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Toward Stability and Prosperity a Program for Reconstruction and Recovery in Kosovo

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Toward Stability and Prosperity a Program for Reconstruction and Recovery in Kosovo TOWARD STABILITY AND PROSPERITY A PROGRAM FOR RECONSTRUCTION AND RECOVERY IN KOSOVO November 3, 1999 Prepared by the European Commission and the World Bank in Support of the United Nations Mission in Kosovo ABBREVIATIONS AND ACRONYMS CA Customs Administration CFA Central Fiscal Authority CPO Cash Payment Operation EC European Community FRY Federal Republic of Yugoslavia FYROM Former Yugoslav Republic of Macedonia GDP Gross Domestic Product GSM Global System for Mobile Communications IMF International Monetary Fund IMG International Management Group KFOR Kosovo Force MACC United Nations Mine Action Coordination Center NATO North Atlantic Treaty Organization NGO Non Governmental Organization OSCE Organization for Security and Cooperation in Europe PTK Post and Telecommunications of Kosovo SFRY Socialist Federal Republic of Yugoslavia SWG Sectoral Working Group UNHCR United Nations High Commissioner for Refugees UNIP United Nations International Police UNMIK United Nations Mission in Kosovo WHO World Health Organization TABLE OF CONTENTS INTRODUCTION.......................................................................................................................... i I. OVERVIEW .......................................................................................................................... 1 A. BACKGROUND...................................................................................................................... 1 B. MOVING FORWARD – HELPING KOSOVARS HELP THEMSELVES ........................................ 2 C. THE CONDITIONS FOR SUCCESS .......................................................................................... 5 II. SUPPORTING GROWTH AND EMPLOYMENT........................................................... 6 A. JUMP-STARTING THE RURAL ECONOMY.............................................................................. 7 Jump-Starting Rural Activity Through Partial Replacement of Assets ................................... 8 Supporting Private Sector in Rural Areas............................................................................... 9 Developing and Strengthening Institutions ............................................................................. 9 B. SUPPORTING THE DEVELOPMENT OF PRIVATE ENTERPRISES ........................................... 10 Setting the Legal and Regulatory Framework for Private Sector Development ................... 10 Improving Private Enterprise Access to Capital................................................................... 11 Encouraging Foreign Private Involvement ........................................................................... 12 C. RESTARTING VIABLE PUBLIC ENTERPRISES...................................................................... 12 III. DEVELOPING EFFECTIVE INSTITUTIONS.......................................................... 14 A. SETTING UP KEY INSTITUTIONS OF ECONOMIC MANAGEMENT........................................ 15 B. SUPPORTING PROPER ADMINISTRATION AT MUNICIPAL LEVEL ....................................... 16 C. ENSURING AN EFFECTIVE JUDICIARY SYSTEM AND THE RULE OF LAW ........................... 17 IV. MITIGATING THE IMPACT OF THE CONFLICT AND THE LOST DECADE 19 A. HELP KOSOVARS RESTORE SATISFACTORY LIVING CONDITIONS .................................... 19 Housing – Targeting Assistance and Leveraging Local Resources ...................................... 19 Local Infrastructure – Supporting Decentralized and Demand-driven Projects .................. 21 Mine-Clearing – Continue to Support the MACC-Coordinated Effort ................................. 22 B. RESTORING AND UPGRADING SOCIAL SERVICES DELIVERY ............................................ 23 Mainstreaming the Parallel Systems ..................................................................................... 24 Financing Operating Costs ................................................................................................... 24 Rehabilitating Damaged Facilities........................................................................................ 25 Supporting a Series of Remedial Programs .......................................................................... 25 Assisting the Modernization of the Social Sectors................................................................. 26 C. REHABILITATING INFRASTRUCTURE NETWORKS FOR ECONOMIC RECOVERY ................. 26 Developing Sustainable Institutions and Financing Systems ................................................ 27 Restoring Telecommunications Service................................................................................. 28 Improving Energy Supply...................................................................................................... 29 Rehabilitating Transport Networks ........................................................................................30 V. IMPLEMENTING THE PROGRAM ..............................................................................................32 A. PREPARING AND IMPLEMENTING SECTORAL RECONSTRUCTION PROJECTS.......................................33 B. SETTING UP EFFECTIVE DONOR COORDINATION MECHANISMS ........................................................34 C. PROMOTING TRANSPARENCY............................................................................................................35 VI. ANNEXES I. AGRICULTURE…………………………………………………………..………………………37 II. PRIVATE SECTOR DEVELOPMENT……………………………………………..…………51 III. HOUSING…………………………………………………………………………………63 IV. WATER AND WASTE …………………………………………………………………..…75 V. LANDMINE CLEARING …………………………………………………………………...87 VI. EDUCATION …………………………………………………………………………..….95 VII. HEALTH ………………………………………………………………………………...109 VIII. TELECOMMUNICATIONS …………………………………………………………….….123 IX. ENERGY…………………………………………………………………………………127 X. TRANSPORT …………………………………………………………………………….143 XI. URGENT NEEDS ……………………………………………………………………..….155 This report was prepared by a team of European Commission and World Bank staff and consultants, in close cooperation with the United Nations Mission in Kosovo, with the support of the European Bank for Reconstruction and Development (EBRD) and the Food and Agriculture Organization (FAO), and with the assistance of the Kosovo Force (KFOR), the International Management Group (IMG), the US Agency for International Development (USAID), UNICEF, the World Health Organization (WHO), other UN agencies, bilaterals, and non-governmental organizations. The European Commission had primary responsibility for the work on housing and institutions. The World bank had primary responsibility for agriculture, private sector development, water and waste management, landmine clearance, education, health, transport and energy. The European Bank for Reconstruction and Development had primary responsibility for telecommunications. INTRODUCTION Five months after the end of the conflict, an enormous effort, on the part of both the Kosovars themselves and the international community, will be needed to put Kosovo on the path to recovery and sustainable development. Infrastructure suffered heavy damage, and homes of more than half a million Kosovars are destroyed. Industry is at a standstill and unemployment remains very high. Institutions are functioning poorly. Much has already been done, under the leadership of the United Nations Mission in Kosovo (UNMIK), by the NATO-led Kosovo Force (KFOR), UN agencies, bilaterals, and non- governmental organizations (NGOs). Equally impressive has been the enthusiasm and the commitment of the Kosovars themselves: houses are being re-roofed and repaired without substantial donor assistance, schools reopened as early as three weeks after the arrival of KFOR troops with unpaid, but highly committed, teachers. But much remains to be done. Addressing the challenges facing Kosovo – reconstruction, institution-building, and transition to a market economy – will require a substantial level of external support to complement the Kosovars’ contributions, and to make the region stable and eventually prosperous. Experience in other post-conflict situations shows that donor assistance has most impact when it is designed and delivered within a comprehensive reconstruction and recovery framework which clearly identifies key priorities for intervention. This Report is a first step in the definition of such a framework for donor support. In a difficult context, where information remains scarce, the authors drew substantially on UNMIK’s work, and on assessments made by KFOR, specialized UN agencies, the International Management Group (IMG), and a number of bilateral and non- governmental organizations.1 The Report will be further refined as more information becomes available. It is also expected that in-depth discussions of the content of this Report will be held with leading Kosovars in the coming months, and that the substance of these debates will be reflected in a new version. The Report consists of five parts. The first chapter is an overview, which outlines the recovery strategy, sets overall goals and priorities, and provides an estimate of external funding requirements in each sector. The three following chapters describe specific actions that should be undertaken to help Kosovars address the most critical challenges: restarting the economy and support growth and employment, building the institutions that are needed for medium-term stability and prosperity, and mitigating the effects of both the conflict and the 1990s policies. In the fifth chapter, the report discusses key
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