project activities became more like traditional technical assistance, with advisers no longer holding executive positions but simply advising and training Kosovo government officials. There was a significant reduction in overall USAID funding for Kosovo in the period from 2004, echoing a general withdrawal of support by all donors at that time. However, USAID focused its reduced budget on areas where it considered it had already established expertise and a proven record, namely public finance, financial system regulation, commercial law, trade policy and privatisation (USAID, 2004). USAID continues to have a significant role in the public finance management field in Kosovo and began two new multi-year projects in 2010: ‘Efficient and Sustainable Tax Administration’ ($5.7 million) and the ‘Growth and Fiscal Stability Initiative’ ($10.2 million). In addition, the ‘Business Enabling Environment Program’ ($16.9 million) works on related issues at the municipal level.
4.7.2 USAID performance
The successive USAID projects were notable for their size and comprehensiveness. Each of the consultancy contracts covered a very broad range of activities under the single overall objective of supporting private investment. A review of USAID activities in 2006 noted that the breadth of the issues covered by the projects was unusual (USAID, 2006b:3) although USAID has since used similar ‘umbrella projects’ in Afghanistan, Iraq, and elsewhere [IA13]. This model means the project has a large degree of flexibility: if progress stalls in one area of activity, resources can be easily redirected to other subjects without the delays of project development and procurement [IA13]. This also means that project failures are less obvious. Non-performing
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consultants can be dismissed or replaced and component activities can be curtailed or expanded without renegotiating the overall contract. Poor results in one activity can be balanced by good results in others. There was also a considerable degree of continuity in USAID’s support to Kosovo’s PFM institutions. Tendering processes for each new USAID ‘Task Order’ were completed before the conclusion of the previous phase to ensure a smooth transition from one project to the next. In fact, although the name of the consulting firm engaged to deliver USAID economic governance projects has changed over the years as a result of company restructuring, takeovers and mergers, the contract to implement these USAID public finance projects has been won by essentially the same organisation since 1999,27 and some individual advisers have also remained in place for many years.
Such comprehensive projects are large financial commitments. USAID contracts for these technical assistance activities ranged in value from $6 million to $26 million. At times USAID funding for economic governance projects equated to US$1 million per month, in contrast to EAR’s average project cost of around €1 million per year.28 USAID staff in Pristina took a close interest in the day to day activities of advisers engaged by the contractor. Consultants were required to report on what they were doing week by week against a detailed list of benchmarks for each component of the project, and to meet regularly with USAID officials to discuss progress (Barents Group LLC, 1999, 2000). In general, however, current and former USAID-funded technical advisers interviewed for this research did not consider the reporting requirements arduous and felt they had scope to exercise judgement and adapt their work to changing circumstances.
I prefer the American reporting system because it’s simple. Every fortnight or every week you just explain to the company how you are going. [IA7]
You had to report on what you did and how that related to what you were supposed to achieve and that sort of thing. Terms of Reference were in general terms and its very much how you interpret that. [IA15]
27 The initial contract in 1999 was with the Barents Group, which was subsequently acquired by KPMG consulting, which then changed its name to BearingPoint. In 2009 BearingPoint went into receivership and its public services business, responsible for the work in Kosovo, was acquired by Deloitte.
28 In 2000 the Euro was worth around 95 US cents, in 2004 it was worth US$1.21 (www.xe.com).
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Source documents and fieldwork interviews are remarkably lacking in criticism of the project activities or implementation practices of USAID assistance. Some concern has been expressed about the complexity of some of the legislation developed by USAID- funded consultants and their narrow focus on achieving project objectives at all costs (Miller, A. J., 2004)[IU2], but interviews with both international technical advisers and Kosovars produced relatively few negative comments compared with those made about the UN Mission or the European Union. Many adverse comments were made, however, about the perceived power and influence of the US in Kosovo, and suggestions, mostly unsubstantiated, that US involvement has alternative commercial or military motives [IA7, IA14, IA2] .
4.8 UK Department for International Development (DFID)
Among the many bilateral aid donors operating in Kosovo, the UK aid agency, DFID, is significant in the field of public administration because of its strong focus on civil service development. The UK identified civil service issues as one of its spheres of comparative expertise and saw the establishment of a competent civil service as an end in itself. DFID’s 2001 Kosovo Strategy Paper noted an urgent need to establish the basic elements of a functioning and politically neutral public service and to avoid the danger of the establishment of political power bases in ministries, issues that had, it was argued, not been addressed in drafting the Constitutional Framework.
If Kosovo is to become a democratically run entity free of the political weaknesses and corruption of other countries in the region it is essential that the structure of an impartial, non-political public service is put in place. There is no tradition of such approaches in Kosovo. (DFID, 2001b:5)
DFID thus undertook to support the development of ‘an accountable and professional Kosovo-led public service which delivers services effectively and equitably’ (DFID, 2001b:18). However, although a number of technical assistance projects have been funded in this field, most were quite small and had limited impact on the quality of the Civil Service. Table 4.4 lists relevant DFID technical assistance contracts in Kosovo during the period from 1999 to 2010.
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Table 4 .4 DFID Projects in Public Administration 1999-2010
GBP Year Project million 2002-2004 Personnel Policies and Procedures Project (PPPP) 3.000 2006 Progress review of strategy for EU integration 0.025 2006 Support for the Standards Process (Macroeconomic Framework) 0.025 2006 - 2009 Support to European Partnership and the Standards Process 1.623 2006 Preparation of Macroeconomic Framework 0.042 2007 Functional Review and Institutional Design of Ministries 0.093 2007 Strengthening the Public Administration Reform Secretariat 0.160 2008 Support to Drafting Government Legislation 0.085 2008 - 2010 Functional Review of Institutional Design of Ministries 2.830 2009-2012 Support to Office of the Prime Minister: Phase II 1.500 2009 - 2011 Strengthen Reform of Kosovo's Public Financial Management 0.198 Total 9.580
Source: http://projects.dfid.gov.uk/Default.aspx, accessed November 2008, updated December 2010. In 2002 the British pound was worth approximately €1.6 and US$1.5. In 2010 it was €1.2 and US$1.6 (www.xe.com/currencytables, accessed 6 Aug 2013).
The two largest DFID projects in public administration were the Personnel Policies and Procedures Project (PPPP), implemented from 2002 to 2004, with a total funding commitment of £3 million, and a functional review of government ministries, known as the FRIDOM project, implemented from 2008 to 2010 at a cost of £2.8 million. Smaller projects supported policy coordination and planning in the Office of the Prime Minister (OPM) and support for EU integration issues as well as some ad hoc, short-term consultancies for the Ministry of Public Administration [KD4]. In early 2011, the British government announced its intention to discontinue DFID involvement in Kosovo (GOV.UK, 1 March 2011).
4.8.1 DFID performance
DFID officials in Pristina identified flexibility and responsiveness as the strong points of DFID’s approach to providing assistance to the government. This, they said, allows it to deal with emerging issues. DFID has thus been able to provide small scale assistance not necessarily reflected in its reporting on major projects.
Whenever they needed one expert on a particular subject area we would bring it. They would very often identify themselves the profile of the internationals and they would be here for three or four days, sometimes even from home they would send drafts … [KD4]
The DFID projects examined for this research were described as ‘design and implement’ projects which meant that consultants had considerable flexibility to
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formulate the details of the project around broad terms of reference [KD4]. A DFID- funded consultant confirmed that he had felt relatively free to work without detailed supervision, unlike the detailed oversight and monitoring provided by the EU [IA10]. However, the downside of this degree of flexibility, and the delegation of project design to the implementing consultants, was that in some cases DFID officials appeared to have little influence over how projects were implemented or what outputs they produced. A lack of continuity in project activities due to procurement processes was also noted as a problem [KD4]. DFID’s own evaluations of its programs have identified deficiencies due to unnecessary gaps between project phases and a high turnover of staff in the London office, as well as the loss of accumulated knowledge from outsourced technical assistance and consultancies (DFID, 2008). Nevertheless, much of what was done by the large PPP Project was considered successful, with the main obstacle to achieving all the expected outcomes being identified as the poor performance of UN officials in the civil administration and the resulting delays in approving draft legislation and establishing the required institutions for public sector administration (DFID, 2004:7).
4.9 The World Bank and the IMF
4.9.1 IFI involvement in Kosovo
Officially the World Bank and the IMF had no authority to act in Kosovo. Yugoslavia had ceased to be a member of the Bretton Woods institutions during the 1990s and Kosovo, as a non-sovereign territory, was not eligible to join. They thus had limited formal power to impose conditions on the local ‘authorities’, in this case meaning the UN Mission, and more specifically the EU reconstruction Pillar, in the way they could on member states. Nevertheless these two international financial institutions (IFIs) were highly influential in setting the agenda for post conflict reconstruction and influencing the programs of other international actors. Both sent regular expert ‘missions’ to the territory to provide advice on the economic policies and systems that should be implemented, and technical advisers working in Pillar IV were generally ready to follow the lead provided by IMF and World Bank advisers [IA8, IA1].
The IMF, the World Bank, and the US Treasury, the three partners of the ‘Washington Consensus’, have, for several decades, been broadly in agreement on the necessity of the free market for achieving economic development and the importance of reducing
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government regulation and other government involvement in the operation of the economy (Stiglitz, 2002:12). Kosovo was seen as one of the last countries of Central and Eastern Europe to transition to market economics, and a similar set of policy prescriptions was agreed on and set out in the reports and recommendations produced by the IMF and the World Bank in the lead up to the post conflict exercise (IMF/World Bank, 1999a, 1999b).
4.9.2 World Bank financial assistance
The World Bank was keen to participate in post conflict reconstruction in spite of the lack of a clear legal mandate to do so. As Christiaan Poortman, World Bank Regional Director for Southeast Europe, noted at a press conference in July 1999,
the fact that Kosovo, being a province of Serbia, and Serbia itself being part of Yugoslavia, which is not a member of the WBG, nor is it a member of the IMF. Therefore, for us to be in Kosovo requires a certain amount of legal work for us to be able to say that we have the justification and the legal basis to get involved. … but we are confident that we can at least get involved in Kosovo and play our role (World Bank/European Commission, 1999f: para 4).
The Bank found its legal justification for involvement in Kosovo in the clauses of the UNSC Resolution which urged UN agencies to assist the Mission. The World Bank qualified as a UN affiliated agency. However, because Kosovo was not a member, the funding the Bank could make available was limited. In particular, Kosovo was not in a position to accept World Bank loans which also meant that the Bank was not able to impose the conditions on policy that are usually associated with World Bank financing. The Bank expected to be able to achieve its objectives however through providing advice and coordination.
The World Bank can best maximize its impact in Kosovo by using its comparative advantage in policy advice, institution building and aid coordination to help ensure the overall sustainability of the reconstruction and recovery effort (World Bank, 1999g:9).
Between July and November 1999, the Bank produced, either alone or jointly with the IMF or the EU, a succession of significant, although somewhat repetitive, analytical reports on the situation in Kosovo intended to assist other bilateral and multilateral donors in developing their reconstruction programs (IMF/World Bank, 1999c; World
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Bank, 1999b, 1999e; World Bank/European Commission, 1999g, 1999f). Through the Joint Office for South East Europe, established in Brussels in early 1999, it organised donor conferences, collected information on donor activities and produced reports and analysis.29 However, the Bank also provided some financial assistance. Between 1999 and 2009, when Kosovo officially became a member, the Bank provided 28 grants totalling around US$170 million in a number of sectors (World Bank, 2009a:17). Funding for public finance and public administration development was a relatively small component of this and comprised several budget support grants and one technical assistance project (Table 4.5).
Economic Assistance Grants World Bank advice on public finance and economic development was backed by a series of four ‘Economic Assistance Grants’ (EAG) between 2000 and 2003, each providing US$5 million to the Kosovo Consolidated Budget (KCB) as budget support (World Bank, 2001a, 2002a, 2003, 2004b). The EAG agreements were seen as facilitating World Bank engagement in policy dialogue with UNMIK, the PISG and other donors. Given that the total forecast Kosovo Budget in 2000 was DM 423 million, compared to the World Bank contribution equivalent to around DM 9.5 million, or 2.2 per cent of the total, the actual persuasive value of the grant money may be questioned, however the Bank considered that even this relatively small budget support was able to generate significant leverage over policy and reforms (World Bank, 2004b:10). For much of this period, World Bank conditions and policy prescriptions were being applied to the UN Mission and to donor-funded technical advisers working in Pillar IV, who were particularly amenable to accepting World Bank advice, rather than, as in normal circumstances, to a national government and its officials. The World Bank’s reputation and its influence on other donors thus carried more weight than the actual amount of money proffered.
Public Expenditure Management Technical Assistance Grant (PEMTAG) The World Bank began funding technical assistance for public finance management after the PISG government had been established. In October 2004, the Bank proposed a grant of $5.5 million to be used for a variety of activities including technical assistance in budget formulation, budget execution, procurement, and internal audit, as well as assistance to the health and transport ministries and the implementation of pay and
29 http://www.seerecon.org/calendar/1999/events/k2dc/sd/ebrd.htm accessed 15 June 2008.
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grading reform in the civil service (World Bank, 2004a). Internal audit and pay and grading reform were subsequently deleted by the time the project was approved in June 2005, although the total grant amount remained at US$5.5 million (World Bank, 2005). Of this, $2.4 million was allocated to technical assistance on budget formulation, cash management, bookkeeping, accounting, financial reporting, and procurement.
The Bank felt that there was broad-based political support for the ideas promoted by the project, based on previous compliance with reform measures, and the enactment, in 2002, of a new Law on Public Financial Management. The fact that the PISG continued to have large numbers of international advisors working in senior positions was also considered an advantage. As with most World Bank-funded projects, the procurement of consulting services was undertaken by the PISG through the Public Procurement Agency (PPA) in the Ministry of Public Services. Although the Bank provided a procurement adviser to assist with this task, the procurement process was delayed and the project, which had been expected to begin in late 2005, did not start until early 2007. Substantial progress was made after this, however, particularly in the budget formulation subcomponent. The activities were completed in March 2009, some five years after they were first proposed (World Bank, 2009b). The impact of PEMTAG was expected to be reinforced by a second project, the Public Sector modernisation Project (PSMP), originally expected to start in 2010 (World Bank, 2009c). This project was also considerably delayed. One reason for this was that, as Kosovo had become a World Bank member after independence, the project was partly financed by a World Bank loan which required the approval of the Kosovo Assembly and this was held up by a 2010 Constitutional crisis and subsequent elections [KD2]. Procurement for the technical assistance services to be provided under the project eventually commenced in late 2011.
Table 4 .5 World Bank Funding for Public Finance and Public Administration 1999-2010 Amount Year (US$ mil) 2000 Economic Assistance Project - Budget support, PFM development 5.0 2001 Economic Assistance 2 Project - Budget support, PFM development 5.0 Economic Assistance 3 Project (PSD) - Budget support, commercial 2001 5.0 law development 2003 Economic Assistance 4 Project - Budget support 5.0 2005- Economic Policy and Public Expenditure Management Technical 5.5 2009 Assistance Project (PEMTAG) - PFM technical assistance Total 25.5
Source: www.worldbank.org/projects, accessed 6 April 2011
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4.9.3 World Bank performance
The history of the PEMTAG project illustrates the complexities of the World Bank’s project development processes and the long lead times often involved. The project was first officially proposed in late 2004 but did not commence until early 2007. Implementation of the large budget formulation component, when it eventually started, did not go to plan with only six of the proposed eight international adviser positions deployed and the number of local consultant positions also reduced [IA4]. The Bank considered PEMTAG to be a ‘project at risk’ for some time because of the slow rate of disbursement of funds. The final evaluation report also found that monitoring and evaluation had not been adequate and rated the quality of supervision by Bank staff as ‘unsatisfactory’ (World Bank, 2009b).30 In terms of project outcomes, the completion report judged that, overall, the project was ‘moderately satisfactory’. There had been improvements in budget formulation and execution, and in procurement capacity, but in view of the significant levels of support for PFM from other donors it was not possible to attribute these improvements to PEMTAG alone. In addition, the value of the procurement mentoring activity had been compromised by the high turnover of procurement officers (World Bank, 2009b). Given the small size of the World Bank’s contributions, both through the EAG budget support grants and the PEMTAG technical assistance project, the significant delays in implementing World Bank funded technical assistance, and the qualified assessment of impacts, the value of World Bank involvement in this sector in Kosovo must be questioned. The Bank’s contribution relative to larger donors such as the EU and the US was apparently designed more to raise the Bank’s profile and to give it a role in policy discussions than to have a significant impact on Kosovo’s development.
4.9.4 TheIMF’srole
The IMF did not engage consultants or implement technical assistance projects in the way that other international actors did, and it provided only minimal financial assistance before independence. Nevertheless the IMF had a significant impact. IMF staff from the
30 The World Bank is unusual among aid donors in that it provides public access to project appraisal, monitoring and completion reports, including assessments of performance and impact, for all its projects. Similar comprehensive information it not readily available on the activities of most other donors.
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Fiscal Affairs Department (FAD) played a major role in providing advice to Pillar IV officials and advisers on how to establish taxation and budget institutions, set up a banking and payments system, and on general macroeconomic policy issues (IMF, 2001b, 2001c, 2002a, 2002b). Regular IMF ‘missions’ provided guidance and set benchmarks [IA8, IA12] and produced internal ‘Aide Memoires’ equivalent to IMF dealings with member states [KD2]. The IMF’s impact in Kosovo was primarily the result of its reputation and influence with other actors.
They recommend which direction the organisation should go and the other donors take notice of that … The IMF has the biggest say always, really, they always do. And generally it’s a positive relationship [IA8].
The Fund took a particular interest in the early development of the Banking and Payments Authority (BPK), which later became CBAK, and provided an international Managing Director until the position was transferred to a Kosovar in March 2008. In 2005, when the Kosovo budget moved from surplus to deficit following the transfer of responsibility to the PISG government, the IMF was closely involved in formulating the joint PISG/UNMIK Memorandum and ‘Letter of Intent’ committing the government and the UN civil administration to a program of IMF approved fiscal policies. The role of the IMF has become more significant since Kosovo was accepted as the IMF’s 186th member in June 2009. The Fund is now in a position to impose its policies through conditions on financial assistance. In 2010, the Kosovo government negotiated a ‘standby arrangement’ to support the 2010 and 2011 budgets in exchange for adherence to IMF-approved fiscal policies. While in many contexts an IMF imposed program indicates economic weakness, international advisers saw IMF agreement to the program as a sign of confidence in the capacity of Kosovo’s public finance management institutions [IA13].31
31 In early 2011, however, a government decision to grant large salary increases to civil servants breached the agreement with the IMF on budget restraint and the IMF program, and EU funding that had been linked to it, was suspended pending Kosovo’s fulfilment of a new set of conditions involving ‘decisive steps towards fiscal sustainability and stronger budget management and execution’ (IMF, 2011). The IMF program was restarted during 2012 (IMF, 2012a).
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4.10 Relations between actors
4.10.1 Conflict between UNMIK Pillars
The different interests and priorities of these international organisations and donors, as well as their different management and staffing arrangements, generated a degree of conflict between them which impeded their ability to achieve results. UNMIK’s four Pillar structure, which united several international bodies under the UN umbrella, did not succeed in eliminating conflict and disagreement between the lead participants, and has itself been identified as a source of difficulty for the mission. Garton Ash, for example, commented on
the complexity and chaos of the international presence itself, which matches and compounds the local Kosovar confusion … all these international organisations have their own marked bureaucratic styles and political constraints. All compete with each other. All are subject to innumerable national pressures (Garton Ash, 2000:452).
King and Mason similarly argue that ‘it became clear that some of UNMIK’s problems were a result of structural deficiencies’ (King and Mason, 2006:126). Many functions were duplicated, which led to turf wars and confusion. Both the UN and OSCE, for example, initially had plans to establish an international police force (UNSC, 1999g:4), and as noted above, the UN Civil Administration’s functions appeared to overlap in places with the EU’s role in Pillar IV. Three of the four Pillars had some role to play in developing the public administration. King and Mason also suggest there was confusion over who was the Mission’s ultimate political master. On paper this was the UN Security Council, which had authorised the Mission, but two UN Departments, Peace Keeping Operations and Political Affairs, the ‘Contact Group’ of major Western powers, and the European Commission all felt they had a significant role. ‘All of these were offering advice to the mission and much of it was contradictory’ (King and Mason, 2006:126).
The most significant difference between the various participants in the Mission was over the interpretation of the objective of the exercise. The wording of UNSCR 1244 – ‘the “paper bridge” between Western and Russian/Chinese positions in the Security Council’ (Garton Ash, 2000:454) – was intentionally vague about the ultimate goal, allowing the various organisations and individuals brought together in UNMIK to adopt
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different interpretations. Many leading actors saw their objective as development and reform based on establishing as quickly as possible a particular set of institutions considered essential for a market economy and democratic government. As shown in Chapter 3, these goals were not explicit in the diplomatic agreements negotiated prior to the end of hostilities, or in the specifications for the UN Mission, but the major development organisations and donors had already been developing their plans for Kosovo well before the agreement was signed. Their objectives implied a separate institutional development path for Kosovo and a severing of institutional links with Serbia and Yugoslavia. The UN, however, attempted to adhere as far as possible to the Security Council commitment to maintain Yugoslav sovereignty and to cooperate with FRY (Cohen, 2000:123). The UN’s peace and security agenda, responding to the divided opinions in the UN Security Council and the General Assembly, generated a desire to maintain the pre-conflict status quo wherever possible, to apply short-term solutions to appease potentially disruptive elements, and to extend the period of international administration for as long as possible. This was clearly at odds with the development agenda focus on long-term outcomes, firm fiscal discipline, the greenfield development of new organisations, and maximum, rapid recruitment and involvement of Kosovars.
These differences of view generated conflict between the various participants in the Mission and in particular between Pillar IV and the UN. During the early phases of the reconstruction exercise, Pillar IV was dominated by US-funded advisers and the antagonistic relations between the Pillar and the UN may, in part, have reflected the generally poor state of the relationship between the US government and the UN at this time (Hirsh, 1999). Hirsch argues that the evident US contempt for the UN started well before the Kosovo conflict, dating to the Clinton government’s failed engagement in Somalia in 1993, and exacerbated by disagreement in the Security Council over weapons inspections in Iraq in 1998.
recounting tales of UN incompetence is water-cooler sport in the State Department and the Pentagon. Washington's collective sneer has helped delegitimize the organization that Woodrow Wilson, FDR, and Harry Truman once dreamed would bind the world into a new structure of international relations (Hirsh, 1999:3).
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However, it was not only US officials in Kosovo and US-funded advisers who were critical of the UN’s approach. Pillar IV’s ‘end of mission’ report, produced by the EU, also identified, rather more obliquely, the differences between Pillar IV and the UN over the reconstruction of Kosovo.
While the ‘traditional’ approach to Mission policy focused on the interim character of UNMIK’s mandate and cautioned to engage into new areas alien to past UN peacekeeping activities … the EU Pillar pointed out the necessity to create viable competitive economic institutions and the costs of non action in terms of development and stability foregone (UNMIK/European Union, 2008:6).
Pillar IV advisers complained that UN civil administration staff were reluctant to take decisions or act on issues considered to be political in nature. The donors involved in Pillar IV were intent on implementing policy changes and institutional reforms that would transform Kosovo’s political and economic environment and which necessarily involved ‘political’ decisions. The UN was thus seen as a major obstacle to achieving their goals. As a former senior Pillar IV official expressed it.
We had to push this sort of thing every step of the way as [UNMIK] was incapable of making any decision on the grounds that, (A) it was ‘political’ or (B) that it might bind a future Kosovo government or worse still bind the UN at some time in the distant future [IA16].
Pillar IV consultants often expressed frustration at the level of risk aversion on the part of the UN which slowed the implementation of their preferred policies (Barents Group LLC, 2000:passim).
The UN had no sense of urgency in that respect. The UN was just running a peacekeeping mission and all you had to do was to keep the peace. And the peace was not going to be kept if the teachers weren’t paid [IA1].
The UN was, I think, excessively cautious… The UN was unwilling in many cases to make decisions which they saw as committing a future government, which they then perceived that at some future time there may be a liability visited on the UN. While it was very difficult to see how that could be brought to reality but they were very hesitant to use what authority I thought they had as the government [IA16].
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Delays by UN lawyers in approving and enacting UNMIK regulations were a particular frustration for Pillar IV staff who felt that draft laws sent to UN headquarters for approval ‘went into a black hole’ [IA1].
I think the biggest problems were that the UN lawyers … nothing could be approved by the SRSG but UN lawyers were quite worried about certain provisions. I can't remember the specifics but you had to go all the way to New York to get it approved by New York lawyers and that was something I'd never had to deal with before [IA11].
The World Bank, the IMF and USAID shared this concern about the slow pace of UNMIK’s regulatory activity. The IMF reported that
In a number of cases, notably insurance and privatization, important regulations take months of legal review, or budget decisions are not implemented by spending agencies due to differences in policy priorities or interpretation within UNMIK. These incidents have real economic costs for donors and Kosovars alike (IMF, 2001c:17).
USAID also complained frequently in its reports about the UN’s cumbersome processes for vetting and issuing regulations, administrative decrees and commercial laws, and its slowness to implement agreed regulations in the power, water, solid waste and telecommunications sectors (USAID, 2000c:6; 2001 :5; 2002b:5).
UN legal staff, on the other hand, felt they were being pressured by donors and advisers to adopt complex new legal statutes which were not regarded by the UN as priorities for the Mission.
The various organisations constituting UNMIK and the funding agencies brought numerous experts with an enormous number of proposals for legislation - which were the “results” expected for the donation. These persons were experts in their fields, such as banking or finance, with a determination to propose the very best legislation as they saw it. An example is the lengthy and highly complex banking laws promulgated very early in the Mission. It was far from clear that such overly complex and detailed laws had any chance of being effectively administered (Miller, A. J., 2004:16).
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UN officials interviewed during fieldwork were also critical of the technical assistance model used in Pillar IV suggesting that, compared to the UN approach, it was inflexible and risked producing inappropriate outputs.
USAID had relatively short-term benchmarks. That was the major difference. The impact was that USAID people were chasing after these benchmarks. They had to do more reporting to their own internal structures. … Ultimately it had advantages because sometimes certain project goals were pushed harder. On other occasions, when you required a specific flexibility because the basic assumptions were wrong, or the circumstances had changed, there wasn’t enough flexibility. … When it comes to legislative drafting, what counted was having the legislative draft ready no matter whether it fit in the landscape or not [IU2].
Pillar IV was a bunch of experts. It wasn’t a workforce like UNMIK [IU3].
4.10.2 Relations within Pillar IV
While EU officials and USAID’s contracted technical experts working in Pillar IV were united in their criticisms of the UN components of UNMIK, relations between participants within the Pillar were also sometimes difficult. The heavy involvement of USAID in Pillar IV in the early years, with USAID consultants occupying positions which were under the authority of the EU, left both organisations with a serious ‘principal-agent’ problem (Wittkowsky, 2009:19). USAID has also noted that there were areas where European and US philosophies and approaches diverged and that this slowed progress in achieving USAID’s objectives (USAID, 2001:4). While there was agreement between the two on the general direction of their activities, there were at times differences on detailed policies.
When the contract started there was great common cause between USAID, or the US administration, and the EU and the British and so on, and there was a lot of concord about what was necessary for Kosovo. I think eventually things became a little difficult to manage shall we say. The ideological positions of the US and the EU in particular began to be more divergent in this area of government [IA16].
Conflict between the lead actors in Pillar IV became most noticeable on the issue of privatisation in 2003 (Wittkowsky, 2009:19). Differences of opinion over the speed of
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the transfer of functions from UNMIK to the PISG in 2002 were identified as another source of friction [IA14]. Tensions in the relationship between USAID and the EU impacted in particular on the consultants engaged by USAID to work with the EU Pillar who sometimes found themselves caught up in disputes between the two.
Where there were very strong differences of principle between the US dominant policy line and the European dominant policy line … the US felt it had, through the [consulting firm] contract, a way of getting leverage on its policy preferences, whereas they were actually staffing something which the EU had nominal responsibility for and where the EU wanted to push its policy preferences. ... I found myself personally at times a bit at odds with what the Americans wanted us to push. On plenty of other occasions I was very happy to take the guidance from what the US wanted [IA16].
At the time of fieldwork interviews in 2010, a degree of ongoing tension between the US and the EU was reflected in many of the comments made by advisers working on either EU or USAID-funded technical assistance projects. Many of these negative comments, as noted earlier, were based on perceptions that the US government has significant influence over the Kosovo government and that it uses this influence in pursuit of its own interests, at the expense of other actors. Some advisers suggested that, as a consequence of US political influence, USAID-funded consultants have had better access and more influence at higher levels of the government.
If you are in a USAID project you will probably get an entry to the Ministry very easily. ... in the EC, for example, [we] are EC funded advisers but we don’t have very much weight with the EC people. We can’t push that much. [KA1]
The IMF and the Americans are the only people who have any weight around here. A lot of the other donors don’t get so much respect. The UK gets some respect but nothing compared to the IMF and the Americans, and the EC are at the bottom of the pile. [IA14]
These advisers were also suspicious of the motives of USAID staff and USAID-funded technical advisers, seeing their continuing involvement at senior levels of the Ministry of Finance as a strategy for maintaining US influence or achieving US government policy preferences [IA14, KA1, IA2]. It was reported, for example, that USAID advisers supported policies on procurement law which did not accord with policies
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proposed by EU advisers working on the issue [KA3, IA2]. There has also reportedly been conflict between EULEX and the US Embassy over how to deal with organised crime.
If you were a European looking from a purist point of view you would say that the Americans seem to be happy to tolerate certain politicians who are deeply involved in organised crime because they are their politicians and they want them in place, and that’s where the tension came from [IA17].
Capussela argues that the US has used the Balkan crises to assert and strengthen its influence over Europe (Capussela, 2011). Officially, however, the US government and USAID express support for Kosovo’s ‘path to European integration’ and claims to base its work on helping Kosovo to meet the standards required for EU membership (USAID, 2003c, 2010b).
4.10.3 Relations between international actors and Kosovars
Kosovar attitudes to the international mission The attitude of Kosovars to the international presence was somewhat ambivalent. Although most people clearly welcomed the international intervention, which had ended a decade of conflict and offered the prospect of attaining the long held goal of independence, relations between the international administration and Kosovo’s political leaders were often difficult. There were tensions, for example, over the division of responsibilities between internationals and Kosovars. Initially the conflict was with the Kosovo ‘Provisional Government’ and the other parallel administrative structures that had been established by Albanian political leaders before and during the conflict. This was partly resolved through the power sharing JIAS arrangement, although recurring boycotts and walkouts by various Kosovar politicians disrupted the work of the Interim Advisory Council (UNMIK, 2000c). The ICG reported ongoing Kosovar concern about the role taken by UNMIK in the administration of the territory.
Resenting what they see as a reluctance to consult qualified locals, some Albanians have the impression that they have exchanged one colonial master for another, albeit more benign (ICG, 2001:13).
The clash of expectations between internationals and locals became particularly evident after the establishment of the PISG in 2002. The interpretation of the Constitutional Framework and the slow pace of the handover of administrative responsibilities to local
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institutions were major sources of disagreement. Kosovar politicians claimed that UNMIK had failed to prepare for the efficient functioning of the PISG, and that internationals still controlled the main ‘instruments of institutional establishment’ and did not appear ready to hand them over even when provided for in the Constitutional Framework (Early Warning Report, 2002a:11-12). Other complaints concerned the SRSG’s slowness in promulgating laws after their approval by the Kosovo Assembly, UNMIK’s failure to consult the government on the appointment of judges and prosecutors, and delays in the transfer of responsibility for economic issues, public finance and public utilities (Early Warning Report, 2002b:16; 2003a:15; 2003b:4). In 2003 it was reported that the then Minister for Public Administration, Jakup Krasniqi, wrote to UNMIK claiming the Mission was disinterested in strengthening the authority of local institutions (Early Warning Report, 2003b:4). The wider population were also, at times, quite antagonistic towards the international Mission. Surveys of local opinion track the rise and fall of public attitudes towards UNMIK and other international presences over time. In early 2002, for example, UNMIK’s approval rating was only 27 per cent compared to 70 per cent approval of KFOR (Early Warning Report, 2002a:5). This improved to 62 per cent later that year, but then reached a low of 20 per cent in 2004 (Early Warning Report, 2003c:4; 2005a:4). Public approval of the UN Mission has tended to rise as its involvement in the administration of the territory has declined.
The ambivalence of Kosovar opinions towards the international presence extended to the activities of technical assistance projects. Kosovars perceived a tendency for technical advisers to underestimate the capacity of Kosovars, and resented the use of expensive foreign experts in roles that could have been performed by locals [KG1, KG6, KA1].
Not entirely happy with the international advisers. Because donors are interested in lobbying for these projects. They are interested in having a large amount of money. They make big reports. …could be the first time they send the best one, then the second level, then the third level to implement this ... so not entirely satisfied. [KG6]
You started having consultants who have been consultants all their lives and then in their reports they would forget to change the name of the country ... there are so many charlatans in the field. [KA1]
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The policy conflicts between donors and advisers from different parts of the world were also noted by Kosovars.
People with different backgrounds, with different systems in mind, came in, offered different proposals, not always consistent. When you talk to people with no capacities in these fields they get confused. I am not a specialist, I don’t know anything, but I expect from you the specialist to teach me. You tell me one thing, and the next guy comes and tells me the other thing, and the third guy tells me the third thing so where do I stand? I don’t know anything, but apparently you also don’t know anything. [KA3]
International attitudes to Kosovars It is clear from many statements, both in official documents and in interviews, that the international actors did not have high expectations of their Kosovo counterparts and beneficiaries. Although in 2000 the World Bank noted that rapid rebuilding after the conflict gives ‘testament to the industry of the population and its determination to make up for lost time’ (World Bank, 2000c:3), similar positive comments about Kosovars are rare. In interviews, for example, only one person identified Kosovar staff as a factor in the success of institutional development. More often, official reports and statements, and comments by international advisers and even some Kosovars, paint a bleak picture of Kosovo society and culture, the people and their leaders, as well as conditions in the Balkans more generally, and they frequently cite these as factors contributing to deficiencies in the quality of government administration, and to poor outcomes of development projects. This has been a feature of the international presence since its inception and was noted early on by the ICG which argued that the international administration
… must work harder to treat Kosovars less like errant children in want of firm parenting and more like the self-respecting, accountable citizens on whose behalf it has been asked to serve (ICG, 1999c:11).
As outlined in Chapter 3, a traditional Albanian culture based on clans, patriarchal family relationships, blood feuds and illegality offers a ready explanation for the frustrations experienced by technical advisers. Such cultural values are frequently identified in donor documents as a detriment to civic responsibility and an obstacle to modern practices. A DFID report for example argued that
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Kosovo has a long history of the exerting of influence by family networks and interference in the operation of judicial systems … establishing impartial systems will require a major change of behaviour and attitudes (DFID, 2001b:4).
USAID also noted that Kosovars ‘do not have positive expectations from government, a tradition of public participation or tolerance of minority groups’ (USAID, 2000c:4), and EAR identified ‘existing alternative practices, less reliant on written communication, more on authoritarian structure and verbal negotiation, following another logic than modern, rational administrative culture’ as a challenge to improvements in public administration (European Agency for Reconstruction, 2008d:3).
Other statements identify the problem with Kosovars as the consequence of socialist government and the bad habits it engendered, or the effects of official discrimination against Albanians and the years of conflict. The ICG, for example, reported that
Political interference in the former state companies and even public institutions by the main Kosovo Albanian parties is endemic as politicians who were raised in an environment of one-party rule apply the only methods they know to secure power and economic benefits (ICG, 2001:4).
USAID had a similar view
Years of suppression under Milošević’s totalitarian regime developed a tolerance among the majority of people to uncontrolled arbitrariness of the government and pessimism about the mission of government to serve in the public interest (USAID, 2003a:3).
The World Bank blamed the years of discrimination and conflict.
The long period of exclusion from civic life of the ethnic Albanian population and the legacy of the conflict has led to a severe erosion of skills, lack of sense of civic responsibility, and disrespect for the rule of law. Thus there is also some degree of uncertainty as to whether the Kosovar business community will readily adapt their informal and unstructured methods of operation to the formal requirements of an organized economy. While one might expect that Kosovars who were previously excluded would welcome the chance to live and work with the recognized system, that enthusiasm may fade as persons realize it comes with a cost in the form of rules and regulations to be obeyed, taxes to be paid, etc (World Bank, 2001d:4).
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An adviser interviewed in 2010 saw the legacy of conflict as still a major influence on behaviour.
they don’t use guns anymore, almost not, but the same lack, to a certain extent, the same lack of legality as you have during the war … the war legalised everything [IA2].
Numerous comments by advisers and officials identify more general problems including a lack of modern management behaviours such as forward planning, timekeeping, discipline, accountability, and analytical thinking.
Most Kosovo citizens and municipal staff are inclined to short-term thinking. As one local official put it ‘anything going beyond three months is in the distant future for most people’ (UNDP, 2005a:78).
they’re just not really forward planners. They’ll wait until the problem is now and they’ll deal with it now [IA13].
Sometimes it is not a matter of lacking skills or understanding or capacity to formulate some document. It is just a little bit of laziness, uncoordination, taking everything to the last moment [IA12].
There’s a lack of a culture of accountability. There’s no clear linkage between what you’re expected to do and measures if you don’t do it. .. everyone will know that this guy doesn’t perform well but nothing will happen [KA1].
It’s not that people are deliberately resisting. It’s just that it is unfamiliar to them. And if you don’t have a consultant cracking the whip they will revert to the familiar. They just will [IA3].
The cultural shortcomings of Kosovo society have also been used to explain the behaviour of Kosovo’s political leaders and their failure to implement the policies recommended to them by advisers [KG4; IA4].
The problem with politicians in Kosovo is that they have no concept of public service. They have no concept that they are there to serve. … I think that the thing that needs to be developed in Kosovo is for politicians to understand they are there actually to serve the public, not to serve their own narrow financial or family interest [IA17].
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The fact that Kosovo is in ‘The Balkans’ was sometimes cited as sufficient explanation for the perceived deficiencies of Kosovar society and behaviour.
This is the Balkans. Some things we consider corrupt might be considered quite normal in the Balkans, e. g. nepotism, finding jobs for friends and supporters [IA6].
One interviewee described people of the region as suffering from an ‘Eastern mentality’ different from the ‘shared values’ of the rest of Europe.
This is just how they are. They’ll look for an advantage. They don’t have any concept of contributing [IA3].
There may, of course, be more than a grain of truth in this portrayal of Kosovo, or Balkan, behaviour and attitudes. Kanin (Kanin, 2003) identifies geography, economy and history as explanations for the presence of corruption and crime in the Balkans, and in Kosovo in particular. He argues that economic marginality and fragmentation, poor transport and isolation, conquest and subjugation to foreign empires have all contributed to creating a tradition where corruption and crime are central aspects of society and will not easily disappear. However, statements such as those above in relation to Albanian Kosovar society are also consistent with the particular negative Western conception of 'The Balkans' which Todorova describes as ‘Balkanism’ (Todorova, 1997). Her argument that 'the Balkans have served as a repository of negative characteristics against which a positive and self-congratulatory image of the 'European' and the 'West' has been constructed' (p188) certainly seems applicable to relations between the international, mainly Western, actors in Kosovo and the local population. However, negative statements contrasting European and Western values with local behaviours are not limited to the Balkans but are found in almost any poor, underdeveloped country where foreign donors work, and are arguably a product of those ideas about development assistance which identify local attitudes and behaviours as the problem, and proposes capacity development by technical advisers from the West as the solution.
4.11 Summary
A large number of national donors, international bodies and NGOs were motivated to seek a role for themselves in the post conflict reconstruction of Kosovo and several very significant international bodies focused their attention on public finance management
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and public administration development. On one level their objectives were similar: they all intended to improve the welfare of the people who had been affected by the conflict. However, it can also be seen that the reasons international actors became involved, and what they chose to do, were often determined by factors other than the circumstances in Kosovo. There was a sense, for example, that international actors needed to make up for past failures in Somalia or Bosnia or Rwanda. Prior experiences of post conflict intervention influenced some aspects of the structure and organisation of the Mission, and the economic and political transitions in Eastern Europe during the previous decade informed many of the programs sponsored by international actors, and provided some of the people who implemented them. Diplomatic relations between the lead international actors in other arenas and on other issues often coloured relations between them on the ground in Kosovo.
The particular form and scale of the involvement of different actors was driven by national interest or organisational self interest, their own assumptions about their purpose, mission and ’comparative advantage’, and by competition between them for influence, authority and reputation. They each arrived with their own interests and foreign policy agendas, and somewhat different views about what achieving ‘peace and a normal life’ in Kosovo would entail. They also had different levels of resources to deploy, different degrees of influence over Kosovars, and over each other, and different levels of organisational effectiveness. These differences generated disputes over the allocation of responsibilities, the objectives to be pursued, and the policies to be implemented, often conducted with limited reference to the wishes of the Kosovars.
The UN, the EU and OSCE all struggled in the lead up to the peace agreement to assert their competence and claim a role in the post conflict phase. International diplomacy determined the role assigned to the UN, and at the same time limited its ability to fulfil that role by setting unclear and contradictory objectives and providing inadequate resources. The UN had a high level of formal authority and performed well within its areas of specialist expertise, in particular political negotiations with Kosovo’s politicians. These successes in the political and diplomatic fields arguably made the achievements of other participants possible. However the UN was not organisationally equipped to deal with all the tasks assigned to it. In the field of civil administration it lacked experience, had unclear objectives, no firm agenda, the wrong staff, and was constrained by conflicting political demands. These problems were noted from the start
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and are frequently repeated criticisms, including in the UN’s own reports (UN General Assembly, 2000b).
The EU’s ambitions in Pillar IV initially outstripped its ability to fulfil its commitments and it was thus highly dependent on USAID to support its involvement, however the two organisations worked surprisingly well together for a time on economic governance issues and they share the credit for outcomes achieved in these areas. The EU’s other major contribution, through EAR, adopted a traditional aid project approach and appears to have replicated all the deficiencies in aid administration identified in decades of previous literature on the subject. EAR provided narrow, targeted assistance in specific areas, but the small size and limited scope of each project, together with the considerable bureaucratic overheads and delays, undermined their effectiveness. The contrast between the EAR approach to public administration development activities and the USAID program is stark, as illustrated in Table 4.2 and Table 4.3. USAID delivered its technical assistance in half a dozen large slabs of funding covering many activities under a single overall program; EAR’s activities comprised a multiplicity of small scale, short-term, discontinuous interventions in several narrow fields. EU conditionality associated with Kosovo’s potential membership aspirations has had a significant impact in recent years in stimulating institutional reform action on the part of the Kosovo authorities, but there is some doubt among Kosovars and other observers about the ability of the EU to deliver on its membership offer, questions about the appropriateness of EU institutional models in these circumstances, and suggestions that the EU approach does not do enough to address the economic development issues facing Kosovo.
USAID, an experienced and well-resourced development actor, appears to have been better equipped to deal with the situation in Kosovo. Although not the largest overall donor, USAID had very clear objectives, was able to mobilise quickly, and fielded highly experienced staff and advisers who largely replicated what they normally did elsewhere.32 It also enjoyed a high level of local support. The successive USAID projects in the field of public finance stand out in terms of their size and scope, rapid mobilisation, continuity over time, and clear unambiguous objectives. USAID’s program appears to have been, in this context, and in this sector, largely successful. The
32 Based on the limited evidence from my interview sample, it appears the average age of USAID advisers was considerably higher than those engaged by the EU in Pillar IV or by some other donors. Most were experienced professionals while many EU recruits were recent graduates.
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magnitude of the resources deployed by the US on this rather narrow set of institutions was significantly larger than the amounts other donors were able to mobilise. The material gathered for this thesis tends to show USAID in a fairly positive light, particularly compared to other actors. This is however partly due to the particular coverage of the analysis. Not all USAID activities are surveyed in this study and not everything USAID attempted was successful. Considerable technical assistance effort was directed, for example, towards privatisation of former socially owned enterprises but the privatisation process was plagued with problems and has been widely criticised (King and Mason, 2006:139; Knudsen, R. A., 2010).33
DFID was a relatively small donor in the overall Kosovo context but had the strongest interest in supporting civil service development. This focus on civil service issues reflects British assumptions about the value of its own civil service model and the benefits of transferring it to other contexts, which, as shown in Chapter 6, proved misguided. Outcomes were also undermined by the inadequacies and failings of UN staffing and administration. The World Bank and the IMF engaged in various legal and linguistic manoeuvres to justify a role in a situation which was, technically, outside their terms of reference. The two institutions were insignificant in terms of financial resources during the post conflict phase, and had no formal role before 2008, but were very influential due to their experience, reputation, expertise, agenda setting activities, and the readiness of other actors and local political leaders to comply with their policies. Their influence is based on their ability to attract intellectual talent, less hampered than the UN by nationality quotas, their command of data, and their energetic dissemination of doctrine (Larmour, 2002:251). The impact of the small amount of technical assistance funding provided by the World Bank through the PEMTAG project is doubtful and it is not clear why the World Bank needed to engage in this kind of activity given the resources already deployed by so many other donors.
The following two chapters describe the events that unfolded on the ground when these actors tried to work together to develop a new set of public administration institutions on the ‘green field’ site of post conflict Kosovo, and show how the differing objectives,
33 King and Mason note for example that ‘the EU agency responsible for running public enterprises and privatising socialist ones proved that a small army of Western technocrats and consultants was just as able to preside over a dysfunctional mess as any socialist apparatchik.’ (King and Mason, 2006:139).
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resource levels and administrative capacities of these actors influenced the outcomes that, as a group, they were able to achieve.
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5 Public Finance Management Institutions and Policies
Arrangements for managing Kosovo’s public finances were put in place in the months immediately following the conflict by a group of significant international actors including the EU, through its role in leading UNMIK’s Pillar IV, the US, through USAID technical advisers, and the World Bank and the IMF, through their regular expert missions and published agenda-setting reports. There was initially a high level of agreement between these actors on the centrality of public finance institutions for Kosovo’s reconstruction and future development, and concurrence on the policies and systems to be implemented. Although this strong agreement and cooperation between the lead actors began to dissipate after a few years, public finance management in Kosovo is an area in which these donors are able to point to significant achievements against their original objectives.34
This chapter documents the process of establishing the main public finance institutions and the outcomes achieved. It begins by discussing the significance of public finance institutions, as perceived by donors, and the complex policy issues and conflicts they sometimes generate. It then identifies the main factors that have influenced the development of this sector of public administration in Kosovo. The most significant of these appears to have been the importance and authority of the international actors involved in the task, the broad agreement between them on the objective, and the level of resources they applied, however, certain features of the context in which they worked were also relevant, in particular the post conflict ‘blank slate’, the ability of international staff to exercise direct authority over the new institutions, and the small size and relative insulation of some of the public finance institutions from Kosovo’s
34 This analysis does not deal in depth with work done by the same donors on other ‘economic governance’ issues such as private sector development, commercial law, the banking sector, and the privatisation of former state owned enterprises, where outcomes may have been less positive. It also focuses on the largest donors and does not consider the efforts of smaller donors who also played a role, including the US Treasury Department, or of donors and NGOs who worked on developing financial management functions in individual government ministries and at the municipal level.
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political environment. These influences are illustrated through a detailed account of the development of policies and institutions in four main areas of public finance management: revenue collection; expenditure management; public procurement; and audit and financial control. The final part of the chapter assesses the outcomes achieved in these areas, as reported by donors and advisers, by independent evaluations, and by Kosovars. In many areas of public finance there is evidence that the international actors, on the whole, achieved what they set out to achieve and their activities have resulted in well functioning, Kosovar-led institutions. In some areas, however, it is evident that delayed and under-resourced projects and disagreements over policy have produced unsatisfactory results, although the particular characteristics of these functions may also have limited the possibility of donors achieving their objectives.
5.1 The Significance of Public Finance in Development
Public finance management (PFM) comprises the functions and institutions which enable a government to raise revenue and to spend it to deliver government services. Public finance management is arguably one of the essential functions of government because it provides the means for achieving other government objectives including national security and economic development. There are two reasons why donors take a strong interest in public finance in developing countries. The main reason is that this particular set of public institutions is considered essential for ensuring economic stability and a well-functioning market economy to support private sector led development. Thus USAID described its program in Kosovo in terms of building ‘economic governance’ rather than as public finance or public administration development. Another reason for the high level of donor interest is the role that public finance institutions play in ensuring the effective and honest use of donor-provided development funds. PFM receives considerable attention from bodies such as the World Bank, the IMF and the OECD. Concepts and standards of ‘best practice’ that all countries are expected to meet have been established in numerous manuals, guidelines, textbooks and assessment frameworks (Premchand, 1993; Schick, 1998; World Bank, 1998b; Potter and Diamond, 1999; Allen and Tommasi, 2001; IMF, 2001a, 2007; Shah, 2007).
These documents attempt to apply the rationality of accounting, numbers and economic theory to what is, in fact, a highly political and contested activity. Public revenue and
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expenditure systems are influenced by the constitutional arrangements, political processes and ideological complexion of each country. Electoral systems based on proportional representation and coalition governments, for example, are often proposed in conflict prone countries as a means of encouraging political stability, but are criticised by public finance experts for producing delays in policy making, ‘pork barrel’ budget projects and suboptimal fiscal policies. A system that that gives a dominant role to the Ministry of Finance, on the other hand, makes it easier to control budget decisions and enforce fiscal restraint, but may be regarded as limiting democratic accountability (Alesina and Perotti, 1996). The macroeconomic and fiscal objectives of the finance ministry are often in conflict with other political priorities such as investing in social infrastructure or providing employment for former combatants. In setting up new public finance arrangements there is thus considerable potential for conflict and disagreement over objectives and priorities. International actors also sometimes disagree over the degree of complexity and sophistication of the systems and procedures that should be adopted and the choice between pragmatic short-term solutions and long-term sustainable outcomes. The idea of an impartial government making rational decisions on the distribution of economic benefits among the population, on which Western public finance models are based, may also be at odds with the cultural systems and economic realities in many developing countries, while politicians often have an interest in perpetuating inefficient and opaque procedures for their own benefit.
5.2 Factors Affecting Public Finance Development in Kosovo
All of these difficulties and conflicts emerged at times in the development of PFM functions in Kosovo, however, a striking feature of accounts of this area of activity is the strong agreement between the lead donors on what needed to be done, and the high level of resources and effort they directed to achieving their shared goals as rapidly as possible. Other important success factors were an early start to recruitment of Kosovar staff and a willingness to transfer responsibility to them quite quickly, the nature of the post conflict environment which gave international officials and advisers control over the institutions, and the limited scope and size of these institutions. The following section reviews and evaluates these explanations for the results achieved in different public finance functions.
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5.2.1 Donor unity
As noted in Chapter 4, it was initially unclear which component of the UN Mission would have responsibility for public finance management issues. Based on advice from World Bank and IMF experts, however, it was soon resolved that these functions would reside with the EU-led Pillar IV (Seale, 2000:1), and thus EU and USAID technical specialists played the lead role in institutional development. The World Bank and the IMF also brought their influence to bear on setting policy and resolving obstacles. Within Pillar IV, EU officials, USAID advisers, and visiting IMF and World Bank staff were largely united on the policy directions that should be pursued. These actors were clear from the start that the objective of their intervention was to create modern, Western, market-oriented institutions in a self-governing Kosovo. Discussions sponsored by the World Bank and IMF during the conflict (IMF/World Bank, 1999a, 1999b), and at the two donor conferences held during 1999 (World Bank/European Commission, 1999a, 1999b), emphasised economic development and a rapid transition to a market economy as the main tasks for the post conflict period. Their interpretation of the wording of UNSCR 1244 allowed maximum reorganisation of the local economy and its legislative framework and institutions. Agreement on the objective and the need to achieve immediate progress apparently overcame potential sources of conflict between the lead participants in Pillar IV and took precedence over institutional rivalry, as noted by one USAID-funded technical adviser.
We got agreement with them [USAID], and I think reluctantly, that we would implement and propose policies that we thought were best for Kosovo, and in some instance it could be conceivable that it may not be what the US government would prefer. Because we all had different agendas and there was some concern there that some of the policies we might implement, particularly on tax and privatisation, may not be the policies that the US government would want supported. They had to accept it I think. [IA1]
The strong agreement between the parties began to break down after first few years as differences developed over the details of policy and how institutions should be developed. This coincided with the transition to a more typical development assistance model, the progressive handover to Kosovars, and the increasing influence of EU accession as the framework for institutional development. Although the US and other lead actors publicly support the policy of compliance with EU standards, it has
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generated a certain amount of tension and disagreement over policy in some areas of public finance.
5.2.2 Significant effort and investment
The positive outcomes achieved in the development of PFM institutions in Kosovo, particularly in the early years, can also be attributed in large part to the energy and urgency with which the leading players addressed the task and the level of resources provided. The development of public finance institutions moved remarkably quickly. The Customs Service was established within a few weeks of the arrival of the UN Mission and tax administration, budgeting, banking and accounting functions were in place not long after. The high priority given to PFM by the lead actors also translated to a significant commitment of resources. Table 5.1 provides an estimate of the amounts spent by the major donors on projects in this field, including EU funding for Pillar IV, USAID economic governance projects, the World Bank’s PEMTAG project, and EU projects in public finance managed by EAR or ECLO.35
Table 5 .1 Indicative funding for technical assistance in public finance development by major donors 1999 – 2010 ($1 = €0.85) US$ million Euro million EU Pillar IV 160.0 136.0 USAID Economic Governance 104.5 88.8 EAR and ECLO PFM projects 30.5 25.9 World Bank (PEMTAG) 5.5 4.7 Total PFM technical assistance 300.5 255.4 Sources: European Commission, 2008, Multi-annual Indicative Planning Document for Kosovo 2008-2010 http://www.eulex-kosovo.eu/docs/info/basic/Basic-ENG.jpg ; USAID Office, Pristina; http://ec.europa.eu/enlargement/archives/ear/agency/28-ContractListWeb/kos/kos.htm; http://www.delprn.ec.europa.eu/?cid=2,94;www.worldbank.org/projects
Although the numbers are approximate, it is clear that a substantial portion of the estimated €6.3 billion directed to Kosovo’s reconstruction and development over this period (around 5 per cent) was specifically targeted at public finance activities.36
35 Compiling accurate data on the exact amounts spent by donors and international bodies in Kosovo on particular sectors or activities is difficult due to their different approaches to classifying projects.
36 The total amount of development aid and other assistance provided to Kosovo over the decade to 2010 is in the vicinity of €4 billion (World Bank/European Commission, 2002, 2006; IMF, 2008). In addition the UN spent around US$2.7 billion (€2.3 billion) on its contribution to UNMIK (based on data on
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The number of international technical experts engaged in the exercise was also significant, particularly in the early phases. A very large contingent of specialists in economic, financial and budget issues was deployed by USAID to work in Pillar IV within months of the end of the conflict. By early 2000, USAID had around 70 technical advisers working on this project (Barents Group LLC, 2000). The EU Pillar also, eventually, fielded more than 100 staff to work on economic reconstruction issues. These staff were recruited and engaged on individual contracts in much the same way as USAID technical advisers [ID1]. The intensity of the technical assistance and capacity development effort was noted by both internationals and Kosovars.
MFE, from the beginning, has had very, very heavy donor assistance and engagement. Look at our project. We were basically in all core departments of the Ministry, very integrated, sitting down day to day ... in a way it pays off. Also the policy side was led by internationals, plus the IMF, the World Bank … [IA12]
We have a lot of training. Just for example from USAID, we have been twice to the US, we have some good discussion with budget departments in the US, the OMB, the Congressional Budget Office. We have a lot of training at a Vienna institution, and we’ve been in other countries to take more experience. [KG1]
The strength of purpose exercised by the lead donors is reflected in the language used in USAID’s description of its contribution.
The success of this strategic objective is due to the aggressive development and introducing of economic reforms; a concentrated effort to institutionalize them; and a commitment to human capacity development in order to sustain them. (USAID, 2002b:3-4)
The speed and clear direction of the PFM work was described by one of the advisers involved in the following terms:
The CFA was one of the two or three institution building components of building government in Kosovo which was ahead of just about everybody else. It was dragging a lot of the rest of government with it. [IA16]
actual expenditure reported in annual reports to the UN General Assembly on the budget for UNMIK 2001-2011).
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The development of the Customs Service was similarly described as a very intense and focused exercise.
... they put in place quite rigorous procedures and good forms of legislative basis and regulatory basis … Recruitment was done on a very assiduous basis, training was done on an assiduous basis, and there was a hell of a lot of training on values and anti-corruption and that sort of thing. [IA16]
The rapid and resource-intensive early efforts by USAID and Pillar IV contrast strongly, however, with the rather fragmented and small scale EAR and WB technical assistance projects that followed. Both organisations became involved in providing direct PFM technical assistance much later than either USAID or the EU Pillar and, in relative terms, the projects they funded were small and narrowly targeted. As a consequence they were arguably less effective. One of the consultants working with the USAID program compared EU projects unfavourably with USAID’s approach.
From what I’ve seen here, I’ve seen USAID, in various projects, get results. And I see the EU sometimes dither around and waste resources. You just have to find people who have worked in both camps and ask them. I haven’t found one person who doesn’t say they greatly prefer the US model. Because they want to be involved in projects that succeed. They want to do things and achieve things and the US have the resources of USAID and their initiative behind the projects, they’re not going to waste their money. [IA13]
The World Bank’s single technical assistance project in public finance management during this period was also relatively small scale and slow to be implemented, and on the Bank’s own assessment may have had limited actual impact (World Bank, 2009b).
5.2.3 Early ‘Kosovarisation’
The international actors in this sector were also largely agreed on the importance of recruiting Kosovar staff to the new institutions and an early handover of responsibility to local personnel.
The model was always that there was a relatively small number of internationals and we recruited from the outset from the local employment pool. [IA16]
Building local expertise was one of the Pillar’s main goals from the outset. International experts worked alongside locally hired staff to create a core cadre
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of personnel for sustainable institutions in the post transfer future (Wittkowsky, 2009:23).
Kosovarisation was stated as an explicit objective of US assistance in early documents produced by the US government on its activities (USAID, 2000b, 2001) and USAID supported a rapid transfer of responsibility to the PISG when it was formed in 2002.
It was in the task orders that we should get out as soon as possible, get out of line positions, and we very quickly got out of Treasury line positions and budgeting and all those things in 2002 and 2003. [IA13]
This was in strong contrast to the practices of the UN-managed components of the public administration, particularly during the JIAS period.
The culture of many of the UN people was that they were there for the long haul to make decisions. The culture of the Central Fiscal Authority [in Pillar IV] was to create an institution in which the top people became redundant as soon as possible within two to five years. [IA16]
In spite of their support of an early transfer of responsibility, however, Pillar IV staff and advisers did continue to be heavily involved in the work of the public finance institutions for some time. Several USAID-funded advisers were still working with the MFE in 2010. One of them explained the difficulty of transferring responsibility to local staff.
It was a long-term process because we were building up on our gradual achievements and then you just have to make judgement call whether you can allow things to eventually … you take the risk that things will eventually fall apart and it will be a failure or you just sit back and OK, see what happens. Maybe it won’t be perfect but it will be done. [IA12]
Not all observers agree, however, that early handover of responsibility was a good idea. The poorer performance of the Tax Administration relative to the Customs Service, for example, was attributed in part to the relatively early transfer of responsibility for taxation to local managers [IA8, KG2] whereas the retention of the Customs Service as an UNMIK ‘reserved power’ after 2002 meant that international staff held key senior roles for an extended time providing it with a stable management structure [IA17].
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5.2.4 The post conflict context
While donors readily identify their own efforts as the significant factor in achieving positive outcomes, certain features of the environment in Kosovo in the post conflict period also contributed to the ability of international advisers to achieve results. Early reports on the post conflict situation produced by the World Bank and others suggested that the absence of existing functioning PFM institutions would facilitate the work of external actors (World Bank, 1999b:5) and several people involved at the time agreed that the ability to set up new organisations and recruit new staff was a significant advantage.
The Albanians did not want to have anything to do with the existing Serb institutions, so we were able to recruit our own staff who had not worked in a similar role before and train them. [IA16]
To a significant extent, however, the donors in this sector created their own ‘blank slate’ by choosing to employ younger, promising but inexperienced staff through open recruitment, and by strongly resisting proposals to re-establish previous taxation, customs, payments and banking institutions or to re-employ previous personnel. This approach was opposed at the time by many former public sector employees who felt they should be given preference, and by the Serb government who objected to the creation of new, independent institutions. Donor efforts were also helped by the fact that UN administration gave international staff and advisers executive authority over public administration functions for the first few years which insulated the new institutions from local political pressures. The advisers were in a position, unprecedented in normal aid projects, to implement their preferred policies with limited local consultation, to identify and dismiss corrupt or poor performing staff, and to resist efforts by Kosovar politicians to recruit political supporters to the administration [IA1, IA16, IA11]. When responsibility was eventually transferred to the local authorities it was generally handed to counterparts who had been selected and trained by the international experts.
However, the post conflict environment also presented obstacles to the full achievement of donor objectives in this field. The adverse contextual factor most frequently identified by international participants working for USAID, Pillar IV or other non-UN agencies was the presence of the UN itself. The UN components of the Mission did not wholeheartedly share the assumption of USAID and the EU Pillar that economic transition and development should be the priority. The UN had many other day-to-day 141 Chapter 5: Public Finance Management
issues to deal with and faced conflicting pressures from the Security Council, the General Assembly, and the UN Secretariat, as well as the government of Serbia and a range of other special interest donor groups and NGOs, which limited its ability to facilitate the ambitions of the EU and USAID for rapid economic reform and development.
5.2.5 The nature of the PFM institutions
In addition to focused attention and the favourable context, the nature of the institutions in the PFM sector, in particular their small size and their degree of isolation from the wider public administration, affected the outcomes that donors were able to achieve. The CFA, for example, was initially a relatively small entity. During 2001 it had a mere 108 local employees, not including Tax and Customs staff (UNMIK Reg. 2000/67:Schedule 1). The small size of this body relative to the number of USAID and EU international staff, and the highly centralised nature of the budget and treasury functions at the time, made it possible to separate the organisation from both the Kosovar political environment and the UN bureaucracy and to provide it with a sense of identity and professionalism. This is reflected in the relative stability of MFE staffing over the years compared with other government institutions.
When we were building it up, we over-recruited and over-trained with the expectation that people would move on … There’s been a bit of that but not much. It’s quite surprising how many have stayed. We have had consistency of staff … There’s a low turnover rate in spite of complaints about low salaries. [IA13]
The same conditions did not apply so clearly to either the Customs Service or the Tax Administration. In 2001 both organisations were already relatively large and many of their staff were working in decentralised locations across the country: customs officers at border posts and taxation officials in regional tax offices. They were therefore more exposed to external influence and pressure. The fact that the Customs Service in these circumstances has managed to maintain a relatively good reputation for effective performance, among international observers if not among the Kosovar public, is surprising. The Tax Administration is only slightly larger than Customs (in 2010 it had 712 staff compared to 622 in Customs) but its work requires staff to have frequent contact with businesses in Kosovo’s highly politicised economy, which may offer more
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opportunity for adverse influence. However, both the Customs Service and the Tax Administration were newly created and clearly defined entities with an internal hierarchy, a professional identity, and unity of purpose which may contribute to their apparent of good performance.
Staff engaged in the decentralised procurement and financial control functions, on the other hand, are located within and report to their individual ministries and agencies. In spite of the extensive external training provided, and efforts to establish a professional status for these staff through independent certification processes, their dispersal throughout the administration means they do not have the separate identity or independence of the MFE, Customs or Tax Administration. Within each ministry these staff are vulnerable to corruption and politicisation and their performance is influenced by the extent of inefficiency and mismanagement in their home organisation as much as by the training and supervision provided by the central procurement or internal audit coordination agencies. In the absence of a strong civil service ethic and an effective system of legal controls and sanctions there may be limited scope for even the best designed and resourced donor project to have significant influence in these areas.
5.3 Overview of PFM development in Kosovo
The following detailed account of the development of PFM institutions focuses on the largest providers of technical assistance including the EU in Pillar IV, the EU Customs Assistance Mission, EAR, USAID, and the World Bank, as well as the role of IMF and World Bank advisory missions. Figure 5.1 shows the approximate sequence and timing of the major technical assistance activities in the field of public finance administration over the period from 1999 to 2010.
Figure 5 .1 Approximate timing of major technical assistance projects in PFM 1999-2010
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 EULEX/ECLO Customs and Tax World Bank PEMTAG EU PIFC/Internal Audit EU PIP EU Procurement EU CAM-K/CAFAO EU Pillar IV USAID Economic Governance
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During the first few years of this period, donor-funded activities were quite unlike ‘normal’ technical assistance assignments, a point that several people emphasised during interviews. International consultants in Pillar IV were not advisers to the government: in effect they were the government. Many were appointed to executive positions equivalent to Ministers or Permanent Secretaries, exercising legal authorities under UN regulations and responsible for establishing the structure of new organisations, recruiting and training their future staff, developing policies, and creating new legislation (Barents Group LLC, 1999, 2000). After the creation of the PISG in 2002, international advisers and officials continued to play a significant role in government ministries, although through a more conventional technical assistance model, with foreigners simply providing policy and operational advice to Kosovar officials.
UNSCR 1244 did not provide clear guidance to the interim administration on economic policy issues, objectives or strategies. A broad interpretation of the meaning of ‘substantial autonomy’ was considered to provide scope for basic budget and finance operations (Seale, 2000:2). The international experts soon decided that neither the previous Yugoslav system of financial administration, nor the parallel system established by Albanian Kosovars during the 1990s, would be a suitable foundation to build on. The parallel system had been funded by contributions from Albanian emigrant workers in Europe and America, kept largely as cash, and it was unclear how much money had been collected, or exactly what happened to it. In the splintered political environment of the time there were allegations of misappropriation and large losses in pyramid schemes in Albania (Judah, 2000:69). These financial administration arrangements would certainly not have met the World Bank or IMF standards of transparency and accountability (World Bank, 1999b:20). The customs regime of the FRY was also considered to be too distorted to offer a basis for efficient growth in Kosovo (World Bank, 1999b:13), while public procurement and internal audit were completely new topics in a formerly socialist administration. It was agreed, therefore, that it would be necessary to create institutions for public finance management ‘from scratch’.
At the first donors conference, the head of Pillar IV, Joly Dixon, set out a concise but comprehensive list of the steps that would be taken to establish a functioning economy and institutions for managing public finances. These would include the identification
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and activation of revenue sources, expenditure priority setting and needs assessment, and putting in place sound procedures for budget execution and control. Other immediate priorities included ensuring safe cash management facilities, creating a central payment bureau, ensuring an orderly foreign exchange market and developing a supervisory regime for commercial banking institutions (Dixon, 1999a:para 21-24). Dixon’s plan said, in many fewer words, more or less what the World Bank and the IMF had already set out in their lengthier reports for the conference (IMF/World Bank, 1999c; World Bank, 1999e). These reports and statements, between them, set the agenda for institutional development in public finance that the technical advisers engaged by the various donors then proceeded to implement.
5.4 Revenue Agencies
5.4.1 The Customs Service
The public administration in Kosovo had previously been financed by the Republic of Serbia, but this source of funding had ceased even before the arrival of the UN and the departure of Serbian civil servants. The new administration in Kosovo was thus in urgent need of funds to support essential public service operations such as education, health care, electricity, water supply and sanitation. The UN Mission was not funded for these activities and donors have always been reluctant to pay for the normal ongoing activities of government. Establishing a Customs Service to collect local revenue was thus one of the earliest steps in public finance development. The initial intention of the UN had been to operate an UNMIK Customs Service on the same basis as the UNMIK Police, using a large number of seconded international customs officials for an extended period [IA17]. The EU Pillar, however, took a different approach and elected to develop a local customs service in order to ensure sustainability once the international presence was withdrawn, illustrating the significant differences in thinking between these two arms of UNMIK about the purpose of the international mission and the future of the administration.
By the July donor’s conference, the Head of Pillar IV was able to announce that a number of Kosovars who had previously worked in the FRY customs organisation had already been identified and would start work shortly (Dixon, 1999b). This approach was supported by the IMF which claimed that the customs administration ‘was a rare service in that Kosovar Albanians continued to be employed in responsible positions’ and these 145 Chapter 5: Public Finance Management
individuals seemed to possess the requisite skills and a strong willingness to return to their duties (IMF/World Bank, 1999c:para 5). By the end of August, 38 former FRY customs officers had been appointed to the Kosovo Customs Service, but the positive view of former customs officials was apparently short lived. International advisers expressed concern that these staff from the ‘stagnant’ Yugoslav customs service were unfamiliar with modern techniques (European Commission, 2002:8). Recruitment of further staff thus focused on attracting younger recruits with no previous customs experience, and, according to one Pillar IV official, the former FRY officials were gradually phased out of the service [IA16].
The EU established a Kosovo Customs Assistance Mission (CAM-K), comprising 10 customs officials seconded by EU member states, to provide training and technical support to the local recruits (TAFKO, 1999:4). A USAID- funded customs adviser also worked with the EU contingent. In early August, approximately six weeks after the start of the post conflict mission, the new UNMIK Customs Service commenced work controlling the border crossings with Albania and Macedonia (FYROM) and monitoring commercial traffic (UNMIK, 1999:August). Revenue collection could not commence however until the rate of customs duties had been decided and legally authorised. Import duties and fees are a readily identifiable and easy to collect source of government revenue, but at the same time the level of tariffs may have an impact on the economy and on the development of trade. The World Bank and IMF provided advice on the rates of duty considered appropriate for Kosovo, based on data collected by customs officials monitoring the border posts. Having found the previous FRY customs code unacceptable, they proposed a flat ad valorum tax for all items (Dixon, 1999b). The World Bank noted that this was a radical reshaping of the previous trade and customs regime which demonstrated that UNMIK was taking a pragmatic approach to the sovereignty/autonomy issue (World Bank, 1999b:3). UNMIK Regulation 1999/3, approved by the SRSG on 31 August, established customs rates on imported goods and, on 3 September, the Customs Service began collecting revenue (UNMIK, 1999:September). The borders with Montenegro and Serbia remained open, however, and provided an avenue for avoiding duties. Pillar IV advisers were keen to establish a customs post at the entry point from Montenegro as soon as possible, but this needed the approval of the UN which was delayed until early 2000. This was a source of conflict between Pillar IV advisers and the UN (Barents Group LLC, 1999). The World
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Bank also pointed out that it had resulted in the loss of significant amounts of expected budget revenue (World Bank, 2001c:16).
During this period, the Customs Service began recruiting additional staff. More than 1,100 applications were received for the new positions and in November interviews where held with around 270 people. In the absence of any authorised public sector employment policy at that time, employment conditions and salary rates for the customs staff were negotiated by Pillar IV advisers (Barents Group LLC, 1999). By March around 50 people, nearly 30 per cent of them women, had been appointed and trained (UNMIK, 2000c:March). Also in March 2000, a full-time international Director- General of Customs was seconded from the UK Customs Service to exercise executive authority for customs matters, working within Pillar IV. The EU-funded CAM-K continued to focus on providing operational support and training. Two further UK Customs officials were seconded later to form the core executive management of the service, and this arrangement with UK Customs continued until the eventual transfer of the Customs Service to the Kosovo government in 2008 [IA17]. A number of people have suggested that the consistent use of British advisers in senior positions in the Customs Service was significant, both because it provided continuity and because of the status of the British customs service. Not all these observers were themselves British.
One of the reasons we were able to deliver was that the people involved in UNMIK Customs with executive authority all came from the same customs service in Europe, i.e. the UK. …. So you got consistency of approach. [IA17]
It had a good model to follow, namely the British customs service, including the uniforms. … This helped to create a strong identity and a sense of purpose. [IA6]
It has had a lot of advisers and all of them were from the UK. In one sense it helps because you have one system, one type of procedures, so it would be useful rather than having ten people from ten different countries trying to apply ten different systems. [IA2]
5.4.2 Tax administration
While the EU took the lead in establishing the Customs Service, USAID-funded advisers in Pillar IV played the primary role in setting up the Tax Administration. This was also, from the start, almost entirely staffed by Kosovars. Recruitment of tax 147 Chapter 5: Public Finance Management
inspectors started in November 1999 and the first 34, selected from 700 applicants, started work on 26 January 2000 after completing a one week training program (UNMIK, 2000c:January). The majority had no previous experience in tax administration activities. Although several of the recruits were identified as having potential for future management roles and were fast-tracked into additional training [IA16], executive decision making authority for the taxation administration was exercised by a USAID-funded international adviser performing the role of Director of Taxation. As in the case of customs duties, the previous Yugoslav system of taxation was rejected as the basis for Kosovo’s taxes for a number of reasons.
The locals wouldn’t accept it, they wouldn’t use it. That meant we had to get our own taxation system. Secondly, we weren’t looking at a socialist, soviet-type taxation system. We were looking at a democratic, Western, market-based system. [IA1]
Tax collection began with taxes that were simple to implement. In January 2000, the SRSG signed regulations imposing an excise tax and a 15 per cent sales tax on imported goods which could be assessed and collected at border posts along with customs duties (UNMIK, 2000c:January). A tax on the larger hotels and restaurants with revenues over DM 15,000 a month came into effect on 1 February 2000 (UNMIK, 2000c:February). This targeted a relatively small number of clearly identifiable businesses which, at the time, derived most of their revenues from the large international community in Pristina. In the same month, the newly trained tax inspectors started making educational visits to local businesses and issuing tax identification numbers (Barents Group LLC, 2000).
The tax system developed rapidly during 2000. In March, a business registration process began in preparation for future tax collections. In May, the Hotel, Food and Beverage tax was expanded to more establishments and a regulation on a ‘Presumptive Tax’, which applied a fixed tax to businesses based on their size, was also passed. These were followed by a Value Added Tax in 2001. Figure 5.2 lists the many items of taxation legislation promulgated by UNMIK during this period.
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Figure 5 .2 List of tax laws approved by UNMIK 1999-2002
31 August 1999 Regulation No. 1999/03 On the Establishment of the Customs and Other Related Services in Kosovo. [Amended by Regulations No. 2000/55, 2005/39, 2005/41, 2006/2, 2006/4, 2007/12, 2007/16 and 2007/31] 22 January 2000 Regulation No. 2000/2. On Excise Taxes in Kosovo. [amended by Regulations No. 2000/26, 2000/56, 2001/15, 2001/38, 2002/16] 22 January 2000 Regulation No. 2000/3. On Sales Tax in Kosovo. 1 February 2000 Regulation No. 2000/5. On the Establishment of a Hotel, Food and Beverage Service Tax. [amended by Regulations No. 2000/31 and 2000/35] 29 February 2000 Regulation No. 2000/8. On the Provisional Registration of Businesses in Kosovo. 12 April 2000 Regulation No. 2000/20. On Tax and Administration Procedures. [amended by Regulation No. 2001/39] 20 May 2000 Regulation No. 2000/29. On the Establishment of a Presumptive Tax. [amended by Regulation No. 2001/40] 31 May 2001 Regulation No. 2001/11. On Value Added Tax. [amended by Regulations No. 2001/41, 2002/17 and 2005/40] 20 February 2002 Regulation No. 2002/3. On Profit Taxes In Kosovo. 20 February 2002 Regulation No. 2002/4. On Personal Income Taxes In Kosovo.
Source: http://www.unmikonline.org/regulations/unmikgazette/02english/Econtents.htm#, accessed 2 February 2013.
The proposed further expansion of the tax regime to include a Profit Tax and Personal Income Tax was delayed, however, by a dispute between the UN and Pillar IV over the application of income tax to UN staff. By February 2000, USAID advisers had already drafted an income tax law which was expected to come into operation later that year. The tax would not apply to the thousands of international staff working in Kosovo, but the UN insisted that its local employees should also be exempt. UN local staff salaries were considerably higher than those paid to civil servants or private sector workers and would have provided an estimated 35 per cent of the income tax revenue. Pillar IV advisers felt strongly that it would be politically unacceptable to exempt them.
If you had someone who was earning DM 1500 a month not paying tax because he works for the UN while someone earning 300 DM a month is paying tax because he works for the government, you would have riots. [IA1]
The UN’s position was based on the provisions of the long standing ‘Convention on Privileges and Immunities of the United Nations’ (UN, 1946). Subjecting UN employees in Kosovo to income tax might set precedents for other governments to
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impose similar taxes, which the UN would then need to reimburse to its staff.37 The UN ultimately won this dispute, but the stand-off between the UN and Pillar IV over the issue delayed the introduction of income taxes for two years until February 2002. In spite of these obstacles, the performance of the tax system progressively improved. In 2003, the UN Secretary General reported that the level of voluntary compliance with tax laws had increased as a result of the improved capacity of the Tax Administration and the increased number of audits conducted (UNSC, 2003c:para 44). There had also been an 11 per cent increase in customs collections and improved prevention of smuggling activities (UNSC, 2003c:para 46).
Collecting revenue in post conflict Kosovo was not an easy task. One of the major challenges identified was the attitude of Kosovo’s population towards the payment of taxes.
The taxpayers’ mentality at that time was that, for some years we don't need to pay taxes because they were somehow frustrated from the war, and they were thinking that this past war time could last longer and they don't need to pay taxes. So that's why we had to go step by step slowly to try to change the approach and to say to them that, since you were ready to give your life for this country, then you have to pay taxes. … before, during the Serbia time, they had presented that as patriotism not to pay taxes to the Serbian government and that had built up in their mind so it was difficult to change it. And then they have inherited the logic and the skill to make the tax evasion. [KG2]
In some instances, objections to paying taxes and import duties led to threats, intimidation and physical violence against local officials, particularly customs staff.38 In addition, despite the JIAS agreement to disband the parallel administrative structures of Kosovo’s political factions, official tax collections were sometimes competing with
37 The originators of the UN’s employment policies may not have envisaged that the UN would ever be the largest employer in an economy, or that it would employ such large numbers of local cleaners, drivers and security guards.
38 In October 1999, for example, a customs agent was beaten and hospitalized (Barents Group LLC, 1999) and in 2001 the Kosovar Co-head of Customs received death threats related to the removal of staff believed to be involved in corruption (ICG, 2001:8). These dangers did not affect international officials and advisers to the same extent, although one USAID tax adviser left the country abruptly in response to perceived threats [IA8].
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illegal ‘parallel’ taxes collected by local bodies and extortionists (ICG, 2001:7; IMF, 2001b:12). There was concern among USAID advisers that UNMIK’s apparent inability to deal with this would undermine the authority of the Tax Administration (Barents Group LLC, 2000: March).
5.4.3 ‘Kosovarisation’
Control of the Customs Service remained a ‘reserved function’ of the SRSG under the Constitutional Framework for Self Government, which came into effect at the start of 2002. By this time, however, almost all senior positions in the service were held by Kosovars, supported by the small British management team and EU customs experts. Full responsibility for Customs was not formally transferred to the Kosovo government until 2008, after independence, but the Kosovar official who then became Director- General had, according to advisers, effectively been performing that role for much of the pre-independence period, despite not having the formal title [IA8, IA10]. The Tax Administration, on the other hand, became a responsibility of the elected Kosovo government quite soon after the formation of the PISG. During 2002, the first year of the PISG government, a USAID-funded adviser continued to share the role of Director of Taxation with a Kosovar counterpart, but in February 2003, the Tax Administration became a responsibility of the new Ministry for Finance and Economy (MFE) and full authority was handed to the Kosovar Director. A new team of USAID experts arrived to work simply as advisers to the Kosovar staff. Opinions differ on whether the timing of the transfer of responsibility was appropriate. One international adviser believed that the handover at that time was justified.
You had a group of people at the management level who had been in their jobs for three or four years, they had received some sort of training from previous advisers, and they were doing a reasonable job. [IA8]
A senior Kosovar Tax Administration official, on the other hand, considered the transfer had been premature.
I am thinking that probably the transfer of responsibilities to the local director, if that had happened two years later, in 2005, that would probably have been better. [KG2]
One of the consequences of the transfer of the Tax Administration to local control was more frequent changes of middle management staff compared to the relatively stable 151 Chapter 5: Public Finance Management
management in the Customs Service. In the years since the handover to the PISG there have been three changes of Director-General of Taxation and the appointment of a number of middle management staff who had no previous experience in taxation but who were believed to be political allies of the Minister of the day [IA8].
5.4.4 EU-ization of the tax system
Up to this point, US-funded advisers had taken the lead in formulating taxation policy, with considerable input from the IMF, but after the creation of the PISG, the need to align Kosovo’s customs and taxation regimes with the EU acquis communautaire was increasingly raised as an issue in documents produced by EU agencies. In 2001, the EU had carried out an analysis of the customs and taxation systems in Serbia, Montenegro and Kosovo, comparing them to the EU ‘Blueprints’ used in other pre-accession countries, and had developed proposals for the comprehensive modernisation of these services across the three territories (European Commission, 2002:8-9). The use of the term ‘modernisation’ in relation to Kosovo’s Customs Service and Tax Administration sounds strange given that both institutions had been in existence for only a few years, and the customs regime had been established largely by European customs experts. The issue, however, was the need to develop these services ‘along European lines by encouraging the use of EU best practice’(European Commission, 2002:8-9). The EC extended its funding to the Customs and Fiscal Assistance Office (CAFAO) to continue a comprehensive program of modernisation and development of the Customs Administration (European Commission, 2002:8-9). By 2005 the Customs Service had increased in size to more than 500 staff and was collecting 75 per cent of government revenue. A new ‘Integrated Tariff for Kosovo’, based on international and European customs tariff systems, was introduced, as well as a new Excise Code which aligned the Kosovo legislation with the EU acquis. This meant that by 2005 most areas of customs policy were considered to be compatible with EU regulations. However, it was argued that administrative and operational capacity needed to be further enhanced to reach European standards (European Commission, 2005b:40-41).
CAFAO’s scope of work now also included taxation, previously largely a USAID activity, as well as customs. This was intended to ensure that the Kosovo Tax Administration (TAK) developed along EU lines with laws and operational procedures based on the EU Blueprints (European Agency for Reconstruction, 2005b:2). CAFAO reviewed the existing VAT law to ascertain its EU compliance and began redrafting the 152 Chapter 5: Public Finance Management
legislation to align it with the EU’s sixth VAT Directive (European Commission, 2005a:11). In 2006 another ‘Fiscal Blueprint’ review was carried out which set further benchmarks for meeting EU standards for tax administration, which TAK took steps to implement (European Commission, 2008a:6). However, USAID continued to fund a team of advisers in the Tax Administration, including a Senior Adviser to the Director- General, and it is generally agreed that CAFAO’s impact in the Tax Administration was less than intended. EU-funded and USAID-funded advisers in this sector differ on the reasons for this. EU advisers suggested that CAFAO assistance was not welcomed by the Tax Administration.
CAFAO didn’t do much in tax. They wanted to. They did in other countries. They spoke to Tax Administration about what they could do but Tax Administration seemed reluctant to accept assistance. There seemed to be no enthusiasm to accept assistance which is a pity as CAFAO could have been helpful. [IA10]
Well, you can only help if people are willing to be helped, and part of the problem was Tax Administration was transferred to the PISG, to local government control, and it was, to be brutally frank, it was not in the interests of certain vested interests for Tax Administration to develop in the same way as Customs …[IA17]
A USAID adviser, however, argued that the fault was more with the CAFAO approach.
I don’t think they did get much traction and one of the key reasons was they weren’t working in the tax office. They were working in their own CAFAO building and they were visiting the tax office on an occasional basis and I believe that’s one of the reasons why, traditionally, EU projects have not been that successful in the tax office … the USAID projects have always been based in the tax office, working alongside the counterparts. [IA8]
An EU assessment of its customs and taxation activities in 2008 acknowledged that the use of short and medium-term technical advisers with frequent turnover and gaps in assistance had been less effective than the USAID approach of placing long-term, full time advisers in the tax administration (European Commission, 2008a:para 3.8).
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5.4.5 Revenue issues after Independence
Both the Kosovo Customs Service and the Tax Administration continued to receive a significant amount of assistance from donors after the government’s declaration of independence in 2008. In fact, in 2010 both services seemed to have more external advisers than at any previous time since their creation. In Customs, the EU Law and Justice Mission (EULEX) included a large customs assistance component with around 70 international staff, however, only 20-25 of these were advisers. The remainder performed operational duties in the Serb-dominated northern areas where Kosovo government officials were unable to operate.39 The advisers’ focus was on strengthening the law enforcement and investigation capacity of the Customs Service [IA6], an issue of significance for the EU and neighbouring countries as much as for Kosovo. In addition to EULEX, ECLO also funded a small customs and taxation technical assistance project (EUCTA) which began in 2009. In tax administration, USAID continued to be actively involved and commenced a new project in 2010. The emphasis had changed, however, from tax policy and processes towards human resource management and developing the management skills of senior staff [IA8]. EUCTA advisers also work on taxation issues but with a specific focus on VAT [IA10].40 Under the terms of the Ahtisaari plan for supervised independence, both the Customs Service and the Tax Administration continued to be subject to international monitoring which included final approval over appointments to the Director-General posts in both organisations. This arrangement was formally ended in September 2012.
39 In 2011, the Kosovo government made efforts to take control of border posts located in Serb dominated areas of North Mitrovica by force (http://www.balkaninsight.com/en/article/tensions-over-kosovo- serbia-border-rise-again, accessed 23 Mar 2012). In December 2011 the EU negotiated an arrangement which would allow both Kosovo and Serb government officials to police the border crossings, even though the Serb government does not recognise the existence of a border (http://www.balkaninsight.com/en/article/tahiri-serbia-recognizes-kosovo-through-the-ibm-deal, accessed 23 March 2012).
40 It was noted in some interviews that the US does not have a Value Added Tax and was not therefore considered able to implement the tax in Kosovo, however, the advisers USAID recruited to do this work were generally from countries that do have this form of taxation, such as New Zealand and Australia.
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5.5 Budget, Treasury and Payments
Immediately after the conflict, Kosovo lacked all normal financial infrastructure: there were no functioning banks, no secure arrangements for transferring funds into the territory, and limited supplies of any kind of currency in the required denominations. The first official public expenditures by the international administration were stipend payments to a number of judges and health workers in early August, funded from a UN Trust Fund (UNMIK, 1999:August). The payments were made by UN staff in cash directly to individuals. This procedure was criticised by the World Bank which expressed concern that the spending ‘has been organized in an ad hoc fashion outside the context of an overall fiscal framework and budget planning process’ (World Bank, 1999b:21). There was also concern that many of the officials seconded by the UN to the civil administration had limited understanding of government finance administration processes (Symansky, 2010:2) [IA11]. UNMIK’s civil administration urgently needed an agreed budget, a centralised payments system, and reliable accounting for expenditure.
At this point, it was not yet clear which component of the Mission should have responsibility for these functions, with both Pillar II and the not yet fully established Pillar IV both making a claim. This unclear division of responsibility for finance issues in the early stages, and confusion within UNMIK about how the budget process should work, made donors reluctant to release budget support funds (del Castillo, 2008:162). The matter was eventually decided in favour of Pillar IV (Seale, 2000:1) and by September the first USAID-funded public finance advisers were working with the small group of existing EU staff to set up the basic processes and functions of the budget office and treasury (Barents Group LLC, 1999).
5.5.1 Central Fiscal Authority
The first step taken by the advisers was to establish a ‘Central Fiscal Authority’ (CFA) as a legal entity with authority to perform financial management tasks such as preparing the budget, making payments and opening bank accounts. A simple financial management regulation and associated administrative direction was drafted by USAID advisers in September and submitted to UNMIK for approval. This generated one of the first of many subsequent conflicts between Pillar IV and the UN. Draft UNMIK regulations were sent to UN headquarters in New York for approval and the process was
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frustratingly slow. Pillar IV advisers doubted the capacity of UN lawyers to deal with the legislation.
They had no idea. They had never dealt with a legal situation that was trying to set up a government. They had no precedent to work to. [IA1]
Pillar IV advisers refused to process payments from the foreign bank accounts that had been set up for the Kosovo budget until there was legislation in place to authorise them to do so. Reportedly, the then head of the IMF wrote to the UN Secretary General requesting him to intervene to have the legislation finalised [IA1]. The regulation was eventually promulgated by the SRSG on 6 November 1999 (UNMIK/REG/1999/16). The Kosovo budget for the last months of 1999 was approved at the same time (UNMIK/REG/1999/17).
The most important aspect of the three page regulation setting up the CFA was the clause which established a Kosovo Consolidated Budget (KCB) separate from the UNMIK budget controlled by the UN General Assembly. This was one of the first decisive steps towards an autonomous administration in Kosovo. The government in Belgrade protested to the UN Security Council about the decision to create a separate budget authority for Kosovo, arguing that it constituted a violation of UNSCR 1244 (Xinhua News Agency, 17 November 1999). The creation of a Kosovo budget outside the UN mission was also, initially, a matter of concern at UN headquarters (Seale, 2000:3). Budget advisers in Pillar IV considered it important, however, to differentiate between the domestic Kosovo budget, used for the normal operations of public administration, and funding for activities related to humanitarian assistance and international administration. This would allow the cost of maintaining services in the long-term, without donor assistance, to be clearly identified. One of the rules established to do this, for example, was to ensure that no salaries of foreign staff were paid from the KCB (Seale, 2000:3). It also had the benefit that Kosovo’s financial management procedures could be separated from the UN’s complex procurement and finance processes. Drawing a clear line between the KCB and UNMIK finances was difficult, however, and continued to be a problem for some time, particularly in relation to information technology, communication facilities, and office accommodation (UNSC, 2002a:para 47). As more advisers began work, Pillar IV developed detailed budget and treasury procedures, accounting and payment forms and a chart of accounts and began providing training to the people who would need to use them, which largely
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meant the UN officials in Pillar II departments and the UNMIK municipal and regional administrators [IA11].
As in the revenue agencies, EU staff in Pillar IV and USAID advisers agreed that developing local capability to manage public finance tasks was a primary objective and should be pursued as soon as possible. During the period of autonomous government in the 1970s and 1980s, Kosovo, as a province of Serbia, had had limited budget, treasury or revenue functions, which had been primarily controlled from Belgrade (Lewarne and Snelbecker, 2004)[IU1]. When the CFA was created, therefore, there were few existing staff waiting to be re-employed. A former CFA adviser noted that ‘there wasn’t anyone at all in that category from either the banking or finance side so we had to go out and hire everybody’ [IA1].
In the first round we wanted 20 people and we got around 300 applications. There was no work there and 300 DM a month was better than zero. We went through a formal hiring process and we ran training courses for them and they ended up working in the Treasury. [IA1]
The CFA was thus a completely new institution and the people it recruited had very little relevant experience. The work required of Kosovar staff however was initially very basic.
It was simple. At three o’clock you go to the bank, you check this, you write it down on an Excel spreadsheet, you tick them off, you check the bank balance against the cash book, and you teach them that sort of basic stuff and they learn that. [IA15]
From such simple beginnings some of the staff recruited and trained by the international advisers at that time have risen through the organisation to now hold senior management positions in the government at Permanent Secretary, Division or Department Head level, dealing with advanced concepts in public finance.
5.5.2 Banking and payments
By September 1999, the Customs Service had begun collecting revenue but there was, at the time, nowhere to deposit it. Customs collections were held in safes in UNMIK offices, and funds provided by donors were deposited with foreign banks outside Kosovo (Seale, 2000:4). Establishing banking and payment arrangements for the
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Kosovo budget had been identified as an urgent task by the World Bank in its initial report in July 1999 but it proved to be one of the more complex PFM issues to resolve. There was some debate about reactivating the Yugoslav Payments Bureau in order to provide an operational system within a short timeframe, but this system had stopped functioning in Kosovo when telecommunication links with Belgrade were severed during the conflict, and its computer system was considered obsolete. Reviving it, including converting it to manage a different currency and ensuring ‘Y2K’ compliance in the final months of 1999, was not considered a viable option (IMF/World Bank, 1999c:para 2). While this was being debated, however, the PDK-led ‘provisional government’ had already set up its own central bank, with 135 staff, and had intended to take over and operate the Yugoslav system. This was a major source of conflict between UNMIK and the provisional government (USAID, 1999a:8-9).
In October 1999, the SRSG signed a regulation authorising the facilities of the former Payment Bureau to be administered by UNMIK, and setting up a supervisory board to manage the funds of public institutions (UNMIK Reg 1999/11, 13 October 1999). In November, a much more detailed regulation set up the Bank and Payments Authority of Kosovo (BPK) with responsibility for the facilities of both the Payments Bureau and the former National Bank of Kosovo (UNMIK Reg 1999/20, 15 November 1999). The supervisory board became a Governing Board, and the IMF appointed an international Managing Director. USAID-funded consultants and EU staff from Pillar IV filled several Deputy Managing Director posts. From December, the BPK too over administration of UNMIK’s ongoing stipend payments, and provided banking services for the CFA, including depositing customs revenues (UNSC, 2000:22). By the end of 1999, the provisional government had been persuaded to disband and join the JIAS, leaving BPK solely in charge of banking and payment arrangements. The BPK took over not only the buildings but also some of the staff of the former Payments Bureau (Barents Group LLC, 2000:January), but not the staff of the National Bank. In January 2000, former Bank employees protested that UNMIK had violated their right to work by failing to recruit them to the new organisation. Pillar IV declared, however, that recruitment to positions in the BPK and CFA would follow employment practices based on the principles of fairness and transparency, thus exerting control over the recruitment of staff to the new institutions (Barents Group LLC, 2000:January).
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The BPK had two primary functions: operating the payments system and supervising and licensing commercial banks. The World Bank expressed concern about combining responsibility for the two functions in one organisation (World Bank, 1999b:43) and this did generate some conflict between advisers in the BPK and the CFA. It was suggested that the USAID-funded banking advisers tended to focus on the bank supervision task, and implementing ‘best practice’ systems, at the expense of basic government payment and cash management functions.
[the consulting firm] brought in some sophisticated bankers and their issues were to set up a world class banking authority in a situation in which all we wanted, really, was money ... They had three people who were more interested in writing the banking law and regulatory framework but they had no money in the bank and they had no idea how to get it. [IA1]
A UN legal adviser was also highly critical of the lengthy and complex banking laws produced at this time (Miller, A.J., 2004:16).
In 2006, BPK became the Central Banking Authority of Kosovo, an independent public body (UNMIK Reg 2006/47, 24 Aug 2006). By this time all department manager positions were held by Kosovars (USAID, 2006c) and the appointment of a Kosovar Managing Director to CBAK after independence marked the full Kosovarisation of the institution. Pillar IV’s final report praised the achievements of the banking authority, including the development of a large and very competitive commercial banking sector, given the previous distrust of banks in Kosovo (UNMIK/European Union, 2008:15-16).
5.5.3 Budget planning and expenditure policy
Reducing reliance on donor support had been identified by donors and by Pillar IV as a priority and this meant keeping public expenditure levels low (World Bank/European Commission, 2001). The Kosovo Budget for 2000 set out the estimated cost of civil service salaries and operating expenses for the civil administration departments and municipal administrations (UNMIK/REG/1999/27, 22 December 1999). Even though the Customs Service had only been in operation a few months, and internal tax revenue collection had not yet begun, it was anticipated that donors would only need to meet one third of the recurrent cost of the Kosovo administration in the coming year. Domestic revenues were expected to cover the rest (UNMIK, 2000c: January). In early 2001 the IMF noted that expenditure levels were ‘not excessive’ in comparison with other low-
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income countries, given the considerable social and economic needs (World Bank/European Commission, 2001).
Two problems were identified in the budget formulation processes at this time. One was the separation between the recurrent budget and the expenditure required for reconstruction projects. The annual budget prepared by the CFA covered the day-to-day recurrent expenses of public administration, primarily civil service salaries, but all infrastructure and capital investment costs were met by donors under their reconstruction programs and were not under direct control of the administration. The World Bank argued that the separation of the recurrent budget and the capital budget between two documents, two agencies and two sources of funding ‘inhibits the formulation of a coherent budget strategy, undermining the effective and efficient use of budgetary resources’ (World Bank, 2001c:12). This situation continued for several years but was eventually resolved by the expansion of the scope of the KCB, and the relative decline of donor funding. The other problem was the limited ability of the JIAS departments to develop budget plans or to estimate expenditure requirements adequately. Many departments had difficulty defining realistic objectives in their areas of responsibility or accurately judging the expenditure required (UNMIK, 2001:7). The lack of capacity in this case was almost entirely with the UN officials who were then responsible for the civil administration. International officials were often on relatively short-term secondments, unfamiliar with the situation, and inexperienced in such planning processes. However, the problem of inadequate budget planning within government ministries, in particular for major capital expenditure, has continued to be a concern, leading both EAR and the World Bank to initiate technical assistance on this subject in subsequent years.
5.5.4 Transfer of budget functions to the PISG
The unanimity between the lead actors in the field of public finance started to break down around the time of the creation of the PISG and the emergence of a new actor in the form of an elected Kosovo government. Although the JIAS Co-head arrangement had given Kosovar politicians some involvement in budget processes, up until early 2002 policy decisions had been almost entirely in the hands of international officials and advisers. Under the terms of the Constitutional Framework for Self Government, many responsibilities for economic and financial policy and fiscal and budgetary issues would be transferred to the PISG and the Kosovo Assembly (UNMIK Regulation 160 Chapter 5: Public Finance Management
2001/9, Chapter 5). Some functions, however, remained with the SRSG including authority to set the financial and policy parameters for, and to approve, the Kosovo Consolidated Budget (ibid, Chapter 8). The BPK and the Office of the Auditor General would also remain outside the PISG (ibid, Chapter 11).
International actors expressed concern about the possible future direction of fiscal policy under the new government. A 2001 IMF analysis identified the key expenditure policy issues as maintaining a lean public sector and avoiding pay increases; preventing the budget ‘becoming a magnet for industrial subsidies’; keeping state enterprises at arm’s length; avoiding commitments on public pensions that cannot be honoured in future; and ensuring integrated planning for maintenance costs of donor financed public investments (IMF, 2001b:15-16). The World Bank expressed much the same ideas.
Economic viability clearly depends greatly on tailoring the aspirations of the populace to the resources available over the short and medium terms and ensuring that public expenditures and welfare programs fall within these constraints of resource availability (World Bank, 2001c:10).
These concerns may explain the apparent reluctance of UNMIK to implement the proposed transfer of responsibilities. UNMIK Regulation 2001/19 established a Ministry for Finance and Economy (MFE) with an extensive list of functions including budget development and execution, donor coordination, economic analysis, financial reporting, and expenditure monitoring (UNMIK/REG/2001/19, 13 September 2001:Annex II). A Minister of Finance was appointed by the PISG coalition government in April 2002. However, the process of transferring funding, staff and responsibilities to the new Ministry was slow and generated conflict between the government and UNMIK. The 2002 budget, approved by the SRSG in December 2001, assigned 51 civil service staff to the Ministry in three departments: Budget, Economic Policy and Corporate Services (UNMIK Regulation 2001/37). The CFA, although not mentioned in the Constitutional Framework, continued to exist as a ‘reserved power’ with the bulk of its staff and most of its former functions including coordinating budget development and execution, treasury, overall fiscal and macroeconomic policy, the customs service, and tax administration and policy (UNMIK, 2002b:22). In January 2002 the UN Secretary General reported that the CFA would work alongside the MFE and would continue to be responsible for fiscal and financial issues not yet transferred to the government (UNSC, 2002b:para 15). Later in 2002, UNMIK formed an
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Economic and Fiscal Council, with both PISG and UNMIK membership, to discuss budget issues (UNMIK Regulation 2002/10).
The retention of the CFA separate from the MFE generated criticism from some donors, in particular USAID which pushed for a quick transfer of responsibility to the MFE. A USAID report in 2005 argued that the ‘bifurcation’ of the government budget into separate UNMIK and PISG spending agencies made it difficult to establish a clear and sustainable medium-term fiscal strategy (USAID, 2006b:5). An adviser working with the MFE at the time described the situation as USAID saw it.
The UN didn’t want to release any important functions. … UNMIK wanted to retain the budget, treasury, tax all under their guidance for some time. So there was a fight that emanated because USAID decided that they’re here to support governments and they moved all their advisers across to the Ministry of Finance, or most of them anyway … There was a difference of view between UNMIK and USAID. USAID wanted a more rapid transfer to the elected officials and UNMIK of course wished to retain the authority in the Ministry. So unfortunately we had parallel institutions which was what we were all trying to avoid at the time. And it took a couple of years to eradicate. [IA13]
As the CFA, and the secretariat of the Economic and Fiscal Council, continued to be nominally Pillar IV responsibilities under EU authority, this difference of view on the transfer of functions implied a change in the previously cooperative relations between the EU and USAID. Difficulties between the MFE and CFA escalated towards the end of 2002, mainly over the process for approval of the budget for 2003, and were reflected in disputes in the Economic and Fiscal Council. The Assembly of Kosovo refused to endorse the budget that had been approved by the SRSG and complained about the way the budget process had been handled (Early Warning Report, 2002b:17). An UNMIK report to donors in late 2002 tried to address concerns about the separation between the CFA and MFE, citing the successful joint preparation of the 2003 Budget, but acknowledged that the division of responsibilities between the two organisations was unsatisfactory and unsustainable. It proposed transferring responsibilities from the CFA to the MFE by the end of the year (UNMIK, 2002a:47). Thus, in the 2003 budget, the size and functions of the MFE were significantly increased. It now had 366 staff including the treasury, internal audit and donor coordination functions. The CFA, as such, no longer appeared in the budget, but the Tax Administration, Customs Service
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and the Secretariat of the Economic and Fiscal Council remained under UNMIK administration (UNMIK Regulation 2002/23). Responsibility for Tax Administration was subsequently transferred to MFE during 2003.
Tensions between UNMIK and the MFE continued however. A new Public Financial Management and Accountability law, drafted largely by international advisers to replace the original 1999 regulation, was passed by the Kosovo Assembly in January 2003. Under the Constitutional Framework, all laws passed by the Assembly still needed SRSG approval. The PFMA law that was eventually endorsed by the SRSG, in May 2003, included an additional clause that specified that the annual budget appropriations proposed by the Kosovo Assembly would first be reviewed by the SRSG, and by the Economic and Fiscal Affairs Council, and if necessary changes would be effected (UNMIK/REG/2003/17: 2, para (b)). This was by no means simply a matter of the SRSG rubber-stamping budget decisions made by the Kosovo Assembly. The SRSG’s ultimate authority on budget matters meant that significant changes in policy and expenditure amounts were sometimes made by UNMIK after the government had concluded its deliberations.
Some budgetary decisions were made by the by the SRSG … overnight … and took millions out of the Kosovo budget, especially on KEK. It was really complicated. Sometimes at the end of the process, which actually unravelled the whole process. [IA12]
The budget could be created by the PISG … then basically the SRSG would come in and change it as he saw fit. [IA14]
The World Bank expressed concern about the division of budget responsibilities between UNMIK and the PISG and noted that the SRSG constituted a ‘court of appeal’ over the government, most notably in relation to publicly owned enterprises, such as the public utilities (World Bank, 2005:19). The IMF was also critical, arguing that ‘unhealthy competition between reserved and transferred power agencies’ had impeded the development of a clear fiscal strategy (IMF, 2005:2). UNMIK officials, for their part, criticised the performance of the MFE. The SRSG’s report in April 2004, for example, complained that ‘Owing to a lack of preparation by the MFE, several critical budgetary discussions and processes were delayed’ (UNSC, 2004b:14). The report identified delays in discussions on the distribution of the 2003 surplus, the reappropriation of the previous year’s funding commitments, the lack of monthly fiscal 163 Chapter 5: Public Finance Management
reports to UNMIK, and delays in launching the mid-year review and the next year’s budget process. Given that the MFE at that time was still somewhat reliant on USAID- funded technical advisors it is difficult to know whether these criticism were aimed mainly at local officials or foreign advisers. There thus emerged a division between the UN on the one hand and the World Bank, the IMF, USAID and the Kosovo government, on the other, in relation to this issue. The change of SRSG in mid-2004 following the March riots, and the more constructive attitude towards the Kosovo government adopted by UNMIK from that point, appears to have had a positive effect on UNMIK’s relations with the MFE, however, and from 2005 onwards the size and functions of the Economic and Fiscal Council were progressively reduced until all financial management functions were transferred to the government [ID1]. Kosovars are now fully in control of the Ministry, in spite of the continuing presence of international advisers.
Yes they are. There’s no question about that. I don’t think I’d say there are a lot of advisers. It’s what you’d see anywhere when you have a World Bank project or a USAID project. You have one or two advisers on each thing. [IA1]
5.5.5 Fiscal policy under the PISG
In 2004 and 2005 international actors’ concerns about management of the Kosovo budget by the PISG seemed justified. Under CFA administration, the KCB had accumulated a large surplus, equal at the end of 2003 to around 25 per cent of Kosovo’s GDP (Early Warning Report, 2003c:para 32). While most governments are delighted if they achieve a budget surplus, in Kosovo it was seen as a result of poor budget forecasts and inefficient expenditure processes. Local observers argued that it justified an increase in spending, suggesting that the surplus indicated a ‘worrying disconnection between budget policy and the economic realities of Kosovo’ (Early Warning Report, 2003c:para 32), while US government officials argued it meant taxes should be lower [IA16]. This surplus did not last long after the handover to the PISG as the level of public expenditures rapidly increased to support the new government institutions. Moreover, 2004 was the year of the second Kosovo Assembly election and political leaders were under pressure to increase spending. At the same time, the amount of foreign aid provided by donors was steadily declining. Budget expenditure in 2004 reached levels that were considered unsustainable (USAID, 2006b:5) and, for the first time, the budget ended the year in deficit. The accumulated surplus from previous years 164 Chapter 5: Public Finance Management
covered the shortfall, but if the trend continued this source of financing would soon be exhausted(Early Warning Report, 2005a:para 36). Kosovo’s unusual political status meant that the government had no capacity to borrow to cover the revenue shortfall. Both the IMF and the World Bank urged the government to control spending. A World Bank Economic Memorandum in 2004 warned the government to ‘resist pressure to spend on unsustainable recurrent costs and ill conceived capital projects’ (World Bank, 2004c:iv). The IMF proposed reductions in wage expenditure and decreases in the number of employees (IMF, 2005:24-25). The Kosovar authors of the Early Warning Report argued, however, that this would raise social tensions and instead suggested reductions in goods and services spending and increased tax rates (Early Warning Report, 2005a:para 37).
In late 2005 the PISG and UNMIK signed a joint Memorandum on Economic and Financial Policies and a formal ‘Letter of Intent’ which, although addressed to donors, was identical to the agreements normally negotiated between a national government and the IMF, even though Kosovo was not, at that time, an IMF member (UNMIK/PISG, 2005). The agreement committed the government to a fiscal program developed by the IMF, including an agreement to maintain a low tax regime, strict targeting of welfare payments and limited increases in benefits, reducing the civil service by 10 per cent by 2008, holding civil service wages down, except in the education sector, and achieving savings in civil service allowances and benefits. It was also expected that proposed civil service pay reforms and a planned public administration reform program would achieve further savings. This IMF agreement is considered to have been successful, at the time, in imposing fiscal discipline on the PISG government [KD2]. Thus although Kosovo was not formally a member of the IMF, the Fund had considerable influence on fiscal policy in the territory as a result of the willingness of other international bodies to follow its advice. The battle between the IMF and the Kosovo government over the appropriate level of government expenditure has continued, now backed by offers of IMF ‘standby’ finance.
5.5.6 The need for a plan: the Kosovo Development Strategy, MTEFs and PIPs
As Kosovo’s economic priorities moved further from reconstruction to development, international actors saw the need for Kosovo to have a Development Plan to provide a strategic framework for allocating resources. Comprehensive government plans setting out priorities and strategies for development and poverty reduction are promoted by 165 Chapter 5: Public Finance Management
donor agencies and have become a requirement for some forms of development assistance (Driscoll and Evans, 2005). While there are obvious benefits to any government in having a clearly expressed set of policy priorities, the planning exercises promoted by donors have been criticised for being overambitious and excessively donor driven (Dijkstra, 2005; Easterly, 2006a). This was the case in Kosovo. Development planning along these lines began in 2000 when the Department of Reconstruction in Pillar IV prepared a series of ‘Public Investment Programs’ which were intended to present UNMIK’s plans for reconstruction and development. These fairly simple documents were in effect shopping lists for interested donors (UNMIK, 2000b, 2000a). In early 2003, Pillar IV and the PISG established an Economic Strategy and Project Identification Group (ESPIG) to work on a more comprehensive development strategy, and EAR set funds aside in its 2004 financial year program to support the project (European Commission, 2004:17-18). The Strategy Group held a series of seminars to promote debate on a ‘development vision’ for Kosovo (UNMIK, 2004a) and, in August 2004, a policy paper recommended the formulation of a Kosovo Development Strategy and Plan (KDSP), modelled on the EU’s National Development Plan process which had been used in new EU member states such as Bulgaria and Slovenia. The objective was to produce a ‘consolidated, comprehensive development strategy that would gather all economic policy actors around a common analysis of the economic challenges Kosovo is facing, a vision for its future development, as well as the necessary policy and spending priorities’ (ESPIG, 2004b:iii). A team of EAR-funded consultants were engaged to advise on how to pursue this goal. Their report, in December 2004, indicated that preparing the KDSP would be a costly exercise. A timeframe of two and a half years was envisaged and new institutional structures would need to be established, including a Planning Coordination Task Force in MFE. The report was widely debated but the proposal for a new bureaucratic entity was not welcomed at a time when the government was under pressure from the IMF to control expenditure (ESPIG, 2004a:3) and there was limited progress on the issue until 2006 when a local consulting firm, Riinvest Institute, was engaged to coordinate working groups, produce technical working papers, and organise focus groups with members of the public. A draft Kosovo Development Strategy document was finalised at the end of December 2006 (Riinvest Institute, 2006). The fact that the process was very much locally owned and had been driven by Riinvest was commented on favourably (UNDP, 2006:3).
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The 116 page draft KDSP described the economic and social challenges facing Kosovo, summarised the country’s development aspirations in a Vision Statement, and set out detailed objectives and activities within three pillars: governance and capacity; private sector development; and human resource development. It did not, however, assess the cost and timing of implementing the proposed activities, or prioritise them. This generated criticism of the strategies as unrealistic. The President of the Kosovo Chamber of Commerce, for example, complained that large parts of the document were ‘wishes rather than reality’ (ECIKS, 14 July 2006), and a report prepared for DANIDA noted that the technical working papers were ‘still mostly un-prioritised wish-lists of various projects and programs, with no hard budget constraints and hence no fiscal discipline’ (Development Associates, 2007:9). In March 2007 the government confirmed its commitment to finalising the plan and expected it to be ready in April (European Union, 2007:5). EAR provided technical assistance to an inter-ministerial Group in the Prime Ministers Office to support the review and finalisation of the draft Plan (European Agency for Reconstruction, 2007b, 2008c). In October, however, the UN reported that the government had decided to abandon the exercise and instead focus on the Medium Term Expenditure Framework (MTEF), a somewhat briefer statement of the government’s policy priorities in each sector, set in the context of macroeconomic forecasts and budget estimates, which has since become an integral component of the annual budget process (Ministry of Finance and Economy, 2007a:1; UNSC, 2007a:15). EAR technical assistance was redirected towards helping major government ministries develop their strategic policy development capabilities (East West Consulting, 2007a, 2007b; European Agency for Reconstruction, 2007a:114). A subsequent evaluation found that this EAR assistance had successfully trained senior managers in policy development and had improved their inputs to the annual budget process (European Commission, 2009c:18-19).
No comprehensive and definitive development plan for Kosovo, along the lines originally proposed, has been published, however, and it is difficult now to find information on the draft KDSP in donor records and reports. Kosovars are well aware of this project, however, and it was seen to typify the failings of many donor activities.
It was under the Economic Development sector. They funded the Kosovo Development Strategy and it failed. There were a number of attempts, not only
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of the EU but a number of other partners were involved as well. This was a big thing. [KA3]
This project was started, the money was spent but the product is not existing. [KG2]
I tell you this project, which was not planned well, and a lot of advisers and a lot of money was spent, and at the end of the day it is not finished, never. And this kind of project, without looking at the reality of Kosovo, people came here and just took some ideas from other countries, take some documents, just change the names. [KG1]
Other support for government planning was provided by EAR through a series of technical assistance projects aimed at the development of a prioritised Public Investment Program (PIP).41 The PIP projects trained more than 1,000 public officials in project planning and analysis, and senior officials were taken on study tours to Austria, Slovenia and Slovakia (European Agency for Reconstruction, 2007a:108). Between the KDSP project and the various phases of the PIP project, the EU has thus invested heavily in developing the abilities of government ministries in planning and project development: the KDSP at a broad strategic level and the PIP at the level of detailed policy and project proposals. However, defining strategic objectives, policies and projects remains one of the major weaknesses of the budget process [IA12, IA13, IA4].
5.6 Public Procurement
The creation of revenue and expenditure management agencies was relatively successful largely because of the high level of cooperation and agreement between several major players and limited adverse interference from local interests. In contrast, the development of public procurement institutions and policy has, at times, generated heated disagreement between the main actors. This, together with inadequate investment of resources and the high exposure of this sector to political interference, has undermined the outcomes achieved.
41 Phase I started in 2005 with a proposed budget of €2 million, Phase II commenced in 2007 with a budget of €1 million, and Phase III began in 2009 with a much larger budget of €3.3 million (see Chapter 4, Table 4.2).
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Public procurement is a relatively complex topic and an area of government operations where there are multiple competing policy objectives. The primary goal is to make the most cost-effective use of public resources through transparency and competition, but public expenditure on goods and services also has potential economic impacts, so governments sometimes structure procurement rules to favour local suppliers. Public procurement is also an area where inefficiency, conflict of interest and outright corruption can flourish without adequate regulation and monitoring. At the same time, however, a system that is excessively strict may be inefficient and costly, impeding the delivery of public services and undermining the achievement of other government objectives. The procurement system therefore needs to find an acceptable compromise between maximising competition and value for money, and achieving national or local economic benefits, and between centralised supervision and efficiency. Disagreement over the best way to achieve this has been a major cause of delay and confusion in government procurement policy in Kosovo. The development of a public procurement system was further complicated, as elsewhere in Eastern Europe, by the fact that concepts of competition, equal treatment of suppliers and transparency were new ideas in a former socialist economy. In addition, market competition was not well developed and there were a limited number of local providers for many items (Piselli, 2003:47; Duli, 2008:11).
There have been repeated efforts to develop an agreed and workable legal framework for government procurement activities in Kosovo that would address all these issues satisfactorily. Five different procurement laws have been promulgated between 1999 and 2011, as shown in Figure 5.3, but many more draft laws have been prepared and debated over this period.
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Figure 5 .3 Kosovo Legislation on Public Procurement 1999 - 2010
1999 Financial Administration Instruction No 2, 1999, Public Procurement Using KCB Funds. 2004 UNMIK Regulation No. 2004/3, 9 February 2004, On the Promulgation of the Law on Public Procurement in Kosovo adopted by the Assembly of Kosovo (2003/17, 11 Sept 2003). 2007 UNMIK Regulation No. 2007/20, 6 June 2007, On the Promulgation of the Law Law No. 02/L-99 amending Law No. 2003/17 on Public Procurement in Kosovo adopted by the Assembly of Kosovo (8 February 2007). 2010 Law No.03/L –241 On Public Procurement in the Republic of Kosovo, 16 November, 2010 2011 Law No 04/L-042 On Public Procurement in Republic of Kosovo, 19 September 2011
Sources: UNMIK Official Gazette (http://www.unmikonline.org/regulations/unmikgazette/02english/Econtents.htm, accessed 14 Nov 2012); Official Gazette of the Republic of Kosova (http://gazetazyrtare.rks-gov.net/Default.aspx, accessed 14 Nov 2012)
5.6.1 Financial Administration Instruction No 2 1999
Procurement rules for the Kosovo administration were first established by USAID- funded advisers as part of the exercise of setting up expenditure processes for the Kosovo Consolidated Budget. Finance Administrative Instruction (FAI) No 2 1999, ‘Public Procurement Using KCB Funds’ was subordinate legislation to the Regulation which set up the CFA (UNMIK/REG/1999/16, 6 November 1999) and was based on the procurement regime which had been adopted previously by most Central and South East European countries in transition (Duli, 2008:17). At the time, most large scale procurement activity was implemented by donors using their own rules and procedures. UNMIK’s purchasing requirements were relatively limited and complex procedures were not considered necessary. However, the FAI included sanctions for corruption and fraud and specifically noted the role of public procurement in developing competitive local suppliers (Piselli, 2003:52).
The FAI set up a Public Procurement Regulatory Body (PPRB) within the CFA to be responsible for providing advice, coordinating training, publishing procurement notices, and reviewing complaints. Actual responsibility for procurement operations was devolved to each UNMIK administrative department. However, the UN also established a Central Procurement Entity (CPE) in the Department of Public Services under Pillar II, to provide assistance to UNMIK entities in implementing procurement processes and
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to manage complex or high value procurements. The CPE’s role was not clearly specified in the FAI but developed through practice (Piselli, 2003:56). The approaches to procurement policy and to practical implementation issues taken by the PPRB, in Pillar IV, and the CPE, in Pillar II, were often different (Piselli, 2003:56-57; Duli, 2008:28-29). Neither of the two procurement bodies was adequately resourced to carry out its functions with each having only two staff - one international and one local. Lack of resources meant that some functions of the PPRB and the CPE could not be implemented. Most international UN staff had limited experience in procurement activities, and they tended to be on relatively short-term contracts so there was a continual need to provide training in procurement processes (Piselli, 2003:55)[KG7].
Criticisms of the FAI The FAI addressed an immediate need for simple guidance on how to administer Kosovo Budget funds, but its simplicity was its major defect. It gave procuring entities considerable freedom in selecting the procurement method to use and, in practice, single source and emergency procurement methods were used frequently, mainly due to lack of planning by UNMIK administrators (Piselli, 2003:59; Duli, 2008:45). Moreover, there were significant delays in preparing the detailed rules, procedures and forms needed to implement the legislation, and some of this was never completed in full (Duli, 2008:45). Standard bidding documents were developed, modelled on World Bank procedures, however they were initially only available in English, later being translated into Albanian and, later again, Serbian. Even when translated, the legal and technical language was difficult for local suppliers to understand and so they were at a disadvantage relative to international bidders (Piselli, 2003:53). A Pillar IV official claimed that the CPE, in Pillar II, had been associated with a number of ‘procedurally poor and unsuccessful procurements’ and that throughout the procurement system there was evidence of poor procedure, high risk of compromise, poor asset management and considerable waste (KPMG Consulting Group, 2002:7). At this time, the CPE, and most public procurement, was still managed largely by international officials.
5.6.2 The 2004 PISG Procurement Law
It had been expected that the FAI would be in place for about a year until a more complete document could be issued. In fact it remained in operation for more than four years. Two attempts were made between 1999 and 2003 to develop a new regulation. Delays in preparing a replacement law were largely due to disagreement between 171 Chapter 5: Public Finance Management
donors about how Kosovo’s procurement laws should be formulated. The World Bank supported the approach that had been used previously in other Balkan countries including Montenegro, Albania and Bosnia [KG7]. These procurement arrangements had been developed before the EU started to formulate clear procurement directives and at a time when membership of the EU was not an immediate prospect for countries in the region. From the early 2000s, however, Balkan countries with aspirations towards EU membership were expected to align their laws with new EU directives which linked public procurement with the idea of an internal EU market, emphasising transparency and prohibiting discrimination on the grounds of nationality (Trybus, 2006). The Constitutional Framework for Kosovo, finalised in 2001, also required Kosovo legislation and practices to be aligned with relevant European and international standards and norms (UNMIK Reg 2001/9, clause 5.7), so it was clear that any new law on procurement would need to be prepared in accordance with EU procurement directives. Several competing draft procurement laws were prepared by various international experts working with either the PPRB, in Pillar IV, or the CPE, in Pillar II. In the meantime, responsibility for this issue had been transferred to the newly established PISG ministries.
It was not until June 2003 that a draft law was presented to the Kosovo Assembly. This was debated and eventually passed, with numerous amendments, in September (Assembly of Kosovo Law No 2003/17) and subsequently signed and promulgated by the SRSG, four months later, in February 2004 (UNMIK Reg 2004/3) (Duli, 2008:45). This new law, at 91 pages, was considerably more detailed than the previous FAI. In place of the PPRB and CPE it established three bodies: a Public Procurement Regulatory Commission (PPRC); a Public Procurement Agency (PPA); and a Public Procurement Rules Committee. The World Bank praised the new law: it addressed many of the flaws in the prior legislation and established open tendering as the main procedure for awarding public contracts, made abuses of procurement procedures more difficult, and improved transparency in decision-making (World Bank, 2005:19-20). In 2003, USAID announced that the essential benchmark for its involvement in the procurement field, contributing to the draft law, had been achieved and so USAID’s work was complete (USAID, 2003b:12). EAR assumed primary responsibility for providing further technical assistance in this area. Pillar IV retained an interest in
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procurement issues, however, as a consequence of its responsibility for public expenditure management, and continued to be involved in debating future draft laws.
The new Law envisaged a four month transition period, but by the deadline of June 2004 the new procurement institutions had not been established, mainly due to delays by the Assembly in nominating members, and the necessary secondary legislation was not finished. The previous bodies therefore continued to operate. In fact it was not until a year after the passage of the law, in February 2005, that the new PPRC started work. The PPA began operating another year later in March 2006 (Duli, 2008:45). The first phase of EAR assistance to public procurement, intended to draft the necessary secondary legislation, was also considerably delayed and this in turn delayed training of procurement officers on the new procedures. In the meantime, previous secondary legislation was applied, but even that had never been fully completed and did not always agree with the new rules. The new secondary legislation eventually entered into force in January 2006, two years after the primary legislation was approved (Duli, 2008:51-52).
5.6.3 2007 Amendments to the Law on Public Procurement
If the 1999 FAI had been too simple and incomplete, the main problem with the 2004 law was that it was too complex. All donors and external commentators broadly agreed on this point. The UNDP assessment of administrative capacity in 2005, for example, described the Procurement Law as lengthy and complex and some of its provisions difficult to implement.
Kosovo has gone from a position of having no or little procurement law to a position of having a full and comprehensive procurement law extending to over 90 pages. Given the existing procurement capacity in Kosovo and the novelty of this law, users have difficulty in applying it. (UNDP, 2005a:24)
The World Bank also expressed concern over the complexity of the law (World Bank, 2005:20) and the EC progress report in 2005 noted that there had been serious difficulties in its application.
Instead of simplifying public procurement processes and making them more transparent, the procurement law proved too complicated to apply properly in the Kosovo context and led to delays and higher costs to the Kosovo Consolidated Budget. (European Commission, 2005b:41) 173 Chapter 5: Public Finance Management
A PFM adviser shared this view:
They were over-complexifying the thing. They were putting far too many process checks in on the basis of accountability, basically reproducing one of the most complex and time consuming procurement systems in the world, to no good benefit. Although I don’t have any problems with the basic principles that underlie it, it was a question of how you would make it actually work in a country like that. [IA16]
The law was thus under revision well before it had been fully implemented. EAR- funded technical advisers developed a new draft law during 2005, in cooperation with other stakeholders, and submitted it to the government for consideration in October 2005 (European Commission, 2005b:41; European Agency for Reconstruction, 2006a:28). There was, however, no immediate response by the government, and the next year the EU adopted a new procurement directive which would require further revisions to the Kosovo law. A second phase of EAR assistance therefore focused on both simplifying the 2004 legislation and implementing the new EU directive. However, World Bank and USAID advisers were also involved in providing advice to the government on procurement and, as before, there were differences of opinion between international donors [KA3]. A draft amended law was eventually agreed between them, and was provided to the government in May 2006. The debate in the Kosovo Assembly was protracted and many amendments were made. The version that was finally passed by the Assembly, in February 2007, and submitted, as required under the Constitutional Framework, to the SRSG for endorsement was not considered by EAR to sufficiently reflect the requirements of the EU and the advice of their consultants. In response to approaches from EU representatives, UNMIK lawyers prepared a compromise version which was ultimately approved and published by the SRSG, without further reference to the Assembly (UNMIK Reg 2007/20) [KA3]. The amended law came into force in June 2007. A further EAR project was started to ensure effective implementation of the new law, develop secondary legislation, and train and certify procurement officers (European Commission, 2007a:para 3.1). Secondary legislation to implement the law was eventually completed 18 months later, in January 2009 (European Commission, 2009a:31). This UNMIK compromise version of the legislation still failed to meet EU requirements, however. One of the issues of concern, for example, was the proposed process for nominating members of the Procurement Review Body which was felt to
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allow scope for political influence (European Commission, 2007a:3). So the law was again under review with a view to making it fully EU compliant.
5.6.4 The 2010 Republic of Kosovo Procurement Law
The first post-independence Report on Kosovo’s progress toward ‘European Standards’ gave the procurement arrangements a reasonably positive assessment (European Commission, 2008c:37). A year later, however, the September 2009 report was much more critical. It found fault with the activities of all three procurement regulatory bodies, considered training and certification of procurement officers was insufficient, noted the high turnover of procurement officers, and that a high proportion of tenders were cancelled on the grounds of non-compliance with legal requirements. Procurement officers were considered to be vulnerable to interference and intimidation (European Commission, 2009a:31). A Kosovo government official expressed surprise that public procurement appeared to have become so much worse in one year [KG7]. An EU adviser, however, claimed that the negative report was a response to complaints from international advisers that previous assessments had been too generous.
The World Bank, the UN, the EU, up to a year ago, had used a tick box. Do we have a law? Yes. Do we have secondary legislation? Yes. Are there institutions in place and functioning? Yes. But that’s not the same as it’s functioning OK. [IA2]
In response to the report, the Kosovo government decided to prepare a new law which was finalised in four months, submitted to the Assembly in late 2010, and gazetted in November (Law No.03/L–241). This was significantly faster than the passage of any previous procurement legislation. Although the process was, as in the past, supported by international technical advisers, there was reportedly significant input from Kosovar procurement officers and the central procurement body [IA2].
At the time of conducting fieldwork interviews, in October 2010, advisers believed that this law would address the concerns of the EU. However, in the final stages of the debate in the Assembly, a large number of changes were made and the version that was eventually approved was, again, significantly different from the draft that had been proposed by the foreign technical advisers and accepted by the executive government. According to the European Commission’s 2011 Progress Report, the gazetted law not only diverged from EU public procurement directives but also exposed procurement
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officers to political interference and provided opportunities for corruption (European Commission, 2011b:37). This ‘hijacking’ of the law (SIGMA, 2012:23) generated several months of conflict between the EU Office in Kosovo and the government. In early 2011, EU-funded technical experts prepared yet another version of the legislation. Its acceptance by the government and safe passage through the Assembly was achieved in August 2011. A full set of secondary legislation supporting the new law was also completed and enacted. Although recent assessments by SIGMA and the European Commission consider the new legislation meets most EU legal requirements, they also identify numerous further issues that need to be addressed, including ensuring compliance with the law, improving the skills of procurement officers, and prosecuting corruption and fraud. They also suggest scope for further legislative amendment in the longer term (European Commission, 2011b:37-38; SIGMA, 2012:23-27).
It is difficult for someone who is not an expert in the complexities of public procurement to understand, or even identify, the differences between the various versions of the legislation. The main issue mentioned during fieldwork interviews was the extent of decentralisation of responsibility for procurement decisions relative to centralised supervision and control. Procurement experts were also unable, or unwilling, to say exactly why the Kosovo Assembly has repeatedly failed to pass the legislation in the form proposed by the EU. Frequent references in documents and interviews to the extent of corruption in public procurement imply that the legislative process is influenced by actors with illegal or self interested motives. Kosovo is a small country with limited economic competition and close interconnections between businesses, politicians, officials and political parties which give rise to suspicions of favouritism and bias in government contracts, whether or not actual malpractice can be proven (SIGMA, 2012:24). The debates over procurement policy are also an example of ongoing discord between US and EU interests in Kosovo. Although the US has not formally been involved in providing technical assistance in this field since 2003, USAID public finance advisers continue to have an interest in all matters to do with public expenditure and have contributed to the preparation of draft procurement legislation [IA13]. There were suggestions by some people interviewed that the US government, and USAID-funded advisers, have been involved in behind the scenes lobbying in relation to both the 2007 legislation and the 2010 version in support of non- EU compliant policies [KA3, IA2]. Other sources have suggested that US firms have
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benefited from weaknesses in Kosovo’s procurement practices in relation to major infrastructure projects (Capussela, 2012; Strazzari and Kamphuis, 2012). It is also likely, however, that concerns about the complexity and inappropriateness of the EU legislative model for Kosovo’s public administration environment contributes to ongoing disputes over procurement law. EU procurement directives have been developed in a different institutional context with objectives that may not be immediately relevant for Kosovo. Some advisers are not convinced of the benefits of aligning Kosovo’s legislation with the EU model.
Every time a procurement project comes in here, all they want to do is rewrite the law, because everyone has a different perspective on how procurement should work. And everyone asks me is procurement complex here and I say, the law is EU compliant so what to you think? It is complex. It has to be just from that very definition. [IA13]
In particular, EU directives are not designed as a tool against corruption (Trybus, 2005:409) which is frequently identified as a major problem in public procurement in Kosovo.
What we have found out is that corruption is just massive. It is all over the place. The poor procurement officers are leaned upon, intimidated, and are even corrupt themselves sometimes, but they are really in a bad spot. They are signing contracts and everybody else says they didn’t sign it, so you’re guilty. [IA2]
5.7 Accounting, Audit and Financial Control
An important aspect of financial management, in government or in the private sector, is ensuring that funds are used as intended, without fraud, theft or waste, through the application of effective accounting rules and systems, clear delegation of authority, separation of duties, regular reporting, and internal and external audit processes. As with many other aspects of PFM, accounting is more than a mere technical activity. Weber argued that the adoption of rational accounting based on double entry bookkeeping was one of the elements of the process of rationalisation that was a precursor to modern capitalism (Carruthers and Espeland, 1991). The use of modern accounting also came to be associated with moral values of prudence and discipline, while failure to keep correct accounts was seen as a character weakness The ability to
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produce credible and timely public accounts is widely regarded as an indicator of the competence and effectiveness of a developing country government. However, the institutional arrangements for public sector financial control vary between countries. There are, for example, significant differences between the ‘inspection and control’ approach of communist governments, the ‘Anglo-Saxon’ audit tradition, which is concerned with identifying systems to prevent errors or fraud, and the more legalistic Francophone model based on a Court of Audit [IA3]. The implementation of public accounting arrangements, financial controls and audit in Kosovo since 1999 is another example of the way differences of view among international actors over the most appropriate model to apply have affected the development of new institutions.
5.7.1 Internal Audit: Pillar IV and USAID 1999-2003
The communist system of financial management, which Kosovo inherited from FRY, was highly centralised and incorporated the concept of financial inspection, a process of checking all transactions for compliance and punishing mistakes. Kosovars who had worked in the FRY administration prior to 1999 would be oriented towards this concept of financial control [IA3]. The expenditure and accounting system initially established by USAID-funded accounting advisers working in Pillar IV was also very centralised, largely due to the absence of accounting and financial management skills and systems among either the UN staff in UNMIK or local civil servants [IA15, IA1]. In late 1999, Pillar IV set up an automated Financial Management Information System (FMIS) in the CFA and issued instructions for basic procedures for the use of public funds. All expenditure commitments and payments from the Kosovo Consolidated Budget were approved and processed by the Treasury Department in the CFA [IA15, IA1]. An Internal Audit unit was subsequently established within the CFA in mid 2000 and several local staff were recruited, including a Kosovar Director of Internal Audit who had had some accounting experience. The unit was somewhat misnamed as it was responsible for auditing any transactions from the Kosovo budget and was thus, at the time, effectively performing the role of an external auditor in relation to other civil administration agencies [IA7]. The longer term plan was that each ministry and municipality would have its own internal audit function, so in 2002 USAID advisers began establishing audit units in the PISG Ministries (KPMG Consulting Group, 2002) [IA7]. The CFA Internal Audit Unit, with its 25 staff and the original Director, became part of the MFE in 2002 (World Bank, 2005). Draft legislation to establish an
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independent Office of the Auditor General was also prepared and was approved in October 2002 (UNMIK Regulation 2002/18). A year later an international auditor was appointed to the position of Auditor General (World Bank, 2005:para 14).
A report for USAID, in March 2002, praised the achievements of the internal audit function, reporting that all benchmarks had been consistently met or exceeded. Local staff were judged capable of developing and managing a basic audit plan, and the unit had carried out a number of significant audits (KPMG Consulting Group, 2002:7). In 2003, an independent evaluation of USAID’s activities concluded that internal audit was operating at the level of a mature and efficient institution, demonstrated by the fact that it was administered and operated entirely by Kosovars, unlike most of the other institutions established by Pillar IV at that time. On the basis that the Internal Audit Unit in MFE was fully sustainable without continuing adviser involvement, USAID support was discontinued (USAID, 2003b:18). Technical assistance in accounting and audit during the first few years of international assistance thus appeared to have been extremely successful. The World Bank praised the progress that had been made in public finance management, the creation of a functional and effective budget management system with modern standards of public expenditure management, accounting and audit and transparent fiscal operations (World Bank, 2001a:1; 2004b:3).
5.7.2 The EU and Public Internal Financial Control
Although USAID was satisfied with the internal audit arrangements, the views of other actors were not as positive. A review conducted by the Netherlands Supreme Audit Institution in 2004 found that internal audit did not meet requirements (European Agency for Reconstruction, 2006b). In 2005, therefore, EAR initiated a new two-year program of technical assistance to support internal audit, providing training to a large number of internal audit staff in ministries and municipalities and conducting 30 pilot audits (European Agency for Reconstruction, 2006a:86). As in other PFM functions, ensuring that Kosovo’s systems complied with EU best practice was a primary objective, and this meant the introduction of the EU-originated concept of Public Internal Financial Control (PIFC). EU standards for PIFC have been established since 1999 specifically for countries with little experience of Western-style public finance management and internal auditing who are candidates for EU membership. One of the objectives of the policy is to protect EU interests in relation to the administration of EU funds. Countries seeking EU membership are required to reform their public finance 179 Chapter 5: Public Finance Management
systems to incorporate PIFC best practice (FRIDOM, 2009:8-9). PIFC has a broader focus than financial audit and encompasses the modern administrative concept of ‘managerial accountability.’ This represents a fundamental change in focus away from traditional practices of central, hierarchical control towards delegation of budgets and spending decisions to lower level managers, who are then to be held accountable for results (Iles, 2012:43). The ‘modern’ public sector manager is expected to prepare strategic plans, set objectives and assess risks, and then develop control systems to address and mitigate risks, all of which are to be set out in written form [IA3]. A European Commission booklet on PIFC explains the concept and sets out the processes to be followed which include a ‘conceptualisation’ phase, drafting a Policy Paper and an Action Plan, the establishment of a Central Harmonisation Unit for PIFC, the passage of new legislation, and a comprehensive training program for senior managers (European Commission, 2006).
PIFC is not, however, a concept that exists in older EU member states or in any other developed economies and this has been a source of difficulty in implementing PIFC reforms [KA3, IA3, IA7].
Financial management and control is what, in most of the developed world, would just be regarded as good management. … None of the developed EU countries have a Central Harmonisation Unit. You wouldn’t find one anywhere. There’s no special procedures around financial management and control because it’s just good management. [IA3]
The PIFC approach was quite different from the strategy that had been adopted by previous technical assistance projects. A centralised internal audit unit in MFE had been established to meet the immediate need to protect public finances from misuse and fraud. This was interpreted by PIFC advisers as a re-creation of the former socialist control model.
The problem was that internal audit came first. Absolutely wrong. Financial management and control, which is the developing of management capacity, should have come first and then internal audit should come afterwards. …… They re-created the communist system which had the central bureau and everything and that was what was recreated. [IA3]
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A SIGMA assessment of the status of PIFC in 2007 also argued that the push by international organisations to develop internal audit was premature while the necessary control systems had not been developed (SIGMA, 2007:5), and the FRIDOM review of internal audit two years later also noted that effort had been focused on internal audit capacity with little attention given to establishing broader financial management and control systems (FRIDOM, 2009:10).
The EAR office was reportedly initially reluctant to support PIFC because it was considered premature and too complex for Kosovo.
In Kosovo, internal audit as such is a new concept completely. It is completely different from what was before and people don’t understand it. So you need to start from that. If you have some basic rules in place that would be sufficient for the initial phases. And then you develop. But you cannot start with perfect systems with people who have no clue about it. [KA3]
However, in 2005, EAR-funded advisers assisted the MFE in developing a PIFC Policy Paper and an Action Plan for 2006-2008 which were adopted by the government (European Commission, 2005b:51; European Agency for Reconstruction, 2006a:86; SIGMA, 2007:4). New legislation on internal audit had also been drafted within MFE, and was approved by the Kosovo Assembly in November 2006. However, a new group of EAR-funded PIFC experts subsequently reviewed the yet-to-be-enacted legislation and intervened with UNMIK’s legal advisers to propose amendments in areas where they considered it departed from best practice (Iles, 2012:24). Changes were incorporated into the legislation, without further reference to the Assembly, before it was eventually promulgated by the SRSG six months later, in June 2007 (Regulation No. 2007/19). Further developments in this area have included approval of a ‘Strategy for the Internal Audit Function’, adoption of a revised PIFC Policy Paper in 2007, and establishment of a Central Harmonisation Unit for Internal Audit within the Treasury in MFE (SIGMA, 2007:4; Office of the Auditor General, 2011 451:19-20; Iles, 2012:26).
The next EC-funded project on PIFC, a few years later, extended the scope of activity beyond financial audit to encompass an array of modern management concepts such as risk assessment and monitoring, delegation of authority, and performance management (Iles, 2012:39). Another new PIFC Policy Paper and Action Plan were developed, ratified by the government in April 2011, and was also submitted to the relevant EC department in Brussels for review. The existing laws were also reviewed again. 181 Chapter 5: Public Finance Management
Amendments were proposed to the Law on Financial Management and Accountability and new procedures and concepts were promulgated as a ‘Treasury Rule’ in July 2010 (Iles, 2012:42-45). Subsequent work by this project included a new Financial Management procedures manual and a training program for Ministers and high-level public managers to improve their awareness about public management, public governance, control and accountability (European Commission, 2008b; Iles, 2012:52).
In spite of the level of activity and apparent progress made in implementing the elements of a PIFC framework, a number of observers express reservations about the appropriateness of the PIFC model in Kosovo. Some see the PIFC framework as an invention of EU officials in Brussels which is being imposed on non-EU countries [KA3, IA7]. However, the main practical concern of critics of this approach relates to the decentralisation of financial responsibilities to lower levels of management.
the end goal is to have a modern bureaucracy were managers and senior civil servants are fairly empowered within their ministries to decide on their own objectives, to make their own resource requests to support those objectives and basically manage their own affairs. [IA3]
PIFC, therefore, significantly increases the responsibilities and obligations of managers of government agencies in an environment where civil servants generally have low or inappropriate educational attainments, limited experience, relatively low pay, and are more than likely to be political appointees. As one technical adviser in the field commented, ‘It’s a big ask’ [IA7]. A 2007 SIGMA report noted that decentralisation of internal audit functions would require the establishment of around 50 new internal audit units in ministries and municipalities, some of which would necessarily be very small, which could limit the quality and effectiveness of audits (SIGMA, 2007:3). The decentralised PIFC model also represents a complete change to the highly centralised decision making and personalised management style favoured by many of Kosovo’s government ministers (Iles, 2012:45). Implementing the new framework has been very slow and a recent SIGMA assessment noted that, since EC technical assistance ended in 2011, ‘development and coordination from the Ministry of Finance has virtually stopped’, and implementation of the approved instructions for Financial Management and Control had not begun (SIGMA, 2012:17-19).
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5.8 PFM Outcomes
This section reviews evidence on the results of public finance development in Kosovo in the period since 1999, based on donors’ own assessments, official reviews and evaluations, comments by independent observers and interviews with international advisers and Kosovars. The data suggest that PFM is widely regarded as a success of the international intervention. The Customs Service, the Ministry for Finance and Economy, the Central Bank and to a lesser extent the Tax Administration are considered to be relatively competent, well functioning institutions. However, not all components of PFM are rated well. In particular, budget planning processes in line ministries, public procurement and internal audit are frequently criticised.
5.8.1 PFM successes
Donor Self-Assessments Good performance in the areas of customs, budget, treasury, banking and taxation have frequently been cited by donors as evidence of the overall success of their activities. The major participants all claim a share of responsibility for this success. USAID’s 2001 Results Review for Congress, for example, claimed that:
Progress toward the achievement of projected results in economic and fiscal reform has far outpaced expectations. … USAID set up the organisation structure, policies and procedures for the entire public financial system and then assisted in staffing and training Kosovars to operate it. (USAID, 2001 :1)
In 2005 USAID argued that the Law on Financial Management and Accountability drafted by its consultants was ‘very likely the best law of its kind in the Balkans’ and was being well implemented, and the Treasury system developed by the USAID project was also described as ‘state of the art’ (USAID, 2005:6). The EU’s ‘end of mission’ report for Pillar IV also noted, and claimed credit for, achievements in this area including the tax system, banking and insurance supervision, and the Customs Service (UNMIK/European Union, 2008:3). The World Bank reported a satisfactory outcome from its operations:
Remarkable progress has been made with establishing a public sector capable of raising sufficient taxes, maintaining fiscal prudence and delivering services. At the same time a legislative framework has been put in place to foster private- sector led growth.(World Bank, 2004b:3) 183 Chapter 5: Public Finance Management
The IMF similarly commended its own contribution:
Considering the low starting levels of institutional capacity, considerable progress has been achieved. Most of the technical assistance objectives have been achieved, in particular regarding the development of the accounting and payments system. ... Together with other technical assistance providers, MFD [the IMF’s Monetary and Financial Systems Department] has succeeded in laying down the foundation of a modern financial sector and in building human capacity to eventually manage the system. (IMF, 2006:19)
Independent Evaluations Kosovo’s PFM systems also rate reasonably well in objective assessment exercises. The widely used Public Expenditure and Financial Accountability (PEFA) evaluation framework, developed by a group of major donor organisations, comprises 28 PFM performance indicators and applies scores ranging from A+ to D-.42 Several PEFA reports have been prepared for Kosovo. The 2007 report awarded 13 A or B scores (Ministry of Finance and Economy, 2007b). It identified MFE’s Treasury system as the greatest strength of the PFM arrangements: the single treasury account and centralised budget processing reduced the risk of misappropriation of funds and enabled timely and comprehensive financial reporting. The operation of the Customs Service was also praised. However, the assessment found problems in long-term budget planning, weak internal audit capacity in ministries, poor performance in public procurement, and major weaknesses in payroll management. The subsequent report in 2009 produced an improved 19 A or B scores (Ministry of Finance and Economy, 2009). The main areas of weakness it identified were similar to the 2007 assessment and all were largely external to the central PFM agencies. Some problems were also identified in taxpayer registration, tax audit and debt control.43 A similar assessment methodology, used by the IMF to compare the strengths and weaknesses of fiscal institutions in ten South Eastern European countries, including Kosovo, found that Kosovo’s PFM practices were no worse than any of its neighbours, and considerably better than some. Kosovo scored well on quality of fiscal reporting, medium-term budget planning and budget
42 http://www.pefa.org/en, accessed 9 September, 2012
43 The 2009 report also included three new measures relating to donor performance, including predictability of budget support and financial reporting, all of which received a D score.
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execution, but relatively poorly on parliamentary approval processes (Olden, Last et al., 2012).
EU Progress Reports Annual EU assessments focus on compliance with ‘European Standards’ in a large number of government activities, including economic policy and financial management. As the purpose of the reports is to identify problem areas and priorities for further work, they tend to focus on deficiencies in Kosovo’s administrative practices. The fact that most matters to do with PFM performance are rarely mentioned can be taken to indicate the relative success in this field. The 2013 report simply noted that 'Fiscal policy has been prudent and budget performance has been on track’ (European Commission, 2013c:3). In some years, however, there has been criticism of the political processes of budget formulation, the government’s ad hoc approach to fiscal policy, and a lack of coordination between line ministries (European Commission, 2008c:276; 2009a:21). The reports have also been less positive about the performance of the Tax Administration noting weaknesses and inefficiencies in tax collection, deficiencies in administration capacity, and legislation that is not fully compliant with EU standards, although steady improvement on these issues is also noted year on year (European Commission, 2007b:36; 2008c:36; 2009a:30; 2010b:34; 2011b:36; 2012:39; 2013c:31).
FRIDOM Reviews The DFID-funded ‘FRIDOM’ review of the MFE and the horizontal review of public expenditure management both commented positively on the competence of the Ministry of Finance and its agencies but found problems in the execution of financial management functions elsewhere in the administration (FRIDOM, 2010a, 2010b). The review of MFE concluded that the legislative framework is fairly advanced, that the Ministry has a reasonably well developed organisational structure, and has qualified staff capable of performing financial policy planning and execution (FRIDOM, 2010b:3). However, the reviews also reported that there was little understanding of the legal framework for public expenditure management at the political level, or within budget organisations, and that it was not being applied properly because of low administrative capacity across the government.
Quality of budget formulation process varies a great deal among budget organizations. Politically stronger budget organizations have even less policy stability and their planning capacities are weaker. Budget execution controls are
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largely devolved to budget organizations but their control and internal audit capacities are still at their infancy. The Auditor General reports severe irregularities in budget execution, particularly in procurement. Little attention is paid to OAG reports and there is no personal responsibility for irregularities. (FRIDOM, 2010a:4)
Independent observers The positive view of the work done to develop central PFM institutions is shared by many independent commentators. King and Mason, for example, praised the economic advances made in the first years of the mission.
The CFA provided an effective fiscal backbone to Kosovo’s rapidly burgeoning government services. It managed to handle very large sums of money without any scandals or inefficiencies … By 2002 the CFA had transformed Kosovo’s budget from being totally donor-driven to being almost entirely domestically funded. This process was faster and smoother than much else that went on at the time (King and Mason, 2006:135).
Blair et al suggest that ‘Perhaps UNMIK’s greatest success was in ensuring a fiscally autonomous and sustainable state’ and that creating the CFA and the Customs Service and achieving a self-funding budget within a few years was ‘a remarkable achievement’ (Blair, Eyre et al., 2005:237). In 2005, the Eide review of conditions in Kosovo, prepared for the UN, praised the establishment of economic structures and legislation and in particular mentioned the ‘well functioning Ministry of Finance and Economy’ and its achievements in establishing the framework for economic management (UNSC, 2005:11).
Fieldwork interviews Most of the technical advisers, donor representatives and Kosovars interviewed for this research agree that, in most areas of public finance, the international effort has been a success. The Kosovo Customs Service, in particular, receives almost universal praise from both foreign advisers and Kosovars [IA15, IA2, IA16, IA14, KA1, IA10, IA6, ID2]. The majority of interviewees also rated the MFE as one of the more successful Kosovo government institutions [KD2, KA1, KG8, ID1, IA12, IA13].
The Ministry of Finance is a functioning institution conducting its normal business in a fairly professional way and sometimes better than others, certainly
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better than other agencies, and maybe even compared to the region, and I think that at the moment it will be sustainable. [IA12]
The fact that the internationally-appointed Auditor General is now able to give an unqualified audit opinion on the Kosovo Budget was cited as an achievement [IA13]. The centralised Treasury FMIS is highly regarded and the basic expenditure processes established in late 1999 are largely still in use [IA1].
We would be more advanced than any country in the Balkans. Without a doubt. The Treasury system here, even the World Bank, I can quote them, they believe it is the best implementation of a Treasury system in any like situation in the world. [IA13]
The Tax Administration is also well regarded although its performance is rated below that of Customs. Several people noted, for example, that the Kosovo tax office does not generate the amount of revenue that would be expected based on the level of economic activity, suggesting deficiencies in tax collection activities [ID2, IA10, IA17, IA8].
5.8.2 PFM failures
Not all assessments of PFM outcomes are positive. There are concerns about the budget preparation process in line ministries and major criticisms of public procurement and internal audit activities. The policy analysis capacity of Kosovar staff is also considered inadequate, and corruption has been identified as a major issue in some areas.
Budget process Interviewees identified various continuing problems in the budget process including frequent changes to the budget after its formal adoption, expenditures approved by the Assembly without the prescribed MFE review process, unrealistic budget bids from Ministries, poor compliance with Ministry of Finance instructions, and inadequate scrutiny of budget proposals by Ministry of Finance analysts [IA13, IA4]. The EU’s 2010 Progress Report argued that ‘policy predictability, consistency and transparency remained a challenge’ (European Commission, 2010b:25). Developing and implementing credible economic policies and public expenditures was also identified as a problem in the 2011 report (European Commission, 2011b:24) although this appears to have improved since the IMF has become closely involved in monitoring fiscal policy (IMF, 2010; European Commission, 2012:17; IMF, 2012b).
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Internal audit and financial control While there are few complaints about the MFE’s accounting and reporting arrangements, auditing and financial control in each ministry or municipality are frequently found to be deficient. As noted previously, USAID was initially quite pleased with its achievements in establishing a basic audit capacity for the Kosovo administration. More recent assessments have been less positive. A SIGMA assessment in 2007 noted that staff in budget organisations seemed ‘to be taking some time to recognise the responsibilities implied in financial management and control’ and the notion of internal audit did not seem to be understood (SIGMA, 2007:6). Subsequent EU-funded technical assistance projects appear to have had limited impact on this problem and FRIDOM’s horizontal review of internal audit in 2009 also noted that senior managers seemed to be largely unaware of their responsibilities for financial management and control (FRIDOM, 2009:4). The Auditor General’s report on the 2010 financial year noted that the quality of financial reporting had been steadily improving. Nevertheless, of the 81 audits conducted by the Office during 2010-2011, 31 had some degree of qualified or adverse opinion (Office of the Auditor General, 2011:i). Technical advisers and Kosovar officials agree that internal audit and financial control capacity remains weak.
if we want to say how effective or efficient they are, I must say they are not that effective, either internal audit or internal control …..The main problem is the role of senior managers who don’t understand the importance of internal control of finances. They are persistent in trying to accomplish political goals and who knows what other interests they are trying to protect. They are not interested in implementing these regulations. [KG3]
One adviser commented that there also appeared to be limitations on the willingness of trained Kosovar staff to apply their skills, largely due to the political environment.
At the end of the day the locals were very superficial about anything they did, and I thought it was fairly deliberate. In my view there is still a bit of fear there of looking too deep and looking for something. Because it’s their future. They’ll lose their job. And I’m sure there are a lot of things have gone on that they should have found but they didn’t. [IA7]
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Procurement Public procurement is the area that receives the most negative comments in reports, evaluations and interviews. During the decade-long process of negotiating the content of the procurement law, the actual practice of procurement by individual budget agencies has been very poor, with frequent accusations of irregularities, mismanagement and corruption. Auditor General reports have identified procurement as one of the main challenges in the public finance system (Office of the Auditor General, 2011:ii). As noted previously, the 2009 EU progress report was particularly critical of the public procurement system (European Commission, 2009a:31). The situation seemed no better in 2010: procurement officers were subject to intimidation, training and certification needed to be improved, and government entities were ignoring instructions to use the Public Procurement Agency as the main executing and contracting authority (European Commission, 2010b:34-35). New legislation which came into effect in 2011 met with approval, but considerable scope has been identified for further work on procurement implementation (European Commission, 2011b:37- 38).
Capacity and sustainability While the performance of public finance institutions on a day to day basis is considered satisfactory, concerns have been expressed about the lack of experience of Kosovar staff and their limited ability to deal with more complex issues of economic policy, budget analysis and management. Lack of skills and experience in these areas was considered to justify the ongoing involvement of technical advisers.
The depth of capacity goes below the DG level but the pool is not that deep. … The most experienced staff have a maximum of nine years experience. Normally you would expect senior staff to have around 20 years of experience in the job. That’s the role of the advisers; to bring their experience. [IA6]
Until now international advisers are playing a big role in the Ministry of Finance simply because financial matters require a lot of very specific skills and you don’t find many people with these skills in Kosovo. [IU2]
Policy depth is your issue. … The biggest gap here if you look at the society now is policy development in government. … It’s the hardest skill to develop. Always the hardest to develop, policy skills. [IA13]
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I think now we’re almost approaching the stage, we are still not there yet, but we are approaching the stage when the public officials know what the advisers are talking about. [KA1]
Corruption Both the Customs Service and the Tax Administration are among the many public institutions perceived by Kosovars to have prevailing large-scale corruption. In June 2011, for example, 42 per cent of survey respondents thought there was serious corruption in Customs and 25 per cent believed there was corruption in the Tax Administration (Public Pulse, 2011b:22). The perception of a high level of corruption in Customs is, however, at odds with the generally positive international assessments of the Customs Service and comments made by international customs experts during interviews. Corruption is frequently identified as a serious concern in all areas of government activity. The evidence on perceptions and experience of corruption in the Kosovo public sector is analysed in more detail in the following chapter on the Kosovo civil service.
5.9 Summary
All PFM institutions have made considerable progress since 1999. They have moved well beyond the basics of the early years to deal with advanced questions of economic and fiscal policy, and most day-to-day functions now proceed with minimal international adviser involvement. Some, however, proceed much more smoothly than others. It is generally agreed that the MFE and the Customs Service are well functioning institutions, given the circumstances in which they operate, and that the Tax Administration, while not as highly regarded or apparently as effective as Customs, is considerably better run and less corrupt than many equivalent institutions in other countries. Many of the items listed by donors on their initial ‘to do’ lists can be ticked off including functioning cash management and payments systems, reliable government accounting, a modern revenue system, a competent Ministry of Finance, a well regulated annual budget process, an effective Customs Service, and a functioning Tax Administration.
The major weaknesses in Kosovo’s system of public finance management appear to be found outside the central public finance institutions in functions devolved to line ministries, such as budget planning, financial audit and control, and public procurement, 190 Chapter 5: Public Finance Management
and in the decisions made by the executive government or the Assembly. These deficiencies are largely a consequence of the low capacity of the public sector more broadly, which is discussed in the following chapter, as well as the realities of Kosovo politics, rather than the quality of the legislative and institutional framework for PFM or the competence of Ministry of Finance staff. The strong initial agreement between leading actors, and the high level of resources they committed, clearly produced the desired results in the areas in which the international actors were able to exercise significant control. The post conflict context was helpful to the extent that it enabled the international actors to exert this control and largely to ignore Kosovo’s political leadership and public opinion. In areas such as public procurement, where Pillar IV was not the only participant and was not able to dominate to the same extent, results were clearly less satisfactory. The early favourable conditions did not last and the increasing divisions and differences between international actors have made Kosovo’s PFM ‘reform’ programs resemble similar donor activities in other developing countries. This has not however undermined the solid achievements in core revenue and budget functions. Although international organisations continue to be involved in monitoring and advising on Kosovo’s public finance management, as they do in most developing economies, day to day responsibility now rests with senior Kosovar managers, many of whom were among the first recruits identified by international advisers in 1999 and 2000.
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6 Public Administration and the Kosovo Civil Service
While the development of public finance functions is generally judged a success, establishing most other public administration institutions is considered to have been, on the whole, far less successful. Numerous reports and evaluations identify multiple deficiencies in public sector administrative practices including overstaffing, inefficiency and high levels of politicisation and corruption (European Commission, 2010b:8-9; 2011b:9-10; Office of the Auditor General, 2011:28-30; Public Pulse, 2011a, 2011b; European Commission, 2012:7). It is easy to attribute poor outcomes in this sector to inadequate performance by the lead actor in the field, the UN’s Civil Administration component. As noted in Chapter 4, almost all accounts of the first years of the Mission are highly critical of the UN in this role. In contrast to the urgent and intense efforts directed towards establishing PFM institutions, the task of creating other public administration structures to form the basis of a future government received relatively less attention and resources. However, the recruitment of a new civil service and the transfer of capacity to a self governing administration ‘presented a challenge of quite staggering proportions’ (DANIDA, 2004:26) and it is likely that even a well resourced and clearly targeted intervention would have struggled to control the development of the public sector institutions in the conditions that existed in Kosovo immediately following the conflict. The size and geographical dispersion of civil service institutions is also relevant in explaining the lack of progress in public administration development. Many international actors, however, tend to attribute poor performance in public administration to the failings of the Kosovars themselves and to features inherent in Kosovo’s culture and society.
This chapter describes the main activities of international actors in creating government departments and agencies, recruiting and training their staff, establishing terms and conditions of civil service employment, and determining salary levels and grade structures. The main focus is on the central coordination of civil service policy by the UNMIK Department of Public Services, and subsequently by the PISG Ministry of Public Services and the Ministry of Public Administration of the Republic of Kosovo.
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The first part of the chapter reviews the history of ideas and practices in relation to civil service bureaucracy and the issues that needed to be addressed in establishing public administration arrangements in Kosovo. The analysis then discusses the main factors that influenced the development of this sector. The remainder of the chapter is organized in more or less chronological order from the start of the UN Mission, through the formation of the JIAS Departments and the Provisional Institutions of Self Government, to the early years of independence and describes developments during each phase. The final section reviews the outcomes of public administration development, as assessed by donors, advisers, outside observers and by Kosovars.
6.1 The Significance of Civil Service Management and Public Administration
The concept of an efficient, apolitical civil service bureaucracy is a product of the 18th and 19th Centuries and is closely associated with ideas about modernisation and economic progress. Rational, impersonal, rule-based administration is considered essential for delivering optimal and equitable outcomes for society. Before the development of organised, centralised, hierarchical civil service bureaucracy, administrative tasks had been executed through personal appointments with imprecise authority and unclear limits (Kamenka and Krygier, 1979; Chang, 2002:76-80). Most of the essential characteristics of modern government administration described in Max Weber’s essay on bureaucracy are still applicable to civil service systems in developed countries (Weber, Gerth et al., 1970:196-244). They include fixed official jurisdictions, government by rules, hierarchy and graded authority, management based on documents, specialised technical skills, security of office, a regular salary based on rank, and career progression based on seniority or exams. This type of civil service administration is generally viewed as a vast improvement on inefficient patrimonial and nepotistic alternatives, and a potentially powerful tool for increasing public welfare. Public bureaucracies have also been criticised, however, for excessive regulation, excessive power, slowness, inflexibility and mediocrity. Balzac, for example, described bureaucracy as ‘a gigantic power set in motion by dwarfs’ (quoted in Kamenka and Krygier, 1979:24).
Early observers of the development of bureaucratic administration saw a clear connection with the increased wealth and power of some European states. Weber, for
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example, argued that the great modern state is absolutely dependent upon bureaucracy (Weber, Gerth et al., 1970:211). More recently, the ‘developmental state’ literature also identifies a strong government bureaucracy in countries such as Japan, Taiwan, South Korea and Singapore as one of the essential elements of their economic successes (World Bank, 1993:Chapter 4; Johnson, 1995:115-140; Leftwich, 2000: 162-163). An effective civil service has thus come to be seen as an essential institution for economic improvement in developing countries and an appropriate target for donor-funded capacity development projects. A competent government administration is also considered to be better able to implement donor-recommended development policies and donor-funded projects. Since the 1990s, the EU has applied a ‘bureaucracy criterion’ as one of the conditions for accession: candidate countries must demonstrate that they have sufficient administrative capacity to apply EU laws and standards (Dimitrova, 2002:177-178), and much EU assistance to potential members is therefore directed to public administration reform.
There are, however, significant national differences in public attitudes to government bureaucracy, and in the constitutional status of the civil service and its relationship with the elected government. In the Westminster system, for example, civil servants generally remain in their posts regardless of election outcomes, whereas in many countries, including the US, senior positions are appointed by each incoming executive government. These national differences lead to debates between donors about the best civil service model to propose for developing countries. The issue has become more complex in recent decades as many Western countries have themselves experimented with civil service reforms intended to address the perceived inflexibilities and inefficiencies of the public sector. These reforms, sometimes referred to as ‘new public management’, include using mechanisms such as performance contracts, competition, and decentralised management, and reducing the security and predictability of civil service salaries and conditions in efforts to stimulate improved public sector performance (Osborne and Gaebler, 1992; Ferlie, Ashburner et al., 1996). There is debate, however, about whether these new models are appropriate in developing countries that lack basic structures and competence (Manning, 2001).
In undertaking the task of civil administration in Kosovo, international actors were unavoidably caught up in these debates about the role and nature of the civil service as well as practical questions about what kind of public service should be established, how
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many people it should employ, and how well they should be paid, whether it should resemble the ‘old’ centralised Weberian model or the responsive, devolved ‘new’ public management, and how closely the bureaucracy should try to emulate the apolitical Westminster ideal. In addition, Western concepts of separation of state powers and apolitical bureaucracy were not features of the previous socialist system of public administration in the region: the party political bureaucracy had been closely intertwined with state administration, party directives often took precedence over legal rules, and public employment had been party-controlled and highly politicised (Goetz, 2001:1033). Many of the processes and behavioural norms introduced by international actors were therefore unfamiliar to Kosovars.
6.2 Factors Affecting Civil Service Development in Kosovo
Responsibility for resolving these issues in Kosovo lay, initially, with the UN’s Civil Affairs Office (Pillar II). This component of the Mission employed and managed all civil servants working in areas such as education, health, social welfare, urban services and housing. Within the Pillar, a Department of Public Services was established with responsibility for developing a regulatory framework for the civil service. Civil service development was thus affected by the problems that limited UN performance in other Mission tasks including the slow deployment of resources and inadequate staffing levels and capacities. Several DFID and EAR technical assistance projects also contributed to this field in later years but their contributions were narrowly focused and had limited overall impact. Organisations such as USAID, the World Bank and the IMF, while acknowledging the importance of an effective public administration, had little direct involvement in this field and seemed to be primarily interested only in relation to the effect of the civil service wage bill on the administration’s budget position. The division of responsibilities within the Mission between the UN-run Pillar II, in charge of public sector employment, and Pillar IV, in control of the public sector budget, largely explains the different development trajectories of these two sectors and set the scene for conflict between Pillar IV’s interest in rapid development and fiscal restraint, and the UN’s interest in achieving other goals related to political settlement and stability.
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6.2.1 Failures of international actors
Inadequate resources An early EU assessment summed up the situation facing the UN’s civil administration immediately after the conflict.
The Civil Administration Pillar faces considerable challenges. It has to take on responsibility for practically all public services and departments of government at provincial, regional and municipal level. It is woefully under-resourced so to do (TAFKO, 1999:2).
The Brahimi Report on UN Peace Operations has acknowledged that the UN struggled to set up and manage its operations in Kosovo. Its administrative practices, procurement bottlenecks, and budget inflexibilities hindered timely deployment and effective operation of the Mission and the UN had difficulty recruiting enough people to fill all the available positions in the civilian administration, let alone finding staff with appropriate experience (UN General Assembly, 2000b). Moreover, the Mission’s objectives in this area were unclear and sometimes disputed. Security Council Resolution 1244 did not provide the Mission with clear objectives in relation to civil administration activities but stated that the Mission’s role was ‘to ensure conditions for a peaceful and normal life for all inhabitants of Kosovo’ (UNSCR 1244: para 10). This did not, to many in the UN, imply engaging in either reform or capacity development. In any case, the UN Mission, under pressure from the Security Council, major international actors and NGOs to solve all problems at once, simply had too much to do, relative to the resources available, to focus significant attention on matters of civil service management. As noted in Chapter 3, planning for the Mission had assumed that an orderly transfer of a functioning administration would be possible and when it was realised that much more would be required there was no effective alternative plan.
Delays in mobilising the full UN civil administration contingent, inadequate staff capacity, and a desire by the UN to minimise conflict with the local population meant that the UN lost the initiative in the creation of public administration structures. This provided an opportunity for local political leaders and powerbrokers to capture economic infrastructure and many of the functions of the public administration (Blair, Eyre et al., 2005:213; King and Mason, 2006:50-51). In the absence of a plan or the resources to establish a new civil service, the UN simply encouraged all former government employees to return to work and the former parallel administration system
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was allowed to continue as the basis for the provision of many public services. In the short time between the end of the conflict and the arrival of foreign forces, the blank slate reported enthusiastically by some of those planning the international Mission vanished as local political factions rapidly re-occupied the public sector and re-activated earlier traditions of administration, work practices and power relationships. The ability of the UN Civil Administration to rectify the problems that had developed in the public sector later on was then undermined by its administrative practices and by the performance of its staff who, it has been argued, were both inappropriately qualified and sometimes of questionable quality (Holohan, 2005:128-129; Magalachvili, 2005:123- 124). Many of those working for the UN or seconded by their governments were former diplomats who had limited administrative experience [IU1;IU4].
The people definitely had political experience. They had seen a lot of conflict situations, but for administration, I don’t think UNMIK could really boast many good people you know. … there was no specific recruitment by the UN. It was the same sort of people who continued to work for the government. … many of them had military background and not really had much experience, but they were eminently suited for the crisis period. But for the administration you needed a lot of people with administrative experience. [IU4]
Regardless of the quality of the UN personnel, UNMIK’s Civil Administration Pillar never had the authorised staffing levels that would have been needed to effectively manage the thousands of Kosovars who made up the civil administration. Table 6.1 provides an indication of the numbers of international and local UN staff and civil service employees in JIAS departments one year after the start of the Mission, when UN staff numbers were at their peak.
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Table 6 .1 International and local staff in Pillar II departments 2000-2001 (approximate numbers) 44 International Staff paid staff from Kosovo JIAS Department UN local staff (including Consolidated UNVs) Budget Education and Science 11 5 27,792 Health and Social Welfare 11 3 11,196 Civil Security and Emergency Preparedness (KPC) 21 27 3,411 Justice 105 49 2,094 Public Services* 258 31 1,033 Culture 5 4 877 Agriculture 6 3 420 Transport and infrastructure 13 5 156 Labour and Employment 6 3 143 Environmental Protection 6 3 29 Local Administration 12 6 24 Post and Telecommunications 11 5 21 Non Resident Affairs 4 3 17 Youth 3 2 16 Sport 3 2 15 Municipalities 256 174 4,889 Regional Offices 175 175 - *including Civil Registry, Vehicle Registration, Travel Documents, Central Procurement, Statistics and Civil Service Administration. Sources: UNMIK Regulation 1999/27 On the Approval of the 2000 Kosovo Consolidated Budget; UNMIK Regulation 2000/50 Amending the 2000 Kosovo Consolidated Budget; UN General Assembly budget for UNMIK 2000-2001 p 95.
In the JIAS Departments of Education and Health, a handful of international officials were responsible for around 38,000 civil servants. These two functions had evolved from the previous ‘parallel administration’ of the 1990s and effectively continued to operate according to existing practices and local political influences. Repeated subsequent efforts to regulate and standardise employment numbers, teacher qualifications, and pay rates in these sectors met with only limited success (World Bank, 2006c:65-109). In the Department of Public Services, on the other hand, 61 international UN staff, 197 UN volunteers and 31 locally recruited UN employees themselves performed numerous administrative tasks on behalf of Kosovo, including registering vehicles, issuing identity documents, processing civil service pay, and
44 The table does not include technical advisers who may have been funded by other donors in these administrative departments. UN Regional Offices were established to coordinate UN municipal administration and did not employ Kosovar civil servants.
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procuring supplies through the Central Procurement Entity.45 The process of recruiting Kosovar staff to management roles in these departments did not commence until several years after the start of the Mission.
Unclear and conflicting objectives Progress in developing a local public administration was also hampered by the UN’s relatively conservative approach to its administrative responsibilities, reinforced by protests from Belgrade and criticism in the General Assembly, and its reluctance to make decisions or implement reforms which might in any way be construed as prejudging Kosovo’s eventual separation from Serbia. This was very different from the stance taken by both the EU and the US, acting through Pillar IV, which assumed the need for significant change and consequently a separation from Serbian institutions. The UN’s primary focus was on maintaining peace and avoiding civil unrest and it has been argued that UNMIK was therefore reluctant to take assertive action to ensure responsible governance of the public sector.
These reforms were not done before by the international community because they had a different agenda which was security and peace. As the government is the key employer, it wasn’t possible to shed large numbers of staff without leading to unrest. So the problems piled up and were not dealt with. There would have been riots. [KD1]
The absence of a clear agenda for developing a local administration meant that the UN was exceedingly slow to establish the legal framework and rules for public sector employment compared with the speed of activities in other areas. It took several years for the first law to regulate civil service employment to be enacted, in December 2001, and the necessary supporting administrative instructions were not finalised until 2003. These delays brought the UN Civil Administration into conflict with other international actors intent on pressing ahead with institutional development and local recruitment.
The multinational makeup of the UN mission, with officials drawn from the various UN member countries, contributed further confusion and uneven development in the various civil administration functions. Lacking effective policy coordination within UNMIK,
45 The Department of Public Services relied heavily on UN volunteers (UNVs) for its staffing (only 6 of the 203 UNVs in UNMIK were not assigned to this department). Approximately 80% of UNVs are citizens of developing countries (http://www.unv.org/about-us/faqs.html#4, accessed 17 Sept 2012).
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many officials simply replicated practices that were familiar to them so that each department was set up according to different models. This was apparent to many local observers [KD1, KA3, KA1, KG3].
... in the civil ministries which were under UNMIK, the administration is evolving along the lines of the country from where the senior international officer is coming from, because there is no definitive blueprint. So it is evolving as if it was a mirror of the boss of that department. It was a classic pot pourri you know… [IU4]
you had an administrator coming from one country in UNMIK for three months and he would have his set of ideas, and then you would have another administrator that would come from somewhere else, somewhere maybe even worse than Kosovo, with his other set of ideas. [KA1]
there were different experts representing the UN from different countries – from UK, India, Bangladesh, Canada – and people representing countries that were less developed than Kosovo. This caused many problems. [KG3]
While technical advisers working on USAID and EU projects also sometimes brought different ideas and systems from their own countries [KA3, KG3, IA3], the structure of the assistance effort in Pillar IV meant that they were generally subject to firmer specification of the policies and systems expected to be implemented. UN staff were largely left to run their departments as fiefdoms according to their own ideas.
Reluctant Kosovarisation The UN civil administration departments were relatively slow to train and develop local staff to take over administrative responsibilities. Pillar IV had begun training Kosovars for management roles in public finance institutions a few months after the start of the Mission, in 1999, but some Pillar II departments, in particular the Department of Public Services, were largely managed by international officials for a considerable period. This was frustrating for Pillar IV advisers engaged to provide Kosovar civil servants with financial management skills.
We were constantly training internationals and we were not being sent locals to train. We had to go and find them. And we were training internationals constantly because they were turning over every three to six months. This was almost three years after the start of the mission. [IA16]
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A concerted effort by UNMIK to recruit local staff to management positions was first initiated in 2001 and was still underway in 2003, at a time when PFM institutions such as the MFE and the Tax Administration had already been transferred to Kosovar control.
The contributions of DFID and EAR Although the UN had the primary role in creating and managing the civil administration, EAR and DFID also contributed technical assistance resources to civil service development efforts. Both became involved in public administration capacity development several years after the start of the Mission, however, and in relative terms their financial contribution was small. EU funding for public administration over the period to 2010 was primarily designated as support for European Integration, but it also included €0.57 million for a review of civil service pay and grading, support to develop the Prime Minister’s Office, and funding to establish the Kosovo Institute for Public Administration (see Table 4.2 in Chapter 4). As discussed in Chapter 4, there has been much criticism, both in official evaluations and in interviews with advisers, of the way EU-funded projects are planned and implemented. EU projects in this sector have generally been short-term and sparsely resourced, with significant bureaucratic overheads and long implementation delays. The amount made available to review civil service pay grades in 2003, for example, was very small relative to the significance of the problems it was intended to address, and did not include funds to ensure that the proposed reforms were implemented [IA9]. DFID’s most significant contribution during this period was the Personnel Policies and Procedures (PPP) Project in 2002-2004, with a large budget of £3 million. This achieved some success in establishing procedures but it promoted a British Westminster style of civil service management which was inconsistent with the constitutional arrangements put in place by UNMIK, and with the preferences of Kosovo’s leadership.
6.2.2 The post conflict context and the nature of public sector institutions
While the performance of the UN’s Civil Administration Mission could certainly have been better with clearer objectives, appropriate staff and more resources, it must be acknowledged that the situation in which the administration was established was also extremely difficult. Although there were few functioning public institutions apparent to international observers immediately after the conflict, Kosovo was far from being an institutional vacuum in the minds of the local population. The uncontrolled return to
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previous jobs and the reactivation of the parallel education and health services, aimed at resolving the immediate issue of restoring economic activity and normality, lent support to pre-existing ideas about public sector employment as an entitlement, a form of social welfare, or an instrument of political influence. Subsequent efforts at public administration reform thus had to confront local traditions and assumptions formed by Kosovo’s history and its experience of socialist government, as well as the vested interests of political leaders. The public service in Kosovo soon acquired the features of public sector behaviour found in almost any developing country, characterised by reliance on personal and political connections, vague boundaries between public and private interests, and the diversion of public resources for political objectives. It has been argued that UNMIK’s failure to understand the complex and questionable political economy linkages in Kosovo’s administrative arrangements was one of the major failures of the mission (Blair, Eyre et al., 2005:206; King and Mason, 2006:244). However, the nature of public administration itself, its size and diversity, also made effective external management and reform difficult. The civil service is dispersed across many functions and locations. The UN had enough difficulty managing effectively within its own organisation and between its central and regional offices. It’s ability to influence the actions of local political interests and civil servants throughout the territory was limited. The remainder of this chapter illustrates the impact of this combination of factors on the evolution of the civil service bureaucracy in Kosovo up to the period following independence, the largely negative assessments of the performance of the Kosovo government bureaucracy today, and the ongoing efforts to ‘reform’ a system that was, in theory, established by the international administration just a few years ago.
6.3 The Kosovo Civil Service in 1999
6.3.1 Recruitment
The fact that most Serbian government employees had left the province at the end of the conflict did not mean that Kosovo had no civil servants. Within days of the end of hostilities, Albanian Kosovars started to reclaim the positions they had held in public enterprises, utilities and government departments ten years earlier, before the mass dismissal of Albanian staff by the Serb authorities. The Albanian-run parallel health and education services also restarted. International officials saw this return to work as an
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important step in reconstruction, and UNMIK soon formally authorised thousands of pre-1989 government workers to resume previous jobs, while at the same time trying to encourage Serb employees to stay. In July 1999, the UN Secretary General reported that UNMIK would make maximum use of skilled former or current public employees of any ethnicity who would be integrated into the interim civil administrative structure and would be selected on the basis of capability, the level of local confidence enjoyed by the individuals, their efficiency and integrity (UNSC, 1999d:para 56). In fact, however, UNMIK had little opportunity to apply any kind of merit selection process. In mid July municipal employees officially returned to work in Pristina, and at the beginning of August, 400 former post and telecommunications employees were welcomed back to their jobs by newly arrived SRSG Kouchner. At the municipal and regional levels, UNMIK international administrators were working with self-identified ‘local authorities’ to provide water, electricity and health services (UNMIK, 1999:August). UNMIK’s Civil Affairs Office was soon responsible for large numbers of civil servants. Samantha Power, writing in the New Republic magazine, noted that the UN policy meant that everyone who had ever been employed in the government was offered a job. This was intended as a temporary measure, partly aimed at protecting Serb jobs in the face of Albanian claims for priority (Power, 1999:19).
UNMIK’s rationale for this expansive public employment policy was based on its peacekeeping objective. According to one UNMIK official:
Allowing the number of civil servants to grow rapidly initially … was a conscious choice and based on the need to build peace. The UN’s first priority was to get people into jobs in order to support the economy and to build peace. Efficiency could come later. The immediate issue was to prevent the derailment of the country. Derailment didn’t happen, so it worked. [IU3]
While this policy may have helped to secure peace it also created an opportunity for politicisation of government employment. This was particularly a problem at the municipal level and in the former public enterprises.
Having been out of the system for ten or more years, the people who then occupied the positions were not qualified ... basically they were the KLA fighters and they just started taking over the institutions, like the socially owned enterprises, the factories and all those things ... [IU1]
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This huge body of thousands of people was created nearly from zero, so this was an excellent opportunity for occupation of power within the civil service, a political opportunity. [ID1]
While this was happening, international bodies and donors were debating how a local administration should be established, how large it needed to be, and how much it should cost. It seemed generally agreed that the informal parallel administration operated by the Albanians from 1989 to 1999 would not be a suitable basis for the new institutions.
the experience accumulated from the years of operating the parallel systems … would be helpful, but it should be noted that the standards and methods required for a formal government system to operate properly imply considerable relearning and adaptation of civic and political behaviour in the direction of a consensual framework for decision making. (World Bank, 1999b:5)
The World Bank also argued that the administration of service delivery functions during the previous period, from 1974 to 1989, had been characterised by a lack of representation, an unaccountable bureaucracy, and a lack of engagement by civil society (World Bank, 2000b:1). The International Crisis Group noted that, while local people understood the local scene in a way the UN could not, all their experience in administration, if any, was derived either under communism or in the former parallel administrations which operated according to their own rules (ICG, 1999d:8). By this stage, however, in most areas of public service delivery, particularly health, education and municipalities, it was too late. The parallel system had reconstituted itself and there appeared to be no practical alternative (World Bank/European Commission, 1999g:24).
6.3.2 Civil service pay
In 1999 most of these public sector employees were working largely without an official salary.46 Although UNMIK had been mandated to perform civil administration functions, it had not been provided with a budget to employ a local civil service. Donors, in keeping with normal policies, were also reluctant to provide funding for regular public sector salaries. The Secretary General’s first report to the Security Council on the Kosovo Mission included a plea for more member donations to cover the cost of public sector salaries and recurrent costs until UNMIK was able to raise budget
46 They may, however, have received unauthorised fees, gifts, ‘tips’ and bribes.
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revenue from local taxes (UNSC, 1999d:para 14). In August UNMIK was able to start paying ad hoc stipends to a handful of judges, prosecutors and customs officials using funds from a UN Trust Fund. Further payments were subsequently made to teachers, health workers and fire fighters (UNSC, 1999c:5). Three pay rates were decided for the stipends: DM 300 for executive positions, DM 200 for professionals, and DM 100 for support staff. Employees were reported to be very dissatisfied with these pay rates (UNSC, 1999e:12). The stipends were paid in cash but arrangements for delivering payments to individuals were at that time rudimentary given the absence of banking facilities and identity cards. UN officials faced the challenge of unambiguously identifying beneficiaries, establishing authorising procedures, and physically transferring cash throughout the province under NATO protection (European Commission, 1999b:5). Rigorous controls were impossible.
With the news that the UN would pay stipends, schools and hospitals were filled with people supposedly working there. There was no way of knowing who was employed and who was not since records had disappeared. In any case, since the main objective was to restore security and move the political transition forward, everyone present received the small stipend - whether they were entitled to it or not (del Castillo, 2008:150).
When it came to paying stipends there was a difficulty knowing who is who and who is working where. We just had to trust the people. [IU3]
In mid-December 1999, UNMIK was apparently still scrabbling for funds to cover the stipends (CRS, 2001:11). The situation improved shortly afterwards, however. By the end of 1999 the availability of promised donor funds improved and the new UNMIK Customs Service began delivering revenues to the budget.
The 2000 proposed Kosovo Consolidated Budget provided for a transition from stipends to a regular salary system. Funds were allocated for a total of 57,409 staff in central departments and municipalities at an average monthly salary of DM 262 (UNMIK/European Union, 1999). An agreed civil service salary scale was issued in the form of a memo. It was based on a set of seven standard job titles, with each assigned a ‘coefficient’, ranging from 3 to 10, which was applied to a common ‘multiplier’ to calculate the relevant salary for each grade. Any increase in the ‘multiplier’ would flow on to all job levels and maintain relativities between the highest and lowest grades. There was thus a single salary for each job level and no within-grade progression. It was
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a simple system, intended as an interim measure, but in fact this rudimentary arrangement remained in operation for more than a decade.
6.3.3 Employment terms and conditions
UNMIK Regulation 1, issued in July 1999, gave the SRSG power to appoint any person to perform functions in the civil administration, and to remove them (UNMIK Regulation 1999/1, 1 July 1999, Section 1, Clause 2). A Civil Service and Personnel Section was established within UNMIK’s Department of Administration and Support to manage the future Kosovo civil service, which was expected to have two staff to address policy and institutional issues and three to develop civil service remuneration schemes (UN General Assembly, 1999b:18-19). According to comments in fieldwork interviews, however, this office was unable to provide guidance on the recruitment of new staff or advice on appropriate pay and conditions.
I would go to .. the head of public services [in Pillar II] and said I want to employ a lot of people and he said, well we don't have any employment contracts, we don’t have this, we don’t have that, and I said fine we are going to do it anyway. [IA1]
My understanding was that there was no standardised process of recruitment. We had this 2001 regulation on the civil service but until that time it was more or less … there was a very ad hoc system of employment. [IU1]
In the absence of Pillar II guidance on terms and conditions for civil service appointments, responsibility for public employment was, for all practical purposes, devolved to each of the employing agencies within UNMIK. Brief references to staff recruitment and personnel policies were included in early UNMIK regulations, but the focus was largely on the need for equitable ethnic representation. The regulation on exercising control over payment facilities and services, for example, specified a need to appoint persons of a high level of professional competence and integrity and to apply non-discriminatory personnel policies (UNMIK Regulation 99/11, 13 October 1999, Section 4), while the regulation establishing the Central Fiscal Authority (CFA) simply stated that the head of the CFA ‘shall implement non-discriminatory personnel policies designed to ensure that the composition of the staff of the CFA reflects the multi-ethnic character of communities of Kosovo’ (UNMIK Regulation 1999/16, 6 November 1999,
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Section 6). These regulations were silent on questions of terms of employment, remuneration or performance.
6.4 Public Administration under the Joint Interim Administrative Structure (JIAS)
The creation of the JIAS at the start of 2000 was intended to begin the process of forming a Kosovar-led administration. Twenty administrative departments were set up to manage public services, each under joint international and Kosovar leadership (UNMIK 2000/1, 14 January 2000). The first task of the new Interim Advisory Council (IAC) was to allocate responsibility for the departments between the Albanian political factions represented on the Council (UNSC, 2000:2). The political parties then nominated their own candidates to the national Co-Head positions in their departments. There was an intense process of negotiation over the number and importance of the departments each party would head (World Bank, 2000b:19). Four Co-Head positions were reserved for representatives of minority communities and were allocated by the SRSG.
The process of creating new JIAS departments out of the existing UNMIK departments was quite slow and there was considerable criticism of the UN’s performance (ICG, 2000:29; CRS, 2001:7). In March 2000, only four of the 20 departments were reported to be operational and staffed. These included the Central Fiscal Authority, established in the EU’s Pillar IV, and the Departments of Health and Education, which were largely based on the previous parallel institutions (UNSC, 2000:3). In August 2000 the ICG reported that some departments still appeared to exist primarily on paper, and all were said to suffer from ‘insufficient staff and resources, policy neglect at the top, lack of coordination between departments and lack of transparency between international and local Co-heads’ (ICG, 2000:3). A series of UNMIK Regulations were issued to formalise the establishment of each department and they contained a brief section on employment policy which emphasised non-discrimination and ethnic representation, gender balance, and professional qualifications, competence and merit, in that order. Formation of the civil service was discussed by the IAC in February 2000. The Council adopted a set of guidelines for ‘an objective and transparent recruitment policy aimed at hiring the best experts in the field’ (UNMIK, 2000c:February) but the guidelines were not formally promulgated in UNMIK legislation.
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The Pillar II Department of Administration and Support Services became the JIAS Department of Public Services (DPS). Although the UN staff of the Department now nominally shared responsibility with the appointed Kosovar Co-Head, in effect, as in most of the JIAS departments, UN officials continued to play the lead role. The Department had responsibility, among other things, for the overall strategy on public services and for developing regulatory frameworks for the recruitment and terms of employment of civil servants, their rights and obligations, appointments and promotions, salaries, benefits, pensions and disciplinary procedures (UNMIK Regulation 2000/12, 14 March 2000, 2.1 (b)) (UN General Assembly, 2000a:23). It would be more than 18 months, however, before any of the envisaged regulations were finalised.
6.4.1 Terms and Conditions: UNMIK Civil Service Regulation 2001/36
The question of civil service employment conditions became urgent in 2001 with the development of the Constitutional Framework and the imminent transfer of responsibility for most public administration functions to an elected Kosovo government. Several UNMIK regulations on civil service issues were promulgated at this time, but they provided only part of the necessary legislative framework. DFID began taking an interest in the issue of civil service development in early 2001 and provided a consultant to draft a Basic Public Service Law on behalf of the Department of Public Services (DFID, 2001c; UNSC, 2001:4). UNMIK Regulation 19, on arrangements for the Executive Branch of the PISG, issued in September 2001, shortly before the first Assembly election, set out the broad terms for administering the provisional government ministries, including defining the position of Permanent Secretary in each Ministry and establishing a Senior Public Appointments Committee to coordinate recruitment to these posts. It also laid out a set of general principles to guide the establishment of the civil service (UNMIK Reg. 2001/19, 13 September 2001). It had been expected that DFID’s draft law would be issued as an UNMIK regulation well before the election of the Kosovo Assembly (DFID, 2001c:para 11). The Kosovo Civil Service Law (KCSL) was eventually signed by the SRSG in December 2001, which was after the election, but still before the composition of the executive government had been decided (UNMIK Reg. 2001/36, 22 December 2001). At the time, DFID considered passage of the regulation before the election of a government important. It was hoped that this would ensure that the essential principles of sound civil service
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management, as seen by DFID, would be enshrined in law before the civil service was handed over to local politicians, and thus the chance that elected representatives would reject the principles of the law would be reduced (DFID, 2001a:18-19). In subsequent reports, however, DFID officials had second thoughts about this strategy:
the KCSL was adopted before the current Government took office and therefore inevitably does not have the same degree of local ownership as later policies … the law has been felt by some senior politicians to have been 'imposed' with insufficient local discussion. (DFID, 2003:16)
The Regulation defined who would be classified as a civil servant, listed governing principles for the civil service (namely equity, political impartiality, integrity, honesty and accountability, transparency, merit, non-discrimination, and inclusiveness), and attached a civil service code of conduct. It still did not provide much detail, however, about the terms and conditions of employment of civil servants. These were to be set out in a further document, a separate Administrative Direction, which had also been drafted by DFID consultants, and was expected to be issued by Pillar II as soon as the Civil Service Law was approved. This did not happen, however. An Independent Oversight Board (IOB) to deal with complaints from civil servants against their employer, the government, was also envisaged in the Civil Service Law and had been expected to be put in place fairly promptly, but its creation was also significantly delayed. In fact, both the Administrative Direction and the IOB were not implemented until several years after the creation of the PISG.
6.5 The Civil Service under the Provisional Institutions of Self Government (PISG)
6.5.1 ‘Kosovarisation’
Under the terms of the Constitutional Framework agreed between UNMIK and Kosovo political leaders during 2001 (UNMIK Reg. 2001/9, 15 May 2001), responsibility for most functions of the JIAS departments would be transferred to an elected Kosovo government. In many departments this meant there was a need to implement a rapid ‘Kosovarisation’ of senior management positions which were still in the hands of UN officials (UNSC, 2001:4). In April 2001, UNMIK adopted a Kosovarisation strategy which required departments to appoint Kosovars to all senior and middle level posts and
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to transfer substantive responsibility and authority to them before the November 2001 election (DFID, 2001c:para 7). The handover of authority was not, however, as smooth or as rapid as official statements might have suggested. In January 2002, following the election, the Secretary General explained that UNMIK international staff would continue to perform administrative functions after the government was established, but would hand over executive functions as soon as possible (UNSC, 2002b:para 12). Thus many international Co-Heads remained in place under the title of Principal International Officers (PIOs) and in most ministries policy issues, including donor liaison and legal drafting, were still controlled by UN international staff [IU3]. Almost a year after the creation of the PISG, the Secretary General reported that nearly 50 per cent of senior Kosovo Civil servant posts remained unfilled and two Permanent Secretary positions in Ministries were still held by UNMIK staff (UNSC, 2003d:para 3). A UN report on UNMIK’s achievements in 2001-2002 reported a successful transfer of functions to the PISG, with municipal autonomy fully accomplished and recruitment of senior posts in the PISG completed (UN General Assembly, 2002:3-6), but this appears to have been an optimistic view of the actual situation. UNMIK reported to donors in November 2002 that it was difficult to find suitable candidates to fill the vacant positions particularly at middle management levels and in jobs requiring particular skills (UNMIK, 2002a:20). USAID was among the international actors who were critical of UNMIK’s policies on the transition to self government and the slow transfer of authority.
Certain authorities have been retained by UNMIK that, in the view of many observers, should legitimately be turned over to the PISG. A prominent view amongst Balkan experts is that UNMIK has proceeded at a slower than optimal pace in turning over authority to the PISG (USAID, 2003c:2).
In early 2003, two years after the Kosovarisation strategy had been initiated, a joint ‘Transfer Council’ was established by UNMIK and the PISG to accelerate the process (UNSC, 2003a:para 2). By mid 2003, the Secretary General reported that the number of international UN staff in ministries and municipalities had been reduced, financial administration had been handed to Kosovars, PIOs had ceased performing executive functions, and an increasing number of government policy decisions were being prepared by Kosovo civil servants (UN General Assembly, 2003:4-5; UNSC, 2003c:para 3). On 31 December 2003, four and a half years after the start of the
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international Mission, UNMIK officially transferred responsibility for all ‘non-reserved’ competencies to the PISG (UN General Assembly, 2004:4).47 However, in fact, international UN officials continued to work closely with the PISG ministries for some time after this. The Secretary General’s budget performance report for 2004-2005, for example, noted that UN officials supported the operations of the transferred ministries and the Office of the Prime Minister through the provision of expert advice and advocacy, intervened to ensure compliance with UNSCR 1244, the Constitutional Framework and applicable law, and monitored the ministries through regular meetings with senior staff, attendance at policy meetings, and weekly, monthly and special reporting (UN General Assembly, 2005:5).
UN officials justified the gradual pace of the handover to Kosovars on the need to balance the transfer of responsibility with the requirement for stability and good government, citing concerns about corruption and lack of public accountability. The UN also faced opposition from the Serbian government in Belgrade, and Serbs in Kosovo, to any transfer of responsibilities to the Kosovo PISG as being outside the terms of UNSCR 1244 (UNSC, 2004a:para 5). A DANIDA assessment argued that the speed of the hand-over ‘needs to be seen in a context in which there has been widespread criticism of bureaucratic ineptitude and inefficiency’ (DANIDA, 2004:72). Hans Haekkerup, who was SRSG in early 2002 when the PISG was formed, has argued that the UN
tried to hand over authority as fast as it could be defended to keep the political momentum. From an administrative point of view it was certainly too fast. Our real difficulty was to build a (multi-ethnic) civil service according to our standards in a place where corruption always has prevailed. (quoted in DANIDA, 2004:72).
One of the UN officials interviewed during fieldwork also argued that the period of international supervision should have been longer [IU3]. However, a Kosovo-based research group has suggested that
there is an argument to be made that local authorities should have been allowed to make blunders even at the expense of their own community as freely elected
47 UNMIK continued to be responsible for administration in ethnic Serb dominated areas such as North Mitrovica.
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representatives. The UN’s position was that they should be tutored for a longer period of time under the argument that they are not mature or tolerant enough. (Kosovo Institute for Policy Research and Development, 2003:10).
Other observers have suggested that one reason for the slow transfer of authority was the reluctance of some international officials to relinquish their positions.
It was also becoming very difficult for the UN personnel to exit out of Kosovo … in the PISG, we formed the government, we recruited our counterparts, we trained them, we handed them the power, then what the hell are we doing there? I must go! But I didn't go, that's the problem. So all of us stuck onto our jobs, so that was another challenge. [IU4]
when it came to transferring, UNMIK was a little hesitant again. The SRSG had to sign a document saying that, under the law he accepts the external auditor report and the municipality is now responsible. UN staff can stay and build capacity, which they did for some time, but no longer were they in control of the bank accounts and things like that. That was hard for them. [IA13]
6.5.2 Terms and conditions: DFID’s PPP Project and Administrative Direction 2003/2
With the formation of the PISG, the JIAS Department of Public Services became the Ministry of Public Services (MPS) and a Kosovar minister was appointed by the coalition government. A Department of Civil Service Administration (DCSA) within the Ministry assumed responsibility for civil service policies, including finalising DFID’s draft Civil Service Administrative Direction and establishing the IOB. DCSA had a budget for 43 Kosovar civil service positions (UNMIK, 2002b:67-71) but, although Kosovar staff were recruited, many UN officials from the former JIAS department remained in their posts and continued to control policy development and the passage of legislation through UNMIK’s approval processes [IU3](DFID, 2003:14).
DFID’s Personnel Policies and Procedures (PPP) Project, which commenced in 2002, was designed to support the Kosovarised DCSA in finalising the Administrative Direction, implementing the Civil Service Law, and developing detailed policies and instructions for personnel managers in the PISG administration. DFID had high expectations of the project. The planning documents stated that the principal beneficiaries would be ‘the people of Kosovo who, perhaps for the first time, will have
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a Civil Service in which they can have confidence; and which is dedicated to serving the needs of the whole population’ (DFID, 2001a:8). The project was to be a ‘learning by doing’ exercise which would involve Kosovars in the design of personnel management procedures. It would also provide training to civil service personnel managers and support the Independent Oversight Board and the Senior Public Appointments Committee (DFID, 2001a). The contract was awarded to the Centre for Management and Policy Studies (CMPS), a British public sector training body, in consortium with similar German and Irish organisations and a local Kosovo NGO.
DFID’s planning for the project had noted potential risks to successful implementation, including possible delays in appointing Kosovar staff and transferring responsibilities from UNMIK (DFID, 2001a:18-19). In the event, most of the identified risks were realised. Slowness on the part of UNMIK international officials in implementing their part of the civil service development process emerged as a major issue, and the first DFID review of the project noted that these delays had had a direct impact on progress and the ultimate achievement of its goals (DFID, 2003:5). Development of the capacities of the Kosovar DCSA staff was also hampered by significant personnel changes and delays in the confirmation of appointments which meant that the staff were not able to play a part in policy development as had originally been hoped (DFID, 2003:8). The continued involvement of UN officials at senior levels of the Ministry of Public Services was also identified as an obstacle. Unlike normal technical assistance exercises, the ultimate clients, the Kosovar staff of DCSA, were only accessible to the project team through the intermediation of international UNMIK staff. DFID felt that the project team had been kept at a distance from the decision-making process on policies and procedures and questioned whether ‘there has been a positive transfer of skills and knowledge from UNMIK staff at Head of Division level and below’ (DFID, 2003:8).
In spite of these obstacles, some aspects of the PPP Project went very well and it has been commented on favourably by both international and Kosovar observers [IA9, KG5, KG10]. In particular, the activities related to developing personnel procedures and training personnel management staff seem to have been very successful. A Personnel Managers Forum was set up to debate detailed rules and procedures, and a large number of personnel managers were trained in how to apply them. A group of local trainers recruited by the project were transferred, with their training materials, to the new public
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sector training body, the Kosovo Institute for Public Administration (KIPA), at the end of the project (DFID, 2003, 2004). A review of the project in early 2003 praised efforts to ensure ownership of the personnel management procedures (DFID, 2003). Kosovar staff still working in the Department of Civil Service Administration interviewed for this research in 2010 spoke glowingly of the assistance they had received from the project’s consultants seven years earlier [KG5, KG10].
A DFID project completion review in 2004 considered the project ‘reasonably successful’. The impact of the training component had been considerable, but success in the establishment of the DCSA had been limited, and the Independent Oversight Board had still not been established at the time of the review so there was a concern that the personnel management function ‘is put under pressure in relation to political motivated nominations and appointments’ (DFID, 2004:8). The lengthy delay in progressing the Administrative Direction through both PISG and UNMIK approval processes had also been a major frustration for DFID, and for the PPP consultants. Although the Administrative Direction had been drafted at the same time as the Civil Service Law it was not approved and issued by UNMIK until January 2003, almost two years after it was proposed. The Administrative Direction (UNMIK Regulation 2003/2, 25 January 2003) set out detailed provisions on civil service eligibility, selection, contract terms, probation, promotion, work hours, leave entitlements, occupational health and safety, disciplinary processes, internal appeals, termination and retirement of civil servants. By this point, the Kosovo administration had in effect been in existence for almost three and a half years, from late 1999 to early 2003, without any formal regulations on these matters. DFID reviewers generally attributed this slow progress to failures of UNMIK officials. A senior UNMIK official was himself at a loss to explain the lack of progress on this issue.
Every country has a civil service set up and the moment we decided which one to have we just needed to adapt it to Kosovo conditions and that’s it. So the fact that it took two years to create – recruitment, conditions of service, terms of service – all the things that go with a civil service, took inordinately long. [IU1]
A possible contributing factor to slow progress on policy issues, however, may have been that the UK implementing body, CMPS, was a training organisation (now known as the National School of Government), as were most of its consortium partners. The focus of their activities was therefore on the training and mentoring aspects of the
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project, which were evidently highly successful. The project was less successful in ensuring that UN officials cooperated in enacting the relevant instruments, and in dealing with issues such as the compatibility of civil service rules with other legislation and the political acceptability of the proposed civil service model.
6.5.3 Getting to Westminster: The Senior Public Appointments Committee
The Senior Public Appointments Committee (SPAC) was considered to be an essential component of the proposed system of civil service management and an important measure for preventing the politicisation of the civil service. It’s sole purpose was to ensure merit-based and non-political selection of Permanent Secretaries and CEOs. Membership of the Committee would comprise three government ministers, including the Prime Minister and the Minister for Public Services, two appointed non-Albanian ministers, three international members appointed by the SRSG, and three ‘eminent inhabitants of Kosovo’ representing civil society, who would also be appointed by the SRSG (UNMIK Reg. 19/2001, 13 September 2001:Annex I, Part E). The elected government would thus be well and truly outnumbered on the Committee. The new government, when it was formed in early 2002, was not at all happy with the idea of the SPAC, or indeed with the concept of a ‘Permanent Secretary’, and the appointment process for senior ministry staff was one of the first issues discussed by the new Cabinet when it met (UNSC, 2002c:2).48
The drafters of the legislation had chosen a civil service design based on the British model which envisaged that Ministries would have a strong, apolitical Permanent Secretary who would run the ministry’s civil service. It soon became clear, however, that this was not the model preferred by Kosovo’s politicians who were attracted to the system found in many other jurisdictions, including the US, where senior officials are appointed by the elected government.
This model was contested from the outset as most ministers believed (not without reason) that they would encounter difficulties in gaining full control over their ministries. Moreover, Kosovo’s political culture is similar to those of
48 I was an observer at one Cabinet meeting at which Ministers from all the coalition partners were essentially of the same view. They all complained bitterly about the appointment of Permanent Secretaries and blamed the international officials, especially the UN head of DCSA and the SRSG, for imposing this process on them.
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its neighbours, where every change in government results in substantial purges in the patronage built civil service. Unfortunately, this culture proved stronger than all well meaning attempts to build sustainable institutions (Wittkowsky, 2009:32).
some of the politicians thought that, no, when there’s a change really they want their own person, so this created a problem. [IU1]
The SPAC started work in 2002, closely monitored by international officials, but achieving the hoped for apolitical appointments proved difficult. By October 2002 only five of the 11 Permanent Secretary posts had been recruited (UNSC, 2002a). The slow pace of appointments was partly due to Ministers refusing to accept the candidates selected by the committee.
Sometimes this did not work very well. You had people bringing in Permanent Secretaries that were sometimes possibly not qualified, who came in for political reasons … so there was always a problem. Sometimes the minister did not want somebody, or if there was a change of minister he wanted a change, so there was sometimes, you know, without due process sackings and so on. [IU1]
A UNDP assessment of administrative capacity conducted in 2005 noted that
a fully merit-based selection proved impossible to achieve. In reality, politics continues to interfere when recruiting senior executives and Permanent Secretaries (UNDP, 2005a:46).
The report concluded, however, that in spite of concerns about politicisation, most senior positions seemed to be staffed with qualified individuals and therefore proposed full Kosovarisation of the SPAC, with international officials only as observers, and an alternative model which would allow the final decision among selected qualified candidates to be made by the relevant Minister (UNDP, 2005a:46).
6.5.4 A guarantee of fair treatment: the Independent Oversight Board
It was hoped that the evident problem of politicisation of the civil service would, in part, be countered by the proposed establishment of the Independent Oversight Board (IOB) (UNSC, 2003b). The IOB, created by the UNMIK Civil Service Regulation in December 2001, was intended to protect civil servants from unfair treatment. It was to hear appeals against employment decisions, review middle management appointments,
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and assess general compliance with the principles set out in the legislation. It would also have the power to seek remedies for successful complaints and to inspect the employment records and procedures of ministries. The Board’s seven members were to be selected by the SRSG in consultation with the Prime Minister, and at least two members were to be non-Albanian. One international member was to serve on the Board for the first year. Establishing the IOB was, however, a very slow process. The appointment of staff for the Board’s secretariat was not completed until October 2003, almost two years after the regulation that created it had been approved. The appointment of the seven Board members took even longer and was somewhat confused.
The expressions of interest were published and said it was a voluntary job, which meant it was not paid, and in the middle of the recruitment process they decided this didn’t make sense …. but by then the applications were received and the fact that it was a non paid job determined the quality of the applications. We don’t want to be too conspirative that this was done on purpose, but the end result was not really the best and not anyone, the EU and DFID and the World Bank, was putting a lot of hope on the IOB. In the end we got a quite weak institution to be quite honest. [KD4]
DFID staff attributed the delays and confusion to the UN officials who were still the dominant players in the Ministry of Public Services. In 2003, for example, DFID noted that ‘although obstacles to its establishment have been addressed, there has been no progress by UNMIK in making appointments to the IOB’ (DFID, 2003:6). Further delays in the appointment of IOB members after they were nominated by the Ministry of Public Services were blamed on Pillar II procedures and delays in the SRSG’s office (DFID, 2004:7). The failure by UNMIK to establish the IOB was considered by DFID to be a serious obstacle to creating an apolitical, merit-based civil service.
The number of appeal cases is mounting, covering issues such as sexual harassment, extreme political interference and enforced embezzlement. ….the delay in setting up the IOB means that civil servants can see that a major element of the guarantee of their fair treatment is still missing (DFID, 2003:6).
All IOB members were finally recruited in October 2004 (UNDP, 2005a:47), however the Board did not start hearing appeals until 2006. In its first year it resolved 129 cases and in 2007 increased this to 386 (OSCE, 2008:para14). It had been intended that DFID’s PPP Project would train the IOB members, but by this time the consultant team
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had been disbanded [KD4]. The OSCE therefore took over the role of developing the professional capacities of the Board and its secretariat, appointing the international member for the first year and organising training courses and study tours to the United Kingdom and Canada to observe similar Westminster-based civil service appeals systems in operation (OSCE, 2008).
Well before its eventual establishment, however, there were criticisms of the IOB’s legal basis and structure. A UNDP assessment in 2005, for example, noted that the IOB did not have instruments to ensure that its decisions were implemented and that there was an apparent overlap between the functions of the IOB and the DCSA: both bodies claimed the right to carry out inspections of the implementation of the Civil Service Law, but neither had sufficient staff to actually carry out such inspections (UNDP, 2005a:47). The major issues, however, were doubts about the legal viability of the IOB in Kosovo’s civil law system, and concerns about its independence. The IOB regulation was based on a common law model but independent appeals bodies of this kind are not common in European civil law jurisdictions (UNDP, 2005a:47). A DFID review of its role in developing the civil service framework acknowledged that concerns had been raised about the position of the IOB in Kosovo’s civil law system, however, the use of a common law based institution was considered justified by the urgent need to operationalise the Kosovo civil service (DFID, 2004:6).
Opinion was also divided on the issue of the IOB’s independence. The Board was located in the Ministry of Public Services and its staffing and budget were controlled by the Ministry. There was a view that this lack of organisational independence also implied a lack of independence in decision making (DFID, 2004:7; OSCE, 2008). The Civil Service Law had envisaged that the IOB’s status would be reviewed after two years with a view to making it an autonomous body reporting to the Assembly, however, given the lengthy delays in simply establishing the Board, this had not been done. Not all observers considered that making the Board responsible to the Assembly would be a good idea. UNDP’s 2005 assessment argued that this might seriously politicise it. Under the principle of separation of powers, civil service management is the responsibility of the government and it would be more appropriate for the government to report to the Assembly on the operation of the IOB (UNDP, 2005a:47). However, most opinion supported the idea of placing the IOB under the Assembly (OSCE, 2008) and in February 2008 the Civil Service Law was amended to make the
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IOB an independent body. Since the passage of the new Civil Service Law in 2010, the IOB is under separate legislation (No. 03/L-192, 15 July 2010) which makes it a body appointed by and reporting to the Assembly of Kosovo.
6.5.5 Civil Service Salaries
There had been no nominal growth in the average level of public sector salaries in the 2001 and 2002 budgets so the newly elected PISG government was under pressure to increase wages, and also needed to recruit more staff for the new Ministries (Early Warning Report, 2002b:1). The level of remuneration appropriate for the civil service has continued to be a source of disagreement between civil servants, the government and international actors. Public sector wages at the time ranged from €131 to €191 per month.49 The lowest average wages were in healthcare (€134) and education (€140) and it was argued that workers in these sectors needed to engage in additional employment to achieve a basic standard of living (Early Warning Report, 2002a:7-8). The CFA noted, however, that wages in Kosovo were already higher than in most other countries of the region: in Albania, Serbia, Moldova and Ukraine the average monthly wage was below €100 and in Macedonia, Bulgaria and Romania it was around €150 (UNMIK, 2002b:33).
The PISG government, in compliance with recommendations of the IMF and World Bank, committed itself to restraint in public sector salary expenditure (UNMIK, 2002a:25), but civil service salaries became an increasingly political issue. In July 2003, the government offered a 20 per cent increase for staff in health and education, and proposed a recruitment freeze for the remainder of the year to cover the cost (UNSC, 2003b:para 6). Education and health workers considered the proposed 20 per cent increase inadequate, however, and threatened to strike. There was noticeable tension on this issue among other public sector employees, and all respondents to the Early Warning opinion poll rated this as a significant problem facing Kosovo (Early Warning Report, 2003b:28-29). In January 2004, the government implemented a further five per cent increase to all salaries (HELM and PAI, 2004:4). International observers were also concerned about the inability of the PISG Ministry of Public Services to control salary spending and employment levels. There was evidence that some wage expenditures
49 Average wages in the wider economy, reported by the Kosovo Statistical Office, were around €200 per month.
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were paid from non-salary budget lines, and that there was ‘wage creep’ as a result of promotion of staff to higher pay brackets in lieu of salary increases (World Bank, 2002b:38-39). In 2003, therefore, EAR launched a project intended to address this issue.
6.5.6 EU Pay and Grading project 2004-2005
Civil service salaries under the PISG were still based on the simple pay scale first introduced in the 2000 budget as a temporary measure. As the civil service developed, however, the system had been subject to ad hoc modifications leading to a far more complex arrangement with widespread manipulation. New categories of staff, such as judges and Permanent Secretaries, had been included, and intermediate coefficients introduced to make finer distinctions between the original seven grades [KG10]. By 2003 there were 69 different salary points and more than 1200 job designations with no clear rules for deciding the appropriate pay rate for each position. Many of the modifications may have been aimed simply at increasing an individual’s salary rather than reflecting a real difference in responsibilities. Previous government decisions to increase the lowest salaries meant that the ratio of the lowest to highest salary was extremely low by international standards,50 there was still no possibility of salary progression within a given job level based on experience or length of employment, and no consistent policy on allowances or non-monetary benefits such as cars and mobile phones (World Bank, 2002b:35; HELM and PAI, 2004:12-14).
The DCSA was nominally responsible for the application of pay policy but in practice the absence of a set of well defined rules and standard job descriptions made it difficult to ensure consistency across the civil service.
This gave a chance to every ministry to deal with it as they wanted to in the absence of these documents and regulations. As a consequence they formed hundreds of new positions that were at different salary levels. For the same job people were paid differently, because there was no regulation, no law, no instruction, just that piece of paper [KG4]
A clear distribution of official duties and authorities within a standardised, hierarchical structure is regarded as one of the essential characteristics of a traditional public sector
50 Based on official pay rates, the salary compression ratio was 4, which is at the lower end of the international range of 3.1 to 20.
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bureaucracy, so bringing some order into the civil service grade system had been identified by donors as a priority (UNMIK, 2002a:20; World Bank, 2002b:39). In 2003, EAR contracted two consulting firms to develop a uniform salary and grading system for civil servants (European Agency for Reconstruction, 2008a). Reviewing the existing salary arrangements for this purpose proved to be much more difficult than had been envisaged. Ministries were slow to respond to requests for information and it became clear that many civil service staff did not have formal job descriptions that could be reviewed. In addition, the civil servants in DCSA who had been expected to work with the international consultants on the process had other work commitments so the consultants found themselves doing most of the data collection and analysis. This also meant that the DSCA staff were not familiar with the proposed new system which they would subsequently be responsible for implementing (HELM and PAI, 2004:10-11).
A report recommending new pay and grading arrangements was finalised in February 2004. The new system was considerably more complex than the original UNMIK seven grade scheme. It grouped jobs into three categories and four salary grades under five work/career streams requiring different qualifications. In addition there were salary steps within each grade allowing salary progression based on performance evaluation. The gap between the highest and lowest salaries was increased to provide better rewards for those in senior positions. The consultants’ report described the system as a modern approach consistent with European practice which would address many of the problems in the current situation, if it was implemented consistently, but the report also noted that a major program of work would be required to put the new arrangements in place. Each existing civil service position would need to be reviewed against the new job descriptions and reclassified, and incumbent staff would need to demonstrate that they met the qualifications required for their reclassified position. The consultants foresaw risks in this process: poor implementation could result in transferring the problems of the existing system into the new arrangements (HELM and PAI, 2004:35).
In the event, however, the risks were avoided because the revised pay and grading structure was not implemented. The new system was originally expected to start from 1 January 2005. An initial exercise in matching existing staff with the appropriate new grade and pay range was undertaken in late 2004 but produced many irregularities and a high degree of grade inflation. Poor fiscal results in 2004, and concern about the effectiveness of the first re-grading attempts, led the government to defer
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implementation to July 2005 (European Agency for Reconstruction, 2005a:22; World Bank, 2005:21), already a considerable time after the consultants had completed their work, but this new target was also not achieved and the exercise was eventually postponed indefinitely. Many Kosovars interviewed for this research cited the EAR Pay and Grading project as a prime example of donor failure and waste of resources [KG2, KG3; KG1].
It was a complete failure. The project was late and whatever was drafted was impossible to implement. People were trained and instructions were issued and when they were supposed to start implementation they said there was no money in the budget. [KG3]
The most common reason cited for the failure of the project was the expected fiscal impact. A senior MFE official complained that the consultants ‘never looked at the budget, just worked on some system which at the end of the day we see it is not possible to apply’ [KG1]. The consultants had estimated a five per cent increase in the total payroll amount under the new system, but had also proposed a transitional adjustment period which would add to the cost. The World Bank argued that introduction of the new structure should be dependent on more analysis of the fiscal implications (World Bank, 2004b:12). The IMF shared this concern [IA9]. It was anticipated that, when the grading of posts was carried out, institutions would push the grades to the highest level they could, and the DCSA was not considered powerful enough to counter this [IA9]. The EAR did not provide follow-on funding for implementing the system, and the capacity within DCSA to support the implementation process was low (UNDP, 2005a:9)[IA9]. Added to this was the potential political reaction to the new salary classifications.
We know there is going to be quite a lot of problems because those that have been upgraded need now to be graded at their level. If this was implemented people who were upgraded initially would have to be back to their normal grade and for them that would be a downgrading. So we have foreseen a grace period of one year. This was discussed and discussed and discussed and approved by the government and implementation started. Then people started complaining. … there was no commitment from the government to take it to the end. They were afraid of social unrest because salaries were anyway low, if you decrease them it is even worse. [KA3]
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Political differences within the coalition government were also a factor
The DCSA and the MPA were not really controlling things, … and the link between MPA and MFE was not strong enough and they wouldn’t really talk to each other because they were different parties. [IA9]
6.6 The Civil Service after 2005
6.6.1 Capacity development and public administration reform
From around 2005, UNMIK’s executive role was reduced to the point where it was no longer possible simply to blame the UN for problems in the management of the civil service, as had been common in the previous period. The PISG government was now clearly responsible for most public administration functions. International organisations still had significant influence, however. The ‘Standards for Kosovo’, as a precondition for final status discussions, replaced direct UNMIK oversight as the main mechanism for ensuring compliance with the demands of international actors, and the European Commission began tracking implementation of the ‘Standards’ in annual progress reports (European Commission, 2005b). Significant improvement in the quality of public administration was among the targets set for future independence and possible EU membership. Although Kosovo’s public sector institutions had been in existence only a few years, and had been established under international supervision, they did not meet donor expectations in relation to structure or performance.
Ideas about capacity development, drawn from the field of development assistance, appeared increasingly in donor reports. The first significant discussion of public administration capacity was a ‘situational analysis and strategy discussion paper’ prepared by the UN Department of Economic and Social Affairs (UNDESA), at the request of UNMIK (UNDESA, 2003). The report is typical of the capacity development literature in that it argued that Kosovo ‘requires transformational change from the earlier mode of administration’ (ibid:viii), and used a three-level capacity building framework: enabling environment; institution building; and human resources development. It assessed the strengths and weaknesses of the Kosovo public administration at that time and made a large number of recommendations on public administration development. These included reviewing and strengthening the existing legal framework for the civil service (although at the time the main legal instrument, the
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Administrative Direction on the civil service, had only recently been promulgated), enacting new laws to deter corruption, establishing the proposed Independent Oversight Board, harmonising the ‘structural taxonomy’ of ministries, rationalising job classifications, stronger minority representation, improved policy coordination, staff performance appraisal, wage decompression, implementation of a personnel information system, and developing the capacities of the DCSA, as well as exploring modern public administration innovations such as citizens’ charters, service standards, performance contracts, and contracting out the delivery of government services. Several of the tasks identified in the report were already included in the terms of reference of donor projects then underway or about to commence.51 The report praised what the UN had achieved so far but argued that:
A public sector transformation on the scale required in Kosovo will take time and demand patience and perseverance as well as clarity of vision, strong sense of direction and committed and consistent leadership and a significant amount of resources. (UNDESA, 2003:viii)
Although there have been repeated efforts over the following years to formulate a vision and sense of direction for the public sector, the last two ingredients – leadership and resources – were largely missing.
The ‘Standards for Kosovo Implementation Plan’ (KSIP), developed by UNMIK in 2004, included several of the initiatives from the UNDESA report as specific actions to be taken by the PISG as a precondition for negotiations on ‘final status’ (UNMIK, 2004b), and a draft Public Administration Strategy was therefore drafted and issued jointly by UNMIK and the PISG in mid-2004 (UNMIK/PISG, 2004). Efforts to implement the strategy made little progress, however. This was attributed by the UN to the capacity limitations of Kosovo’s provisional government (UN General Assembly, 2005:5). In 2005, as UNMIK prepared for talks on Kosovo’s final status, another assessment of the capacity of the public administration was commissioned by the SRSG. The ‘KCAP’ report, prepared by UNDP and financed by the European Commission, documented the existing management ability of the Kosovo
51 The DFID PPP Project to support DCSA had commenced in 2002 and the EAR Pay and Grading Review started in 2003. A DFID project on policy coordination in the Office of the Prime Minister started in 2004.
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administration compared to what would be needed for an autonomous government (UNDP, 2005a). The authors argued that, for Kosovo,
the relevant question at this time is not the gap between the current situation and an ideal world, but the gap between the current situation and some reasonable state of affairs that would allow Kosovo to operate adequately as a self administering entity (UNDP, 2005a:7).
The report, presented to a donor conference in Pristina in May 2005, covered similar ground to the previous UNDESA document, identifying similar weaknesses, and making similar recommendations. In late 2005, the government prepared a ‘Capacity Building Action Plan’ aimed at securing technical assistance from donors to implement the KCAP recommendations. According to government accounts, however, this effort was not very successful because it was prepared under pressure from UNMIK and lacked government ownership (Government of Kosovo, 2007a:12).
Shortly afterwards, however, the PISG Ministry of Public Services decided to prepare its own Public Administration Reform Strategy. In 2006, MPS established a Group of Experts for Reform of Public Administration (GERAP) with members from the government, civil society, and international organisations. DFID, the World Bank and SIGMA each funded short-term experts to provide support and advice. According to a DFID representative, DFID saw GERAP as a promising ‘home grown’ initiative and decided ‘regardless of how weak the strategy is, we will support it’ [KD4]. Progress was slow, however, possibly due to changes in government leadership and staffing [KD4]. In 2007, MPS eventually released three documents: a Report from the GERAP committee, a Public Administration Reform Strategy, and an Action Plan for Public Administration Reform (Government of Kosovo, 2007a, 2007b, 2009). The GERAP report was another analysis of the strengths and weaknesses of public administration in Kosovo covering much the same topics as previous reports. It argued that the development of public administration in Kosovo had lagged behind progress in other countries in the region due to the difficult socio-economic situation and political heritage, low capacity, and the fragmented actions of local and international organisations, as well as the limited amounts of technical assistance and training provided (Government of Kosovo, 2007a:5). Some of the priority actions identified in the Reform Strategy included familiar issues: drafting basic legislation including a new civil service law, changes to the system of salary grades, a strategy for training civil
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servants, reviews of the structure of all institutions, improved policy coordination, and harmonisation with EU standards.
Between the UNDESA report, the Standards for Kosovo Implementation Plan, the KCAP assessment, and the GERAP reports, the weaknesses in Kosovo’s public administration, and the actions required to address them, had been very well documented. Achieving the necessary changes, however, has been much harder. In March 2007, the Kosovo government set up an inter-ministerial committee to coordinate implementation at the political level. An inter-institutional working level group and six subgroups were also established. Up to the end of 2007, however, the working group had only met once (European Agency for Reconstruction, 2008b:44). The Reform Action Plan has been reviewed and updated several times since 2007. In 2010 the European Commission estimated that, despite the passage of several important pieces of civil service legislation during the year, only one third of the reform strategy had so far been implemented (European Commission, 2010b:8). Subsequent assessments continue to note limited progress on implementing the strategy (European Commission, 2011b:9; 2012:7).
6.6.2 FunctionalReviewsandDFID’sFRIDOMproject2008-2010
One of the recommendations of the Public Administration Reform Strategy that has been implemented, with donor support, is in effect another major review. Although the PISG ministries and agencies had each been created by UNMIK, their subsequent development had been uncoordinated. The lack of legislation to regulate staffing structures and the inability of the DCSA to enforce civil service regulations, as well as the different approaches to civil service management taken by the many international advisers and donors in different ministries, were all considered to have contributed to an excessively complex, opaque and inefficient institutional structure [IU4, ECLO, KA3, KG3]. Both the UNDP KCAP exercise in 2005, and the GERAP reports, had therefore recommended conducting functional reviews of all government bodies (UNDP, 2005a:10; Government of Kosovo, 2007a:17). The reviews were expected to result in an agreed structure, personnel numbers and grades, skills, and job descriptions for all government bodies, and to address duplication of duties and ambiguities in terminology which made it ‘very difficult to understand who is who, who is responsible for what and who is doing what in an institution’ (Government of Kosovo, 2007a:23).
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DFID funded the reviews through the ‘Functional Review of Institutional Design of Ministries’ project, referred to as FRIDOM, which started in early 2008 with a total budget of £2.8 million. The project was one of the largest functional review programs ever designed in Europe and made the reviews the centrepiece of Kosovo’s public administration reform strategy (DFID, 2010b:4). The objective was that all 16 Kosovo Ministries and their subordinate agencies would have agreed fiscally sustainable restructuring plans (DFID, 2011). As with many DFID projects it was a ‘design and implement’ exercise. The successful consortium of British, Latvian, Slovak and Spanish consultants proposed 16 vertical reviews of ministries and 14 horizontal reviews of administration functions, as well as a Whole of Government Review. This was described as an ‘ambitious program’ [KD4]. The reviews compared Kosovo’s ‘organisational solutions’ with those of small EU states of a comparable size and with similar coalition political systems, and made suggestions about rationalising and restructuring the government, many of which had already been raised in previous assessments (FRIDOM, 2008).
A DFID annual evaluation of the project in March 2009 found that the project design and the timeframe had been ‘wildly optimistic’, and concluded that the reviews could not possibly be delivered. The project did, however, complete the full set of vertical reviews but a request for a one year extension (DFID, 2010b:19) was not approved and the project concluded in early 2010. In interviews in late 2010, doubts were expressed about whether the recommendations made by the project would be implemented [KG4]. The project completion report, prepared for DFID in 2010, concluded that, ‘with the benefit of hindsight, the project should never have proceeded as designed’. The approach taken ‘inferred a pace of reform and sophistication of decision-making that will not exist in Kosovo for many years’ (DFID, 2010b:12).
6.7 The Civil Service since Independence
There has been some progress in reforming the framework for managing the Kosovo Civil Service in the years since the declaration of independence in early 2008. Several proposals of previous reviews have been acted on, including changing the name of the Ministry of Public Services to the Ministry of Public Administration, and creating a separate office in the Ministry to deal with public administration reform. In 2010 major new legislation relating to the civil service was approved.
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6.7.1 The new Civil Service Law 2010
It had been a struggle to get the original 2001 UNMIK Civil Service Regulation and the associated 2003 Administrative Direction enacted, but the arrangements they put in place were not considered optimal. The two major criticisms related, firstly, to the use of a British common law approach and a Westminster based civil service model rather than a European civil law approach, and secondly, to the fact that government staff were employed on short-term contracts rather than being permanent career civil servants. One of the British consultants agreed that the use of a common law model had been a significant problem.
… it wasn’t done in the Yugoslav legal tradition. It was kind of ‘regulation Britain’. Each consultant was doing, to me, a perfectly good job in their own right and from an HR point of view it was a perfectly good system, but it wasn’t written in the legal framework that is an absolute necessity in this part of the world. It was more Anglo Saxon. [IA9]
DFID officials were aware of this criticism but downplayed its importance.
… we are concerned that the apparent perception of the KCSL, AD and supporting procedures as reflecting British concepts too much at the expense of a more European approach should not be allowed to undermine the necessary commitment to the basic concepts embodied in them. (DFID, 2003:14)
The Civil Service Law provided for staff to be appointed on three year, renewable contracts, a consequence of the reluctance of international officials to commit any future regime to open-ended employment contracts. It appears, however, that many contracts were in fact much shorter than three years, with one year contracts being common [KA3]. There are arguments for and against a permanent civil service and this is one of the issues on which the views of some international advisers differed. Greater job security is usually seen as necessary to protect civil servants from political pressures, and to compensate for public sector pay that is below private sector levels (World Bank, 2002b:38). Contracts of limited duration, extended by superiors, potentially allow politicisation and discrimination, as well as limiting opportunities for career development (UNDP, 2005a:51). As one interviewee put it:
If you don’t like the person, you can just get them out and then you get someone that you like. [KA3]
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One international adviser argued, however, that there is a balance to be struck between the need for civil servants to be protected and the need for efficiency.
Tenure tends to mean that you get stuck with the suboptimal people because you have no way of getting rid of them but the people who are going to move on will move on anyway .. but what you’re doing is generating a cadre of underperformers. [IA3]
The Kosovo government opted to create a traditional permanent civil service, but there were considerable delays in implementing the policy. The MPS had started drawing up a new civil service law in 2005 and had prepared several drafts, but a proposed law was not submitted to the government for consideration until 2007. Elections and changes of government sent it back for redrafting several times [KG4]. The new Civil Service Law was eventually finalised and passed by the Assembly in 2010 (No 03/L-149, 13 May 2010). Assistance in drafting the law had been provided by SIGMA and the DFID FRIDOM project but, according to one observer, local officials played a much larger role in this drafting exercise than they had in the preparation of previous versions [KD4]. The new law replaces the contract system with permanent civil service employment, career progression within functional categories, and internal mobility. Senior positions must be filled from the pool of existing civil servants wherever possible rather than through open advertisement. The rights and duties of civil servants are extensively described, the latter including clear prohibitions on illegal or corrupt acts. The legislation also envisages stricter controls on recruitment and a stronger role for the Ministry of Public Administration in approving staffing plans. New recruitment procedures include a written test but, according to a senior civil servant, this will only apply to new recruitment because ‘if all the existing staff were to undertake these new procedures, it’s certain many of them would fail most likely’ [KG4]. The new Civil Service Law only applies to around 16,000 staff in purely administrative roles, with teachers, health workers and ‘uniformed services’ such as the police to be covered by separate laws.52 The centralised SPAC for senior appointments no longer exists. In its place individual assessment commissions, including external representatives, are to be
52 Law No. 04/L–032 On Pre-University Education in the Republic Of Kosovo, approved in September 2011, for example, provides for conditions of employment and salaries for education staff to be set out in bylaws.
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established for each senior level vacancy and will refer the three best candidates to the ‘head of the institution’ for final decision.
6.7.2 The Law on Salaries of Civil Servants 2010
Also in 2010, a new Law on Salaries of Civil Servants (No 03/L-147, 13 May 2010) was passed by the Assembly, finally replacing the two page memorandum that had been the basis for civil service pay arrangements since 2000. The law was drafted with assistance from DFID-funded consultants, including some who were involved in the previous EAR Pay and Grading project in 2003, and revives some of the work done at that time. It sets out the criteria for classifying jobs to grades based on responsibility, complexity and qualifications required, provides for progress through salary steps within each grade based on performance appraisal, and specifies policies on allowances, leave entitlements and reimbursement of expenses. The DCSA is to be responsible for issuing standards and procedures for job classification, approving the grades proposed for each position in the civil service, approving annual salary progression and setting rules for allowances, leave and expenses. In late 2010, however, there was considerable scepticism, including among some of those directly involved, about the ability of the Ministry of Public Administration to complete the work required to implement the law.
We have this very busy period in front of us. It is going to be very challenging, drafting secondary legislation and implementing these two laws, and training of staff who are going to be implementing these two laws. [KG5]
I don’t see the steps from the MPA. I don’t see the steps which tell me that from 2011 they will be in a position to apply this in a good way. [KG1]
The new salary law will face many difficulties in the implementation stage due to lack of budget and lack of harmonization with the IMF and the WB in relation to fiscal policies on the size of the salary budget. The IMF and the World Bank will not allow it to be implemented. [KG3]
A recent assessment by SIGMA suggests that these misgivings were well founded (SIGMA, 2012:7-9). Up to March 2012 there had been limited progress in the implementation of the Law on Salaries in the Civil Service, although most staff are now on open-ended appointment letters rather than short-term contracts, and all senior officials have been confirmed in their positions using the new procedures. The Ministry of Public Administration itself is subject to the same deficits in staff skills,
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qualifications and motivations that have been reported in the civil service more widely, making the implementation of complex civil service reforms a challenge.
Progress on salary reform is also hampered by concerns that job losses or salary reductions from the proposed changes could be economically and politically destabilising.
I have the impression that they’re afraid. Because it has a lot of consequences, quite serious repercussions of the reforms … despite the fact that the EC is insisting on reforms there is no support. [KA3]
I think the will is not there even from the international side. They did never want to invest much in public administration reform and I think it is just because international organisations have other priorities rather than going through a process which can be very painful and which Kosovo cannot afford for various reasons economically, financially but also politically. [ID1]
Concerns about peace and political stability thus continue to influence attempts to provide Kosovo with an effective public administration.
6.8 Public Administration Outcomes
It is difficult to find positive assessments of the current state of public administration in Kosovo. Although recent EU progress reports provide a picture of rapid and accelerating development in the competence and organisation of the Kosovo government in the years since independence, they also list many serious issues still to be addressed. The Ministry of Public Administration has produced new civil service laws and issued public sector reform strategies and capacity development plans, but the new laws still need to be implemented through subsidiary rules and instructions, reforms are not properly budgeted for, the various strategic development plans are not being properly implemented, the responsible departments within MPA lack adequate resources, and most of the decisions of the IOB are not executed by the relevant public institutions. The Ombudsperson institution, which handles complaints from the public about government services, also lacks political support and adequate resources. Overall, EU reports conclude that the capacity of Kosovo’s public administration remains weak and that public administration reform in Kosovo is still a major challenge (European Commission, 2010b:8; 2011b:9; 2012:7). Comments by both Kosovar and international
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interviewees in the course of fieldwork in 2010 echoed the EU’s negative assessments, one describing the civil service as a ‘disaster’ and a ‘black hole in Kosovo’s public administration’ [ID1]. Low productivity, lack of responsibility or accountability, and an attitude that public sector employment is a form of social welfare were mentioned by several people. Continuing inequities and lack of transparency in rates of pay and job classifications due to the absence of effective control over civil service recruitment and wages was also identified as a problem [KG1, IA9, KG4]. The most serious criticisms concerned political interference, nepotism and corruption within the administration and attempts by politicians to intervene in civil service appointments [KG4, ID1]. The following sections identify the major criticisms of the Kosovo civil service and assess their validity.
6.8.1 Civil service size and cost
Assessments of public sector performance in developing countries usually start with measures of the size of the civil service and the cost of public sector salaries: a poor performing government is indicated by a bloated civil service whose salaries are a drain on public finances. In Kosovo, however, donors, advisers and the government have found it difficult to agree on the number of civil servants that would be appropriate and the salary levels that would be acceptable. The UN’s expansive public sector employment policy immediately after the conflict raised fears that an excessively large civil service was being created. This did not, however, appear to be demonstrated by the data available at the time. The budget prepared for the 2000 financial year committed Kosovo to having ‘a lean and productive public sector workforce’ and provided funding for around 57,000 staff (UNMIK/European Union, 1999:1). This was many fewer than the Serb government had employed under their administration (Dixon, 1999b), and the World Bank suggested that it was very lean by the standards of the region, representing only about 2.5 per cent of the population (World Bank, 1999b:17). Comparative measures of the size of the Kosovo public sector were confusing, however, due to the unusual structure of the economy. The Kosovo administration employed slightly fewer people per capita compared with regional economies, but because of Kosovo’s high unemployment rate, low labour participation, and high levels of informal economic activity, public sector employment was several times higher as a share of total employment (World Bank, 2002b:34). The debate has also been complicated by conflicting perceptions of the size of the civil service. Many people interviewed in
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2010, both internationals and Kosovars, considered the current number of civil servants excessive:
You know it is a huge bubble in Kosovo. They employ I don’t know how many people, thousands and thousands, so it is really big for a place which has less than two million people. [ID1]
We have seen extension of civil service in size booming from year to year. …. First, every politician that came there as Minister hired his own relative or his own friends, he provided a job for them. Secondly, UNMIK didn’t care as long as there was peace. And employing more people means less people unemployed, less poverty, more quiet, nice, that’s it. … and we ended up with an enormous civil service. [KD2]
Budget documents, however, show the number of approved positions to be relatively stable in recent years, and still relatively low as a proportion of the population, as illustrated in Figure 6.1.
Figure 6 .1 Budgeted Civil Service Employment Numbers 2000-2010
Total Employee Numbers in the Annual Budget (Central Government, Reserved Powers and Municipalities)
78,673 77,404 76,493 76,717 75,301 75,885 77,500 67,676 57,409 57,711 55,390
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Annual UNMIK Budget Regulations 1999 - 2008 (www.unmikonline.org); Kosovo Government Budget Laws 2008-2010 (http://www.gazetazyrtare.com)
There is also disagreement over whether salaries for civil servants are sufficient or should be increased. Before the PISG was established, the CFA kept civil service wage levels low. Nevertheless, the IMF argued in 2001 that public sector wages in Kosovo were high when compared to those in other transition economies and in the rest of the former Yugoslavia. Only Bosnia and Herzegovina, also a post conflict territory under
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international supervision, had higher average public sector salaries measured as a percentage of GDP (IMF, 2001b:11). Since then the IMF, the World Bank and other donors have consistently exhorted the government to restrain growth in the salary budget, and public sector wage restraint is a component of the government’s current agreement with the IMF on fiscal policies (IMF, 2011:30).
On the other hand, there is concern that that low public sector salaries contribute to the loss of qualified civil servants and thus undermine performance. Ironically, the gradual development of the private sector, a primary goal of donors, has attracted well qualified civil servants to better opportunities and higher salaries, particularly in the banking sector (Early Warning Report, 2006b:19)[IA15]. The international organisations themselves have also frequently been accused of causing ‘brain drain’ from the government sector by paying high salaries to their locally recruited staff (Seale, 2000:4; ICG, 2001:12; DANIDA, 2004:28; Narten, 2008:259). Senior Kosovo government officials interviewed for this research in 2010 saw low salaries as a major problem in retaining staff [KG1, KG2, KG3, KG7, KG8] and some international advisers also expressed concern about the impact on morale and work effort.
Morale has declined a lot. People are grateful to have a job … but given the responsibilities and the pressures and the long hours some people work, it’s not enough. [IA10]
One can argue that with 40 per cent unemployment you should be happy with a job that pays €100 a month, but I guess what I’m saying is that my guts tell me that there’s a certain critical mass of money that you have to make before you just show up and sleep at your desk and go home. [IA4]
Estimated average monthly public sector salaries have more than doubled in the period from 2000 to 2010, as shown in Figure 6.2, although, as can be seen from the graph, some of this increase in the average may be due to increases in the numbers of senior positions in the administration when responsibilities were transferred from UNMIK to the PISG in 2002-2003, and when new institutions were established after independence in 2008. It may not indicate large increases for the majority of civil servants. The evidence on public sector size and cost is thus unclear. There is no agreement on whether the public sector is too large in relation to the functions it is expected to perform, or that salaries are too generous.
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Figure 6 .2 Budgeted Average Salaries 2000-2010
Estimated Average Monthly Salaries (Euro) (Central Government, Reserved Powers and Municipalities) 350 300 250 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Annual UNMIK Budget Regulations 1999 - 2008 (www.unmikonline.org); Kosovo Government Budget Laws 2008-2010 (http://www.gazetazyrtare.com)
6.8.2 Productivity and efficiency
While it is not clear whether the Kosovo civil service is either bloated or unnecessarily expensive, there are definite concerns about its effectiveness and competence. The weak authority of the civil service administration function is reflected in irregularities in recruitment and poor performance. Many staff do not have the necessary skills for their jobs and are not productively and efficiently employed. The World Bank noted in 2005 that:
Slapdash enforcement of the recruitment procedures specified in the civil service law has resulted in some positions being filled by under-qualified staff. A significant part of the wage bill is said to be wasted on overstaffing, particularly in the municipalities and in support positions in the Health Ministry. (World Bank, 2005:21)
Comments by a senior MPA official interviewed in 2010 suggest these problems continue.
They will hire people with no experience at all. All day long they stay in their offices, drink coffee, surf the internet, because they don’t have any relevant experience, and this is impacting on the processes of all other institutions and because of this we have stagnation of these processes for other institutions as well. [KG4]
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One interviewee saw the ‘FRIDOM’ functional reviews sponsored by DFID as a strategy for addressing this politically sensitive issue.
When you go into specific job descriptions you will find that a lot of people don't do anything, but they are part of the civil service. What this means is that they will either have to revise their job descriptions to do something, or they will be sacked. No other option available. [KA3]
6.8.3 Lack of basic legal frameworks, rules and procedures
One of the glaring failures in the development of public administration in Kosovo in 2010 was the continuing absence, a decade after the start of the process, of a complete legal framework for public employment and remuneration, and effective processes for managing the civil service. As noted above, although new laws were passed in 2010, full implementation has been slow. There has also been no system in place for monitoring civil service employment and salary payments, equivalent to the budget and expenditure control systems established in MFE, so neither the MFE nor the Ministry of Public Administration know with certainty how many civil servants there are, what they do or how much they are paid. Payroll management by government agencies was not considered to be efficient or transparent, and actual employee numbers may not have complied with approved limits (Ministry of Finance and Economy, 2007b:35-36; 2009:44-45).53 The Auditor General has identified irregularities in civil service salary payments and also noted that recruitment procedures and selection criteria are not adhered to and personnel files are not kept up to date with required information on job descriptions, employment contracts and appraisal reports (Office of the Auditor General, 2011:28-30).
6.8.4 Politicisation
When the JIAS administrative departments were established in early 2000, the right to nominate national Co-Heads to manage them was divided between the leading political factions (UNSC, 2000). It is perhaps not surprising, therefore, that there was an
53 An OAG audit of the 2006 budget, for example, found that approximately €23 million, equivalent to 12 per cent of the official salary budget, was paid to employees outside the centralised payroll system through various goods and services contracts and honorariums (Office of the Auditor General, 2007:58). In a more recent audit, six budget entities were still making unauthorised payments in this way (Office of the Auditor General, 2011:29).
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expectation that other positions in the bureaucracy could be filled in a similar way. International Co-Heads reported conflict with their Kosovar counterparts on this question.
The biggest issue was recruitment because we were trying to run an open, transparent, merit-based recruitment process and he would keep coming to me with “look here’s a person I think you should give a job to”, so we had some differences on that. [IA1]
The recruitment of new staff during the Kosovarisation of the PISG ministries opened more opportunities for politicisation of civil service employment. Although UN officials were involved in the appointment of most senior positions, at lower levels there was scope for political manipulation of the process.
There was no oversight, there was no control. That was where it was easy to do, because you were hiring starting from the driver or cleaning lady up to .. it was an opportunity, if you want, for political factions. [ID1]
The idea was to give most of the competencies to locals in order for them to decide ... but certainly it was misused because after that they started to hire people, their friends, relatives, political affiliates as well. [KG4]
In early 2003, the Secretary General’s report to the Security Council acknowledged this concern. Even recruitment organised in full compliance with the Civil Service Law was not sufficient to prevent politicisation:
… there is a perception by civil servants that their career depends on political allegiance more than on professional skills, leading them to apply for positions in bodies where they believe that they would not be perceived as political opponents by the leadership. This has led to an alignment of civil servants according to party politics, in contravention of the principles of merit, political neutrality and impartiality. (UNSC, 2003a:para 6)
In 2004, the Secretary General again reported that UNMIK had found that in 22 of the 30 municipalities there was evidence of appointments of senior civil servants made predominantly on the basis of political considerations, and that
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… civil servants are under increasing pressure to act on the basis of political directives even if that implies not following proper procedures and acting against the Kosovo civil service code of conduct. (UNSC, 2004a:para 6)
The ‘Eide Report’ on the situation in Kosovo, which opened the way for final status negotiations, also noted that newly created institutions had been undermined by a tendency among politicians to see them as their personal domains, with appointments often made on the basis of political or clan affiliations rather than competence and the blurring of the distinction between political authority and the civil service (UNSC, 2005:9). In 2006-2007 UNMIK exercised its power to intervene in public sector appointments and ensured the reinstatement of a number of civil servants who had been dismissed, apparently because they supported the wrong faction within the dominant political party (UN General Assembly, 2007:8). ‘Public Pulse’ surveys indicate that recruitment on merit is still rare. In 2011, only four per cent of respondents believed that government departments and public authorities implemented fair recruiting when hiring new employees. Thirty two percent of people considered family connections were the most important factor in getting a public sector job, followed by bribes (24%) and party allegiance (10%). Only 12 per cent thought that education was a relevant factor (Public Pulse, 2011a:22).
Civil servants have had limited legal protection from unfair treatment, due both to the ineffectiveness of the DCSA in the Ministry of Public Administration, and to failures in the justice system and the courts.
If I was suspended and I filed a letter of complaint to the court because of this suspension, the court after five or six years they might decide on the matter. My supervisors are aware of this and they would not be obliged to implement the law because of these gaps. [KG4]
Although the new Civil Service Law in 2010 removed the insecurity of short-term contract employment, ordinary civil servants remain vulnerable to political influence in relation to the creation and abolition of positions, performance evaluation, promotion and dismissal, and the scope for politically biased appointment at senior levels has increased (Doli, Korenica et al., 2012). The assumption that a politicised civil service is necessarily less effective may be open to challenge, however there are certainly examples in Kosovo that the political alignment of government ministries in an unstable
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coalition government has a negative impact on inter-ministerial cooperation and policy implementation.
6.8.5 Corruption
Opinions vary about the seriousness of corruption in Kosovo’s public administration, but it has always been an issue of concern as noted by the ICG in 2001 (ICG, 2001:8). In 2006 USAID reported an increase in rent seeking, patronage, misappropriation and theft as a consequence of the increased role of local authorities in administration (USAID, 2006b:4). In several ‘Public Pulse’ surveys of local opinion, corruption was identified as the third most serious problem facing Kosovo, although well behind unemployment and poverty (Public Pulse, 2011a:23; 2011b:21; 2012:18). Perceptions of the level of corruption in all public institutions increased significantly between 2011 and 2012. However, there is a significant gap between perception and reality in assessing the level and significance of corruption. The number of people who reported personal experience of corruption, in the form of being asked for money, gifts or other favours in exchange for a service, decreased. A local donor representative also felt that perceptions did not necessarily reflect reality.
I think it is mainly perception of corruption. I think the perception changes with every Transparency International report. Once we are the top of the list and then we are somewhere at the bottom, but I think the perception and the reality in post conflict situations are not that … I think for example if you look at Albania and you look at Kosovo. Albania is suffering much more from petty corruption which gives people alarming sense of corruption.. you don’t have that here. [KD4]
Increased anti-corruption activity by EULEX during 2011 and 2012, including the arrest of the head of the government’s Anti-Corruption Task Force for alleged corruption, may have had the effect of increasing public concern about the problem (Balkan Insight, 2 August 2012, 3 April 2012, 12 September 2012, 22 August 2012). Public Pulse surveys found that most people reported that they knew about corruption in government through the media rather than through personal experience (Public Pulse, 2013:17). It has also been argued that corruption is a problem throughout the Balkan region and Kosovo may be no worse than elsewhere. The Gallup Balkan Monitor in 2010, for example, found that majorities in all Balkan states believed that corruption in government and
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businesses was widespread (Gallup Balkan Monitor, 2010:8) but the actual experience of corruption, in the form of requests for bribes, had declined. Nevertheless, the World Bank has reported that 57 per cent of Kosovo firms say that corruption is a problem in doing business, slightly above the average for South Eastern Europe (World Bank, 2007b:5) and on Transparency International’s Corruption Perception Index 2011, Kosovo was ranked below all other former Yugoslav entities, and below Albania, suggesting that public sector corruption is a serious problem.54
6.8.6 Quality of public services
The civil administration in Kosovo clearly does not conform to the Weberian ideal of rule-based operations, employment on merit, political independence, and freedom from corruption. It could be argued, however, that the real measure of public sector performance is whether the government is able to deliver effective services to the public and to pursue economic development goals. There is evidence that Kosovo is also failing on this measure of the quality of public administration. The Eide report, for example, noted serious shortcomings in the quality of public services, particularly in health and education, where standards are low and services highly politicised (UNSC, 2005:9). The US government has noted that public administration is inefficient and subject to political interference, and that deficiencies in bureaucratic and technical capacities at the local and central government levels hinder economic development (US Department of State, 2012:2). The opinions of Kosovo’s own citizens are perhaps the most relevant measure. The level of public satisfaction with the performance of the government is low and steadily declining, from 50 per cent in September 2008, immediately after independence, to 30 per cent in November 2011, and 27 per cent in August 2013 (Public Pulse, 2013:7).
6.9 Summary
In 1999 public administration in Kosovo was far from being the ‘blank slate’ reported in early donor assessments. Although there were no functioning formal institutions, it had a prior history of bureaucratic administration under a socialist government and a
54 http://cpi.transparency.org/cpi2011/results/ accessed 16 Feb 2013. Kosovo was ranked 112th on international comparisons with a score of 2.9 out of 10. Croatia and Montenegro both scored 4, Macedonia 3.9, Serbia 3.3, Bosnia 3.2, and Albania 3.1.
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network of political and personal relationships that both impressed themselves on the governance arrangements that sprouted on the ‘greenfield’ of post conflict reconstruction. The circumstances immediately after the conflict certainly made pro- active creation of a completely new cadre of public sector employees, as was done in many public finance management institutions, extremely difficult, but the absence of decisive steps by the responsible international actors to establish alternative rules, incentives and norms allowed an ineffective and politicised public administration to become entrenched. The actions taken, or more often not taken, by UNMIK’s Pillar II in this regard were sometimes motivated by a desire to appease Albanian political factions for the sake of peace and stability. However they were also the result of misguided UN assumptions about the nature of the task, and the lack of a clear plan or the appropriate staff and resources to achieve it. Conflicting donor assumptions about how the civil service should be established and regulated, in particular the attempt to impose a Westminster model in a completely different political and legal environment, was one of the causes of resistance and delay. Most interventions in this area were under- resourced and this continues to be a significant problem in public administration reform. The tendency of donors, however, is to blame the Kosovars themselves for slow progress, citing traditional cultural attitudes and poor work ethics. These views are summarised in a recent analysis:
Public administration in Kosovo is not yet governed by legal rationality but by social (clan) pressures and self interest; compliance with new models tends to be ritualistic, with administration being accomplished by personal intervention as much as due process; the poor capacity of individuals cannot be adequately addressed through technical training; … there is no tradition of professionalism; there is a strong connection to traditional ways of working based on personal relationships, deference and hierarchy that are unconcerned with performance … (Iles, 2012:71)
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7 Conclusion
The aim of this thesis has been to examine in detail what happened when international actors became engaged in Kosovo after June 1999 and to assess the impact of their combined efforts on several important aspects of governance more than a decade later. The concentrated attention of many international donors and aid organisations in one place at the same time with more or less the same objectives, and the relative absence of an existing administration able to influence what donors did, meant that the post conflict environment came close to being a laboratory for testing ideas about the effectiveness of development assistance and addressing questions about whether and how this type of aid ‘works’. In this situation, the impacts of donor actions are magnified. On the one hand they may have more influence and achieve better outcomes than in normal development contexts, but it also means that the long-term impact of poor donor performance may be more pronounced and more obvious.
7.1 Successes and failures of reconstruction in Kosovo
The organisations and individuals that began work in Kosovo after the peace agreement arrived with a pre-existing set of assumptions about the nature of the project and how it should be pursued, derived from their own previous activities elsewhere, and from the dominant ideas current in discourse among development actors that were outlined in Chapter 2. The end of the conflict was seized on by many as a ‘window of opportunity’ to completely transform the formerly socialist and economically isolated entity, replacing previous government institutions with new ‘best practice’ models recommended by donors. It was accepted that large amounts of external financial assistance would be required to achieve the necessary transformation, and much of this would be delivered in the form of technical assistance projects using foreign expertise. The data on Kosovo’s post conflict development reveal, however, significant gaps between the theory of how development activity should be implemented, as expounded by peak bodies and donor conferences, and what actually happened.
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Many people had very high expectations of the international intervention, and most of these have been disappointed. Donors have, for example, failed so far to achieve the deep transformation of the economic, political and social environment described in early donor plans, and which continues to be pursued by the EU through its accession process. Early donor intentions to ‘turn Kosovo into a multiethnic democracy with a well functioning economy firmly based on market principles and the rule of law’ (Dixon, 1999a:para 1) and to create ‘a sound market economy, democratic governance and a just social order’ (Dobbins, 1999:para 10) have only partly been realised. The goal of many actors in Kosovo was ‘to transform it into a kind of society that it had never been before’ (Mason, 2006). Numerous reports have described the many ways in which Kosovo today is considered to fall short of this ambitious ideal (European Commission, 2011b; SIGMA, 2012:6; Transparency International, 2012; UNSC, 2012).
The international intervention has also failed to transform the economy. Despite success in developing economic institutions, international actors have not achieved the economic growth and prosperity initially proposed as the path to political stability (World Bank, 1999f:para 15). While living conditions have certainly improved for many people since the end of the conflict, performance on most economic and human development indicators remains poor. GDP grew over the period, largely due to the donor-funded reconstruction effort, but Kosovo is still a relatively poor country with high unemployment, high levels of poverty, slow and uneven economic growth, and dependence on diaspora remittances (World Bank, 2009a:7-8; IMF, 2012b:3; 2013:5). The continuing problems of unemployment, low exports and limited foreign investment are all the more disappointing given that, under the policies promoted by international organisations, Kosovo’s business environment has been made particularly attractive to investors. It has a relatively flexible labour market, few constraints on hiring and firing, an open and liberal trade regime, and a strong, competitive banking sector (World Bank, 2009a:10-11).55 There is no evidence, however, that the alternative policies that may have been favoured by some Kosovars, such as higher civil service wages, continued
55 The lack of private business development is thus now attributed variously to deficiencies in government bureaucratic capacities, weak property rights, inadequate energy supply and transport infrastructure, a low skilled labour force and a difficult business environment, problems in commercial law enforcement and a perception of widespread corruption (World Bank, 2009a; IMF, 2012c; US Department of State, 2012).
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public ownership of socialist-era enterprises, and generous social welfare programs based on previous socialist models, would have produced better results, and may have had much worse outcomes.
Kosovo has not been transformed, but many other objectives of the international involvement have been achieved. Peace has been maintained and, for the majority of the population, life is now more secure and rewarding (although for those living in ethnic enclaves it is presumably less secure and more constrained). Buildings have been built or rebuilt, and thousands of Kosovars have had access to training and new experiences that would never have been possible otherwise. The country has a relatively stable government and has been provided with a set of public institutions that are, on the whole, no better and no worse than those of their neighbours, or many other places with similar economic circumstances. Thus, measured against a relatively modest set of benchmarks, much of what the international community has done over the past decade or so can be considered a success. The experience in Kosovo thus confirms that technical assistance of the right kind in the right circumstances can be successful in creating new institutions and generating local capacity to manage them.
Nevertheless, some activities were clearly more successful than others and at the level of individual institutions the results are very uneven. In some sectors of public administration, initial failure to implement an explicit institutional development and capacity building agenda, due to unclear objectives, the expediency of short-term political deals, or UN ineptitude, has left the current Kosovo government struggling to resolve the problems of a dysfunctional administration. In a number other areas, however, an aggressive and well-resourced development agenda, which skated over issues of consultation and ownership, was able to establish at least the basics of efficient process, and expectations of good performance. There is undoubtedly scope for further improvement in this set of institutions, but the Kosovo authorities have the basic tools for effective public finance management, if they choose to use them. In between these two extremes are fields such as public procurement and internal audit where disagreement or confusion about the policy direction, or changes in the dominant actors and their preferred models, have limited the outcomes that were able to be achieved.
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7.2 Factors contributing to successes and failures in institutional development
The thesis has identified a number of factors that could account for the uneven outcomes in institutional development. They include the different ways that individual organisations and donors engaged in Kosovo, their goals, their methods, and the levels of funding made available; the specifics of the context in which the international actors were operating; and the nature of the public administration sectors in which they worked.
7.2.1 Donors
There were significant differences in the way international actors conceived of and implemented their assistance. The contrast between the aggressive, large scale institutional development programs launched by USAID and Pillar IV, the relatively tentative, smaller scale EAR, DFID and World Bank technical assistance projects, and the entirely different approach taken by the UN civil administration can be seen to have had a lasting impact on the current performance of public administration. The most effective interventions were those that were able to adopt a ‘greenfield’ approach, had clear goals, and a significant investment of resources. The high degree of influence over policy and management exercised by foreign advisers or officials in the initial phases also allowed them to partly insulate the institutions from adverse political influences. This was the case in many, but not all, the functions controlled by Pillar IV, such as the Customs Service and the Ministry of Finance.56 The areas where outcomes have been considerably less than ideal on the other hand have been those where there was no clear institution building objective and where international resources or capacity were inadequate, where pre-existing structures and staff remained in place, and institutions were captured by local political interests. This effectively summarises the situation in most of the administrative functions that were under the control of the UN, where large parts of the wider civil service were established on the remains of previous parallel administrations and municipal governments and became an arena for competition for political power.
56 It also applies to the Kosovo Police Service which has similarly been identified as a relatively well performing part of the administration (Heinemann-Gruder and Grebenschikov, 2006; Wilson, 2006; Public Pulse, 2012:5).
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The conditional nature of much of the assistance applied in Kosovo has also contributed to success. The international actors had a significant carrot to offer: the possibility of independence. For Albanian Kosovars independence was the primary and perhaps only objective and Kosovo’s leaders have been prepared to comply with any externally imposed policy agenda that appeared likely to deliver a future outside Serbia. Now that this goal has been substantially achieved, it has been replaced by a new carrot, the possibility of membership of the EU and the financial and social benefits it might bring. In recent years, EU, IMF and World Bank conditionality has arguably had much greater impact on the actions of the government than any of the aid projects that have been implemented by these organisations. Most notably, EU conditionality in the Balkan region has forced negotiations between Serbia and Kosovo aimed at improving relations between them, in the face of strong opposition from citizens on both sides (European Commission, 2013b). However, this conditionality will continue to work only as long as the potential reward appears realistic.
Very little of what donors did could have been said to comply with the principles set out in the aid effectiveness agenda. Indeed some of the more successful activities appear to have achieved success precisely because they ignored these precepts. Donors set the reform agenda before local political representatives had been democratically identified, and it was clear that many components of the program did not, initially, have wide public support. Many donors were in a hurry to achieve results with no time to wait for public opinion to catch up. Although efforts were made to ensure that the policies of the international Mission were responsive to local opinion, these opinions were regularly overridden by international staff (Chesterman, 2007:18), and even the presence of an elected parliament was not sufficient to ensure local views were recognised, as illustrated by the examples of UNMIK-imposed changes to approved legislation and the SRSG’s revisions to the annual budget. Despite donor consultations, advisory councils and the co-option of political leaders into the administration, it is difficult to argue that the public institutions, legal frameworks and administrative systems constructed in Kosovo were in any way initiated or significantly influenced by the wishes of the Kosovo people. Although the international intervention was nominally coordinated and supervised by the UN, the goal of ‘harmonization’ between donors was also difficult to achieve.
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7.2.2 Context
The context in Kosovo also affected what external actors were able to achieve. In many ways the impact was positive. The post conflict environment allowed international actors to exercise authority and impose reforms in ways that are rarely achievable in most developing countries. Moreover, the Albanian Kosovars were particularly willing to cooperate with the external intervention as the price to be paid for potential future independence, and they continue, on the whole, to show a remarkable degree of deference to the wishes of external agents. International actors thus had the opportunity to introduce new ideas, recruit new personnel, and set up new institutions. Some actors grabbed this opportunity with enthusiasm to impose their preferred ideas and institutions. Others, however, were either unable, or unwilling, to take advantage of this environment.
There were also negative contextual influences. The cultural and political background in Kosovo, the lack of experience and low educational standards of government personnel, and a tradition of inefficient bureaucracy, are some of the features frequently referred to by international actors to explain the difficulties and lack of success of some of their activities, but all institution building and reconstruction activities took place within this context and should have been equally affected by its negative features. Some international actors seemed more willing to challenge contextual constraints and took steps to create the ‘blank slate’ that had been identified in early reports through their recruitment policies and rigorous training programs. Other individuals and organisations appeared more willing to tolerate less than optimal standards and to accommodate the interests of Kosovar politicians, either for the sake of peace and stability, or due to a lack of resources or administrative ability to do otherwise.
7.2.3 The institutions
The nature of the sectors in which they worked and the institutions being established or reformed is also a relevant factor. The small size and specialised nature of organisations such as the Ministry of Finance, the Treasury and the Central Bank, for example, and the relative absence of pre-existing institutions of this type, may have made the creation of new organisations easier. Similarly, the quasi military style of the Customs Service, with uniforms, hierarchy, identity and discipline, may help to explain its relative success compared to the non-uniformed Tax Administration. Public finance functions that are
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centralised under Ministry of Finance or Central Bank control have been, apparently, less exposed to political influence and corruption. Decentralised functions such as procurement, internal audit and civil service recruitment were clearly the most difficult to monitor and control and thus more easily subverted to the interests of individual ministers or officials.
7.3 Issues for development assistance
Many studies of post conflict reconstruction conclude with list of ‘lessons learnt’ and suggestions for improved performance in future exercises. The experience in Kosovo certainly provides additional data to on the problems of development assistance and post conflict reconstruction. Three issues in particular are discussed below.
7.3.1 The value of a long-term perspective
The thesis has taken a long-term view of the development of institutions in Kosovo and has attempted to break out of the narrow confines of individual project assessments and short-term evaluations. It is always easy, in hindsight, to criticise actions taken, or not taken, by others in the past without appreciating the realities of the situation at the time. Any assessment of the achievements or failings of international actors in Kosovo needs to take account of the politically complex and physically challenging conditions in the early phases of the intervention, during which many difficult-to-reverse decisions were made. Generally, however, technical advisers and donors are often relatively uninformed about what happened in the post and the progress that has already been made. As Porter et al have noted, ‘Projects are frequently designed as if time began with the project implementation schedule’ (Porter, Allen et al., 1991:xv). In conducting this research I noted a tendency for people who had only recently become involved in Kosovo to express an ideal view of how things should have been done by those who came before, failing to understand the obstacles that existed at the time. They therefore propose new ‘best practice’ solutions, to replace the previous ‘best practice’ models introduced by their predecessors. Examples of this would include the constant revisions to the procurement law and the introduction of the PIFC concept, as well as repeated public administration policy reviews.
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7.3.2 The window of opportunity versus the need for ownership
A significant issue that arises in discussions of post conflict reconstruction, but also applies to other forms of development assistance, is the tension between the desire of donors to take advantage of opportunities to implement significant and rapid change, and the importance given in donor literature to local ownership of the reform program. ‘Ownership’, and the alignment of donor initiatives with national development plans, are core principles of the ‘aid effectiveness’ platform. It is generally assumed that the imposition of new institutions and processes without sufficient local ownership will not be successful in the long-term, and that donors should only support locally generated change. In Kosovo, however, several large donors more or less forced the adoption of modern institutions and administrative practices and, so far, these institutions appear to be sustainable. In several areas of public finance, in particular, donors and advisers were clear that their role was to establish firm foundations for a competent future administration.
For certain important things we put stakes embedded so far into the ground on things like process and accountability and standards that they would be difficult to pull out and shift. [IA16]
The greatest impacts from technical assistance were thus achieved in the early post conflict period, before the transition to some degree of local political representation. In other words, there was indeed a ‘window of opportunity’ in which external intervention of a certain kind was highly effective. Projects launched several years later, including those sponsored by EAR and ECLO, faced greater challenges, confronting entrenched practices and reluctance to change. The ‘window of opportunity’ approach is only feasible, however, when there are sufficient resources, clear goals, and strong agreement and determination among donors. The considerable weight of the IMF, the World Bank, the EU and USAID were necessary to produce reasonable outcomes in public finance, but even their achievements were incomplete and imperfect. Other efforts to drive significant change quickly were less successful due to a lack of agreement on the policy direction and inadequate resources.
7.3.3 Donor attitudes to Kosovars and the logic of capacity development
An aspect of the international engagement that was not part of the original research question but emerged strongly from the literature and in interviews was the surprisingly
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negative attitude of many donors and advisers towards the beneficiaries of their assistance. As noted in relation to the cultural context in Kosovo, when projects fail, the local counterparts or their political leaders are often identified as the problem. In interview discussions about capacity development, technical advisers seemed to feel licensed to make the type of negative comments about people in Kosovo that they would quite likely consider unacceptable in relation to any group in their own country. These attitudes are, however, entirely consistent with the idea that a lack of ‘capacity’ in the government, its employees, or the wider society, is the cause of development failure, and that external expertise and the transfer of superior technologies, processes and ideas is required to remediate this deficit. The concept of capacity and the pursuit of capacity development are thus logically inconsistent with donor efforts to achieve ‘ownership’.
7.4 The future
Events in Kosovo continue to evolve. At the time of writing (February 2014), EU sponsored discussion between Kosovo and Serbia aimed at some form of normalisation of relations, in particular in the Serb-dominated northern areas, appeared to have achieved a positive outcome (European Union External Action, 2014). Both Serbia and Kosovo are working towards EU accession and resolution of their differences has been made a condition for further progress in this direction (European Commission, 2013b). Incremental developments on some of the many EU accession criteria are noted in each annual EU progress report (European Commission, 2013c). The Kosovo government has also met the fiscal management performance criteria set by the IMF in relation to its Stand-by Arrangement to support the budget (IMF, 2013:1). However, the country and its institutions continue to be subject to close attention from international actors. The EU committed €71.4 million under the IPA program in 2013 and is preparing for the next phase, IPA 2014-2020; the World Bank is continuing to implement its Public Sector Modernization Project; and USAID’s strategy document for 2014-2018 sets out its plans for ongoing assistance in public finance and economic policy.57
57 http://ec.europa.eu/enlargement/pdf/kosovo/ipa/2013/20130122_en_act_kosovo_2013.pdf; http://www.worldbank.org/projects/P101614/public-sector-modernization?lang=en; http://www.usaid.gov/sites/default/files/documents/1863/CDCS_Kosovo.pdf, accessed 8 Feb 2014.
250 Chapter 7: Conclusion
While Albanian Kosovars have been extremely grateful for the assistance received from outside, there is also evidence that their enthusiasm for this relationship is waning. The increasing support in recent years for Vetevendosje! (Self determination), a left wing nationalist movement, may be an indication of growing disillusion and frustration.58 Vetevendosje! opposes involvement by the UN and EU in Kosovo’s internal affairs and dialogue with Serbia, supports closer integration with Albania, and proposes a larger government role in the economy, in direct opposition to the policies promoted by most international actors.59 While support for the radical and sometimes violent actions of Vetevendosje! is still relatively limited, its popularity may reflect a growing sense among Kosovars that they have had enough outside interference, which perhaps itself provides the best indication of the success of reconstruction and nation building.
Kosovar people generally are welcoming but then at one point people get fed up, even though there is still an inferiority complex, especially with people who haven’t gone abroad a lot and if you are an international people say, OK you are international, you know something. But another class of people in Kosovo who have been all over the place and who know that not everybody that comes from abroad has it right. And this is a new movement, a new feeling among Kosovars, not maybe the government but other people are saying, OK there’s a lot of things we can do ourselves if we want to do it right, and we don’t need to listen to the US Ambassador to tell us how … [KA1].
58 The movement won 12 per cent of the vote in the December 2010 election, gaining 14 seats and becoming the third largest party in parliament. Its support was particularly strong among young voters (Balkan Insight, 15 December 2010).
59 http://en.wikisource.org/wiki/Page:Vet%C3%ABvendosje!_political_programm_in_english.pdf/1; http://www.vetevendosje.org/?cid=2,26, accessed 9 October 2013.
251 Annex 1: Interview Codes
Annex 1: Explanation of Interview Codes
During research for this thesis formal interviews were conducted with 44 people who were closely involved, at various stages, in post conflict activities in Kosovo. Twenty four were international advisers or officials and 20 were Albanian Kosovars. In order to preserve the anonymity of people interviewed for this research a code has been used to identify each individual. The code indicates whether the subject is Kosovar or international and their primary function in Kosovo during the period under consideration. A sequence number identifies different individuals within each group. The table below lists the codes used and provides some additional information where possible about the affiliation or function of the individual. Some people have held different positions over the period: these have been classified to their current or most significant past function.
International Technical Advisers
Code Description IA1 International technical adviser, Pillar IV IA2 International technical adviser, EU projects IA3 International technical adviser, EU projects IA4 International technical adviser, WB and EU projects IA5 International technical adviser, EU projects IA6 International technical adviser, EULEX IA7 International technical adviser, USAID and EU projects IA8 International technical adviser, USAID projects IA9 International technical adviser, DFID and EU projects IA10 International technical adviser, EU projects IA11 International technical adviser, Pillar IV IA12 International technical adviser, USAID projects IA13 International technical adviser, USAID projects IA14 International technical adviser, EU projects IA15 International technical adviser, USAID projects IA16 International technical adviser, Pillar IV IA17 International technical adviser, Pillar IV
252 Annex 1: Interview Codes
International Donor Representatives
Code Description ID1 International donor representative ID2 International donor representative International UNMIK Staff Code Description IU1 International UNMIK Official IU2 International UNMIK Official IU3 International UNMIK Official IU4 International UNMIK Official IU5 International UNMIK Official Kosovar Technical Advisers
Code Description KA1 Kosovar technical adviser, EU projects KA2 Kosovar technical adviser, USAID projects KA3 Kosovar technical adviser, EU projects Kosovar Donor Staff Code Description KD1 Kosovar donor representative KD2 Kosovar donor representative KD3 Kosovar donor representative KD4 Kosovar donor representative KD5 Kosovar donor representative KD6 Kosovar donor representative Kosovo Government Staff
Code Description KG1 Kosovar government official, public finance KG2 Kosovar government official, public finance KG3 Kosovar government official, public finance KG4 Kosovar government official, public administration KG5 Kosovar government official, public administration KG6 Kosovar government official, public administration KG7 Kosovar government official, public finance KG8 Kosovar government official, public finance KG9 Kosovar government official, public administration KG10 Kosovar government official, public administration KG11 Kosovar government official, public administration
253 Annex 2: Major Events
Annex 2: Major Events in Kosovo, 1999 – 2008
The following table lists the major political developments in Kosovo during this period and the sequence and timing of actions in the development of public finance and public administration. The information is drawn from a number of sources but primarily UNMIK news archives (www.unmikonline.org/archive.htm, accessed in May 2008), UN Security Council Reports (www.un.org), UNDP Early Warning Reports, and the chronology of events in King and Mason (2006:265-278).
1999 June 8-Jun OSCE decision No 296 authorises end of KVM and establishment of a Kosovo Task Force to prepare for a future OSCE mission 9-Jun Military technical agreement signed between KFOR and representatives of Yugoslavia and Serbia Report of the UN Inter-Agency Needs Assessment Mission presented to the Security Council 10-Jun UN Mission in Kosovo established by Security Council Resolution 1244. 12-Jun Secretary General report to the Security Council on the preliminary operational concept for the civil presence. 13-Jun UN advance team arrives in Pristina July 1-Jul Nine judicial officials appointed by interim SRSG OSCE decision No 305 establishes OSCE Mission in Kosovo 5-Jul EC Task Force in Kosovo starts work to prepare for establishment of EAR 9-Jul Albanians and Serbs return to work at Pristina Municipality after negotiations with KFOR and UNMIK 12-Jul Secretary General's first report to the Security Council on the Mission in Kosovo 13-Jul First meeting of High Level Steering Group representing major donors and international institutions. 15-Jul SRSG Bernard Kouchner arrives in Kosovo 16-Jul First meeting of Kosovo Transition Council (KTC) 25-Jul UNMIK/REG/1999/1 on the authority of UNMIK issued. 26-Jul UN civil administrators deployed to provinces 28-Jul First Donors' Conference – Brussels 29-Jul Council of the European Union formally agrees to support Pillar IV (L 201/1) August 1-Aug UN civilian police assume responsibility for border crossings with Albania and Macedonia from KFOR. 5-Aug Thaci and Rugova both attend KTC for the first time 2-Aug 400 Post and Telecom workers return to work 9-Aug First stipend payments to judges, prosecutors and customs officials (39 people) 16-Aug EC announces Customs Assistance Mission in Kosovo 17-Aug 2,000 health workers to receive ad hoc stipend payments from UN Trust Fund
254 Annex 2: Major Events
27-Aug Railway workers return to jobs reintegrating 800 Albanian former employees who lost their jobs in 1989 with 640 Serbs and Albanians who have already returned to work. (Rail services restart in December.) 31-Aug UNMIK/REG/1999/3 establishment of the Customs Service September 1-Sep KTC discusses budget for Kosovo Customs Service starts collecting revenue 2-Sep UNMIK Reg. 1999/4 authorises use of DM as currency 10-Sep First meeting of Economic Policy Advisory Board 21-Sep KLA formally demobilised by KFOR. USAID project consultants start work in Pillar IV October 16-Oct First Kosovar Police recruits graduate from police school 13-Oct UNMIK/REG/1999/11 on exercising control over payments facilities and services 14-Oct UNMIK/REG/1999/12 on the provision of postal and telecommunications services 21-Oct UNMIK Reg. 1999/14 appoints regional and municipal administrators 22-Oct UN General Assembly considers Secretary General's financial proposal for UNMIK November 6-Nov UNMIK Reg. 1999/17 Approval of Kosovo Consolidated Budget for 1999 UNMIK Reg. 1999/16 Central Fiscal Authority (CFA) created 15-Nov UNMIK Reg. 1999/20 establishes the Banking and Payments Authority (BPK) UNMIK Reg. 1999/21 on Bank Licensing, Supervision and Regulation 17-Nov Second Donors' Conference, Brussels The Serbian government protests about the UN decision to set up a Budget Authority for Kosovo 26-Nov UNMIK/DIR/1999/4 Administrative Direction on expenditure processes defined Authorizing Officers, Approving Officers, Delegations etc. December 15-Dec JIAS agreement signed by 3 main political leaders 15-Dec European Commission agrees to establish EAR 22-Dec UNMIK/REG/1999/27 Approval of Kosovo Consolidated Budget for 2000
2000 January 14-Jan UNMIK/REG/2000/1 established JIAS with 14 administrative departments 21-Jan First members of Kosovo Protection Corps (KPC) sworn in. 22-Jan UNMIK/REG/2000/2 introduced excise taxes UNMIK/REG/2000/3 introduced sales tax 25-Jan First private bank opens 26-Jan 34 tax inspectors sworn in. February 1-Feb UNMIK/REG/2000/5 Hotel, Food and Beverage Tax 25-Feb IAC discusses civil service recruitment principles March 1-Mar Business registration commences. All businesses must register with each municipality in which they are operating. 2-Mar 50 more recruits join Customs Service. UK seconded customs official becomes Director-General of Customs 6-Mar SRSG Kouchner addresses the Security Council and states that the United Nations work in Kosovo lacked clear political objectives and sufficient resources. UK government agrees to fund a civil service payroll system 14-Mar UNMIK/REG/2000/12 establishing JIAS Department of Public Services April 12-Apr UNMIK/REG/2000/20 on Tax Administration
255 Annex 2: Major Events
May 2-May Expansion of Hotel, Food and Beverage tax and introduction of Presumptive Tax agreed by IAC 20-May UNMIK/REG/2000/29 establishing Presumptive Tax July 11-Aug UNMIK/REG/2000/45 on self government of municipalities 21-Aug UN releases Brahimi Report on UN Peace Operations October 5-Oct Milošević government in Serbia overthrown after mass demonstrations in Belgrade. 28-Oct First Municipal Elections December 29-Dec UNMIK/REG/2000/67 approving Kosovo Budget for 2001
2001 January 15-Jan Hans Haekkerup takes over as SRSG from Kouchner February 16-Feb UNMIK announces plan to establish tax collection offices on northern boundary 25-26 Feb Donors' Meeting in Pristina, Kosovo April 16-Apr Tax offices opened on northern boundary amid strong opposition May 15-May UNMIK/REG/2001/9 established the Constitutional Framework for Provisional Self Government July DFID provides assistance for drafting of civil service law (July to Nov) September 13-Sep UNMIK Reg 2001/19 set out the functions and competencies of the ministries of the PISG. 20 JIAS Departments to become 10 PISG Ministries November 17-Nov Election of Kosovo Assembly under the Constitutional Framework for Provisional Self Government December 10-Dec Inauguration of Kosovo Assembly 22-Dec UNMIK/REG/2001/36 on the Kosovo Civil Service UNMIK/REG/2001/37 approving the Kosovo Budget for 2002 28-Dec SRSG Haekkerup resigns
2002 January 17-Jan An LDK member of Kosovo Assembly assassinated 23-Jan Michael Steiner appointed SRSG February 20-Feb UNMIK Reg. 2002/4 introduced personal income tax UNMIK Reg. 2002/3 introduced profit tax 28-Feb Agreement reached on composition of PISG government coalition March UNMIK begins transfer of JIAS Departments to PISG Ministries and advertising for Permanent Secretaries. Principal International Officers appointed to advise the new Ministers. Pillar III (OSCE) working to establish the Kosovo Institute for Public Administration (KIPA) April
256 Annex 2: Major Events
18-Apr Formation of Kosovo Trust Agency to manage privatisation of Socially Owned Enterprises (SOEs) May 6-May UNMIK Reg 2002/10 establishes the Economic and Fiscal Council to advise the SRSG on budget matters 9-May Donors' Conference in Pristina 17-May SRSG Steiner vetos Assembly resolution on territorial integrity Head of Kosovo customs, Ylber Rraci, arrested by the international police, suspected of involvement in smuggling June 12-Jun Provisional government formally sworn in after Serbs agree to participate July 1-Jul SRSG annuls an MOU on economic cooperation with Albanian signed by the Minister of Trade, but on 15 July UNMIK signs a memorandum on economic cooperation. August 28-Aug Teachers Union threatens to strike for wage increases September UNDP begins publication of Early Warning Reports October 4-Oct UNMIK Reg. 2002/18 establishes Office of the Auditor General 26-Oct Second Municipal Elections A training needs assessment conducted at municipal and central levels to establish standards and design training curriculum. November 5-Nov Donor Coordination Meeting for Kosovo in Brussels 7-Nov SRSG annuls Assembly resolution on constitution of Serbia Montenegro December 31-Dec UNMIK Reg. 2002/23 approves Kosovo Budget for 2003 2003 January At the start of 2003 two of 10 senior PISG posts still not filled and internationals continued to act as Permanent Secretary. 25-Jan UNMIK/DIR/2003/2 Administrative Direction on the Kosovo Civil Service promulgated February 6-Feb SRSG Steiner proposes benchmarks concept in New York April 8-Apr Joint 'Transfer Council' established to transfer competencies from UNMIK to PISG as set out in Constitutional Framework. Co chaired by Prime Minister and SRSG. 15-Apr Steiner refuses to sign four laws passed by the Assembly 24-Apr Steiner vetos Assembly election law revisions May 12-May UNMIK Reg 2003/17 promulgates Law on Public Financial Management and Accountability (PFMA) passed by the Kosovo Assembly (Law 2003/2) July 10-Jul SRSG Steiner leaves UNDESA Report on Public Administration in Kosovo Teachers strike for higher wages August 13-Aug Harri Holkeri of Finland appointed SRSG November UNMIK announced transfer of a final set of responsibilties to local provisional institutions
257 Annex 2: Major Events
December 10-Dec UN and local reps 'relaunch' Standards with detailed roadmap for implementation 31-Dec UNMIK Reg 2003/41 approves Kosovo budget for 2004 End 2003 Postion of Director-General of Budget transferred from international adviser to Kosovar
2004 February 9-Feb UNMIK Reg. 2004/3 promulgates Law on Public Procurement (Kosovo Assembly Law No 2003/17) 16-Feb Helm/PAI report on Civil Service Pay and Grading finalised March 17-18 Mar Riots, Violence between Albanians and Serbs including attacks on international police 31-Mar SRSG Holkeri and PM launch Standards Implementation Plan (KSIP) April 1-Apr Air traffic control at Pristina Airport handed transferred to local control. May 25-May Holkerri resigns as SRSG June Local Government working group of UNMIK, PISG and USAID headed by SRSG completed document on the Reform Framework of Self Government in Kosovo July 25-Jul Kai Eide report on strategic review of policy in Kosovo Draft UNMIK/PISG Public Administration Strategy published August 15-Aug Soren Jessen-Petersen appointed SRSG October SRSG announces hand over of more power to PISG and creation of new ministries for energy, local self government, and returns and communities. 23-Oct Second Kosovo Assembly Election: Haradinaj (AAK) becomes PM in LDK/AAK coalition government December 4-Dec UNMIK Reg. 2004/51 on Corporate Income Tax UNMIK Reg 2004/52 on Personal Income Tax 17-Dec SRSG and Haradinaj launch a new Standards process with prioritised targets that are easier to meet. UN proposes to speed up handover of economic power 2005 February 1-Feb UNMIK Reg 2005/4 extends validity of 2004 budget pending consideration of 2005 budget by the Kosovo Assembly SRSG Jessen-Petersen announces proposed handover of competencies in justice and police March 1-Mar UNMIK Reg. 2005/12 approving the Kosovo Budget for 2005 PISG law on tax administration promulgated by UNMIK 8-Mar Haradinaj indicted by ICTY in the Hague, Bajram Kosumi becomes PM April 20-Apr EC decision on 'A European Future for Kosovo' May 25-May UNDP assessment of administrative capacity in Kosovo (KCAP) Donor Conference June
258 Annex 2: Major Events
3-Jun Kai Eide appointed to assess readiness for status talks July UNMIK police transfer control of last police station to Kosovo Police Service August Teachers Union threatens to strike if promised salary increases not delivered. Kosovo receives its own TARIK customs code in place of former Yugoslavia code Four senior managers at Pristina Airport suspended on suspicion of corruption involving fraud September Education and Health sector workers on strike over salaries October 7-Oct UN publishes "A comprehensive review of the situation in Kosovo" (Eide Report). 24-Oct Talks on final status authorised, coordinated by Maarti Ahtisaari. November 2-Nov UNMIK/PISG Letter of Intent on Memorandum of Economic and Financial Policies 9-Nov EC publishes first annual Kosovo Progress Report Kosovo Police arrest doctors in health instituions for using fake diplomas and other illegal activities December 20-Dec UNMIK Reg. 2005/55 approves the Kosovo Budget for 2006 UNMIK approves creation of Ministry of Interior and Ministry of Justice. LDK and AAK agree on distribution of new Ministries: LDK gets Interior, AAK gets Justice
2006 January 21-Jan President Ibrahim Rugova dies of cancer. Fatmir Sejdiu becomes President. February 20-Feb Negotiations on final status begin in Vienna April Vetevendosje protest at UNMIK HQ demanding UNMIK's departure Montenegro votes for independence from Serbia June Soren Jessen-Petersen leaves at end of June. Joachim Rucker becomes SRSG; August 24-Aug UNMIK Reg 2006/47 transforms the BPK into the Central Banking Authority of Kosovo (CBAK). Gives more power to PISG November 16-Nov Kosovo Assembly passes Law No 02/L-74 on Internal Audit
2007 January Kosovo Police use rubber bullets during Vetevendosje protest. 2 people die from injuries. February MPS GERAP Report on the Status of Public Administration in Kosovo, Strategy for Public Administration Reform and Action Plan released March Report of the Special Envoy of the Secretary General on Kosovo's Future Status (Ahtisaari Report) May EU releases report on preparations for a future international and EU presence in Kosovo June
259 Annex 2: Major Events
6-Jun UNMIK Reg. 2007/20 promulgated amendments to the Law on Public Procurement (2003/17) comprising Kosovo Assembly Law 02/L-99 and SRSG amendments to the amendments set out in 'Part B' October UNMIK Customs Service fully Kosovarised. A Kosovar Director-General appointed November 17-Nov Third Kosovo Assembly election
2008 January 7-Jan Agreement on coalition government between former rivals PDK and LDK February 17-Feb Kosovo Government declares independence. 27-Feb UNMIK Reg 2008/12 amended the Civil Service Law to make the IOB an independent body reporting to the Assembly. 29 Feb UNMIK Reg 2008/13 approves the Kosovo Budget for 2008 April 14-Apr Work started on functional review of institutions (FRIDOM) 21-Apr UNMIK Reg. 2008/20 removes the requirement for 3 international members of SPAC June 14-Jun UNMIK Reg 2008/32 promulgates law on preventing conflict of interest in public functions (Assembly of Kosovo Law 02/L-133) 30-Jun EU Pillar IV ceased operations. UNMIK stopped promulgating Assembly regulations from June 2008 August UNMIK Customs Service transferred to the Kosovo Government October UN Security Council agreed to deployment of an EU police and justice mission (EULEX). EULEX will operate in Albanian areas. Police, customs and judges in Serb run areas will remain under the UN umbrella. November 26-Nov UNMIK announces reconfiguration. UNMIK will monitor interests of non Albanian communities and retain a support and mediation role.
260
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