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KOSOVO
>> Regional Overview >> Federal Republic of Yugoslavia Overview
Development Challenge FY2001 Program /
Activity & Budget InformationSummary Tables
Program Summary
Previous Years' Activities
200044
Introduction
Stability and security in Southeast Europe is a key U.S. foreign policy objective. The past decade of conflict in this region has resulted in significant U.S. military and civilian involvement in bringing about and maintaining peace. North Atlantic Treaty Organization (NATO) intervention and the adoption of United Nations Security Council Resolution (UNSCR) 1244 on June 10, 1999, ended a decade of Serbian suppression of ethnic Albanians in Kosovo. International donors subsequently pledged over $3 billion for humanitarian relief, and a large multi-year assistance program of reconstruction and economic recovery for Kosovo in which the European Union is expected to assume a lead, funding role. Donors moved quickly to respond to emergency needs in Kosovo’s post-conflict environment. USAID’s disaster assistance has been critical in this regard, helping with priority needs such as shelter winterization, and community stabilization.
U.S. foreign assistance is an integral component of the Stability Pact, designed to foster geopolitical stability and economic prosperity in Southeast Europe, and will be critical in promoting rapid economic, political, and social stability in post-conflict Kosovo. USAID is providing Support for East European Democracy (SEED) assistance to help Kosovo restart its economy, and establish a sound macroeconomic framework and basic institutions of a market economy; strengthen democratic institutions such as independent media, civil society, and the rule of law; and restructure its social sector. U.S. support is part of broad-based international efforts, led by the United Nations Mission to Kosovo (UNMIK) and NATO’s Kosovo Implementation Force (KFOR), to allow Kosovo to enjoy substantial autonomy and meaningful self-administration within the Federal Republic of Yugoslavia (FRY).
The Development Challenge
After autonomous political structures were dismantled in 1989, Serbia assumed control over Kosovo’s police and economic policies. Ethnic Serbs replaced ethnic Albanians in many public sector jobs, and Albanian-owned companies were taken over through joint ventures with Serb-owned companies. The instability, conflict, and massive refugee movements of the past year have exacerbated the adverse impact of this process.
By the end of the conflict in June 1999, approximately 65% of the province’s total population of two million had fled to neighboring countries (800,000 people) or were internally displaced (500,000 people). Serb forces killed an estimated 10,000 Kosovar Albanians. Over 100,000 Kosovar Serbs also fled Kosovo during and after the hostilities, leaving many institutions and enterprises without staff and management. By September 1999, most Albanian refugees had returned, but Kosovar Serbs continued to leave fearing retaliation. Refugees and internally displaced persons returned to damaged homes (nearly 60% of the existing housing stock had been damaged or destroyed), limited utility services, and an economy that had all but collapsed.
The immediate priority for many people in Kosovo is to restore normalcy to their lives and survive the winter in 1999-2000. To the end, USAID-funded, winterization assistance in 1999 has already benefited an estimated 300,000 people. U.S. assistance also is helping to restart agricultural production, provide emergency and non-emergency food distribution, and provide health care to about 40% of the conflict-affected population. USAID is working through Community Improvement Councils to facilitate the refugee return process, stabilize communities, and help prioritize reconstruction needs. Fifty percent of the conflict-affected population is benefiting from disaster assistance to improve water and sanitation systems.
An estimated $18 million in USAID disaster assistance funding will be needed in FY 2000 alone to continue work on restarting agricultural production; and improving health care services, water and sanitation, and shelter. Looking beyond this winter, Kosovo must overcome a decade of economic and political exploitation, repair infrastructure damaged during the conflict or from the lack of maintenance and investment, and make the transition to a market economy with democratic institutions.
Rebuilding economic infrastructure and institutions, and putting the economy on a sound growth trajectory are major challenges. Current donor estimates are that GDP has fallen by more than 50% and per capita income to less than $400 since the beginning of Milosevic’s campaign against ethnic Albanians. Unemployment has increased to over 50%. By June 1999, the manufacturing sector had essentially shut down, the banking system had collapsed, the 1999 crop season was lost, and much of the livestock had been killed. Kosovo needs to establish new market linkages to replace those to the Serbian market. Agriculture production and agro-processing, which contributed significantly to pre-conflict GDP and employment levels, require inputs to restart operations. Rural infrastructure needs repair – including utility services, waste management facilities and access roads.
In 1999, USAID provided direct assistance for economic stabilization and recovery. Before substantial inroads can be made to improve the economy, however, the few existing institutions must be strengthened, and new economic management institutions and policies put into place. While progress has been made in laying out the legal and regulatory framework for fiscal policy and administration, considerable work remains in areas such as revamping the commercial code to create a business-friendly market environment. Significant human resource development and professional capacity building is also required so that these institutions and systems can be turned over to Kosovars.
While accepting the need for a temporary UN administration, the populace is anxious to see a representative government formed. The transition from UNMIK to Kosovar authority will take place against the backdrop of not only the legacy of Yugoslav-style planning and social ownership, but also the constitutional peculiarities and political uncertainties of the province’s current situation. The transition requires full participation on the part of the Kosovars, but is handicapped by the tradition of parallel institutions and informal ways of operating which emerged during the long period of Albanian Kosovar exclusion from civic participation.
UNMIK is attempting to initiate Kosovar participation through the recent establishment of Interim Administrative Councils. It remains to be seen if they will serve as adequate mechanisms for representation. Political parties have to be strengthened, electoral processes and institutions need to be established, and free and fair municipal and provincial elections must be held. Kosovars need a functioning, civil society, a professional and objective media, and a better understanding of the principles and responsibilities of democracy. Reestablishing the rule of law is also a critical step in building public confidence and allaying security concerns. Facilitating Kosovo’s transition to democracy will remain a priority for USAID in FY 2001 and beyond.
FY 1999 Kosovo Supplemental
FY 1999 SEED Supplemental funds totaling $70.1 million have been allocated to assist in Kosovo’s stabilization and economic recovery efforts. Of these funds, $9 million is being managed by USAID to implement programs providing: loans to micro-enterprises and inputs for the agriculture sector; technical assistance to UNMIK to establish a basic institutional structure for the economy; and support for election preparations and establishing rule of law. About $61.1 million was transferred to the Department of State to support such efforts as civilian de-mining, police training, demobilization of the Kosovo Liberation Army, and UNMIK’s civil service salaries. In addition to the SEED supplemental, about $5.2 million in International Disaster Assistance was provided in FY 1999 for an umbrella grant through which non-government organizations provide services to conflict-affected populations. In FY 1999, Child Survival Funds totaling $500,000 was obligated for the needs of displaced children and orphans. An estimated $2.9 million in Economic Support Funds was allocated to support war crimes documentation, and the search for missing persons.
Humanitarian Assistance
USAID has provided about $67,000,000 in food assistance since March 1998, through the Office of Food for Peace for emergency feeding requirements of Kosovar refugees in the Balkan region. Of this about, about $11,890,000,000 went for the needs of Kosovars in Albania. USAID’s Office of Disaster Assistance (OFDA) provided $33.4 million in FY 1999 for the winterization program in Kosovo, benefiting over 30,000 people; $10.9 million in agricultural assistance to allow local farmers to restart production; $5.9 million to improve water and sanitation systems; $4.2 million for provision of health care, and $3.5 million for emergency food and non-food distribution. USAID’s Office of Transitions Initiatives (OTI) provided $12.466 million for Kosovo in FY 1999, and began working with Kosovar community leaders through Community Improvement Councils to facilitate the return process, stabilize communities, and prioritize reconstruction needs. USAID plans to obligate additional humanitarian assistance for Kosovo in FY 2000: about $7 million from OTI, and about $22 million from OFDA.
Other Donors
The international community is strongly committed to helping Kosovo. The United States is the leading bilateral donor to Kosovo’s recovery process, and has pledged to meet 15% of the costs of recovery and reconstruction. However, the European Union and other multilateral organizations have pledged to bear the lion's share of the burden for reconstruction. USAID works closely with other donors to ensure that U.S. assistance activities complement and leverage other donor programs. The United Nations has assumed the leadership role for post-conflict efforts aimed at building a peaceful and prosperous Kosovo through UNMIK, as well as through the UN High Commission for Refugees. The European Union is responsible for managing the reconstruction, recovery, and economic development arm of UNMIK and has been involved in humanitarian support through its European Commission Humanitarian Office. The Organization for Security and Cooperation in Europe is responsible for the conduct of elections, and for building democratic institutions. Other multilateral organizations, including the European Bank for Reconstruction and Development, the European Investment Bank, and the World Bank, have formulated support strategies. Many bilateral donors have made contributions to the humanitarian effort and are now developing longer-term reconstruction programs. In addition, there are over 250 non-governmental organizations and relief agencies providing humanitarian aid.
FY 2000 Supplemental Request
An Administration request for a supplemental, FY 2000, SEED appropriation, including $92.8 million for Kosovo, is pending before Congress. Supplemental funding for Kosovo is being sought in FY 2000 because the stability of the province and the region is dependent on a quick, targeted response to the many outstanding needs in Kosovo. At the time the FY 2000 appropriation level for SEED was established by Congress, it was already clear that the Kosovo conflict had resulted in the need for substantial resources for governance, administration, public security and human rights programs as well as to begin essential economic and democratic reform programs. Congress accordingly provided total SEED funding above the President’s original, FY 2000, request level; and $150 million was allocated to Kosovo.
During the past few months, it has become apparent that significantly greater resources are required to stabilize and transform Kosovo into an economically viable, democratically self-governing territory. While European and other donors will provide the lion’s share of reconstruction assistance, it is now clear that the base FY 2000 appropriation must be used principally to fund U.S. contributions to international police, police training, human rights, war crimes investigations, budget support and other governance costs. About $55.5 million of the $150 million Kosovo allocation is available to begin democratic and economic reform programs, and to respond to community needs for small scale infrastructure repairs and other humanitarian requirements. These initial programs need more robust funding now, and in FY 2001, if the underpinnings of a viable economy and a local governance capability are to develop in the near to medium term.
The FY 2000 supplemental request would meet assistance requirements in areas where no FY 2000 budget was available previously; i.e., credit guarantee support, accounting reform (including public, corporate, and banking sectors), business development support, agribusiness support, commercial bank development , and local financial reform. Planned support for the following initiatives would be augmented: privatization, budget reform, commercial law infrastructure development, micro credit financing, elections, judicial reform, infrastructure rehabilitation, community development activities and NGO strengthening.
This would permit expansion of assistance in budget and fiscal management capabilities so that local revenue generation and governance capabilities can begin, at the provincial and municipal levels. Banking reform and commercial law development would accelerate creation of a market-oriented framework. Agribusiness support and micro-credit could be extended to many more villages. Small-scale community-level infrastructure repairs will bring electricity, water, sanitation, and other essential services to more communities. Support to democracy through judicial reform, including legal training and professionalization can be accelerated. Independent media and local governance require more assistance to become viable.
In addition to economic and democratic reform programs, the supplemental request would provide additional support for police costs and budget support for immediate security and governance needs of the UN administration in Kosovo.
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Last Updated on: December 12, 2000 |
