Identifier
Created
Classification
Origin
07PRISTINA405
2007-05-22 15:21:00
CONFIDENTIAL
Embassy Pristina
Cable title:
KOSOVO: POOR POE BOARD NOMINATIONS RAISE CONCERNS
how-toVZCZCXYZ0007 RR RUEHWEB DE RUEHPS #0405/01 1421521 ZNY CCCCC ZZH R 221521Z MAY 07 FM USOFFICE PRISTINA TO RUEHC/SECSTATE WASHDC 7383 INFO RUEATRS/DEPT OF TREASURY WASHDC RUCPDOC/USDOC WASHDC RHEHNSC/NSC WASHDC RUCNDT/USMISSION USUN NEW YORK 1161
C O N F I D E N T I A L PRISTINA 000405
SIPDIS
SIPDIS
DEPT PLEASE PASS TO EUR/SCE EUR/ACE
STATE PLEASE PASS TO USAID FOR EE/ECA AND EE/DGSR
STATE PLEASE ALSO PASS TO TREASURY-EMEYER
E.O. 12958: DECL: 05/16/2017
TAGS: ECON KPRV ENRG PGOV PREL YI
SUBJECT: KOSOVO: POOR POE BOARD NOMINATIONS RAISE CONCERNS
ABOUT THE INTEGRITY AND OVERSIGHT OF PUBLIC UTILITIES
REF: A. PRISTINA 260
B. 06 PRISTaP\r-to the board of
directors for the publicly-owned enterprises (POEs) on May 14
has raised concerns about the government's commitment to
sound corporate governance practices, as well as UNMIK's own
commitment to exercise proper oversight of POEs. There are
clear divisions within UNMIK between the senior leadership,
who want to pull back and give the PISG more authority to
make decisions, and the Kosovo Trust Agency (KTA) and UNMIK's
Pillar IV, which want to exercise greater oversight to
protect POEs and other economic sectors from political
influence. On a positive note, the European Commission will
provide an advisor to Kosovo to help draft legislation to
establish corporate governance structures in accordance with
OECD principles. Until this legislation is drafted and
enacted, USOP will continue to remind both UNMIK and the PISG
to take seriously their respective responsibilities in order
to protect the integrity and viability of POEs, which are
important to Kosovo's economic development because they will
attract serious foreign investment. End Summary.
UNMIK RELUCTANT TO EXERCISE ITS AUTHORITY DUE TO ITS
SHORT-TERM STATUS AND RELATIONS WITH PISG...
2. (C) Prior to a May 14 Kosovo Trust Agency (KTA) board
meeting to approve nominees to Kosovo's publicly owned
enterprises (POEs),Econoff met on May 9 with Paul Acda, Head
of UNMIK's Pillar IV, and Andreas Wittkowsky, Deputy Head of
Pillar IV, to raise concerns about nominating overtly
political or unqualified candidates and to urge UNMIK to
exercise its authority to enforce KTA's guidelines. Acda
said that at a recent meeting with the SRSG Joaquim Ruecker
and PDSRSG Steven Schook to discuss the nominations, he was
told by Ruecker not to be "too purist" regarding this
process. Despite concerns from the U.S., World Bank and
others that the proposed presence of Minister of Energy and
Mines (MEM) Ethem Ceku on the Kosovo Energy Corporation (KEK)
board violated good governance practices, Acda noted that the
SRSG and PDSRSG were in favor of electing Ceku to the board
due to the precedent already established in 2005, when
Ruecker (as Head of Pillar IV) and the minister were allowed
to sit on the KEK board temporarily due to "emergency
circumstances," which they argued were still in place. (Note:
Ceku's presence on the board presents conflict of interest
issues regarding his ministry's involvement in the large
"Kosovo C" energy sector development tender and the
internationally-recognized public policy practice of not
allowing a ministry to administer a public utility. Ceku is
also actively involved in politics as a high-ranking member
of the Alliance for the Future of Kosovo (AAK) party. End
Note) Acda maintained that h%4QTQQsive posture on this issue
because, as they put it,
QQ]fg_the final status process reaches a
conclusion, and senior UNMIK leadership does not want create
any unnecessary problems with Kosovar leaders."
...BUT OTHER UNMIK OFFICIALS BELIEVE THAT THEY HAVE A
RESPONSIBILITY TO DO THEIR JOBS
3. (C) There are UNMIK officials who disagree, however, and
believe that the UN should take a more forceful role, even
its waning days, to ensure proper governance standards are
upheld in Kosovo. Jim Wasserstrom, Head of UNMIK's Office of
Oversight for POEs, noted to USOP that he has raised concerns
about overtly political and unqualified POE board nominations
with the SRSG's Office, the Office of Legal Affairs, and
Pillar IV. He noted disappointment with UNMIK's weak
posture, saying that what the UN does (or does not do) now to
ensure proper POE governance will impact public utilities in
the next few years. In another conversation, Chiara Bronchi,
Pillar IV's (economic policy) Director of Fiscal Affairs and
a KTA Board member, expressed her frustration with senior
UNMIK leadership on this issue and described them as being in
"check-out mode" on nearly all relevant economic concerns,
including for example providing KEK serious support to
improve electricity bill collection rates.
KTA BOARD APPROVES QUESTIONABLE PISG NOMINEES FOR POE BOARDS
WITH LIMITED UNMIK OVERSIGHT
4. (C) With this as background, the KTA held its
extraordinary May 14 board of directors meeting to approve
new boards of directors for the following POEs, based on PISG
recommendations: KEK, Post and Telecom of Kosovo (PTK),
Pristina International Airport (PIA),and Kosovo Railways.
The KTA guidelines require that board members have at least
five years of relevant experience in that particular field or
another comparable profession, and that POE board member
candidates have no active involvement in politics. The KTA
Board approved the nominations of MEM Ethem Ceku, Minister of
Finance and Economy Haki Shatri, Rexhepi, and two KTA
officials (internationals) as KEK board members. According
to an internal KTA memo which vetted each candidate and made
recommendations about their eligibility as board members,
neither Ceku or Rexhepi met KTA's qualifications based on the
two criteria of relevant professional experience and no
active involvement in politics. (Note: Shatri was appointed
to the KEK board via general consensus because of the
importance of KEK as a consumer of Kosovo budgetary
resources. End Note)
5. (C) Mindful that they were violating the guidelines for
nominating POE boards of directors and that this was not a
best practice, the KTA board purposely passed a resolution
stating that the selection of the new KEK board was based on
an emergency situation in the energy sector and noting that
the nominees would serve only until the end of the year and
that this decision would not serve as a precedent. The KTA
board also voted to provide special oversight of the KEK
board in order to try to prevent any heavy-handed political
interference in the running of the energy utility.
6. (C) On other POE board nominee decisions, the KTA board
rejected two PISG nominees for the PIA board and recommended
two reputable internationals, but one questionable Kosovar
was elected: Nasser Osmani, a member of the Kosovo Assembly
(Democratic League of Kosovo (LDK) party) and chairman of the
Budget and Finance Committee. Regarding the PTK board, the
KTA board rejected two questionable nominees, in particular
Ramiz Lladrovci, a USG E.O. listee, after quiet and early
USOP intercession with KTA board members. The KTA board
rejected two nominees for the Kosovo Railways board and
recommended one qualified Kosovar Albanian professional, one
minority candidate (ethnic Turkish leader Mahir Yagcilar,
also a member of the Kosovo Assembly) and KTA Managing
Director Jasper Dick. On June 7 the KTA board will vote to
approve the replacement nominees for the PTK, PIA and Kosovo
Railways boards.
EUROPEAN COMMISSION TO PROVIDE TECHNICAL ASSISTANCE TO HELP
DRAFT LAW ON POE CORPORATE GOVERNANCE
7. (C) On a positive note, Wasserstrom said that the European
Commission (EC) will hire an expert to help Kosovo draft a
law on POE governance in accordance with Organization of
Economic Cooperation and Development (OECD) principles of
corporate governance. He said that the expert would be in
Kosovo by late May or June. He noted that there is still an
ongoing debate within UNMIK and the PISG as to whether the
POEs should be overseen by an independent holding company
under the authority of the Kosovo Assembly, or if the public
utilities should be administered by the PISG, with
anti-corruption structures and oversight requirements in
place to ensure that they follow best practices in corporate
governance (ref C).
COMMENT
8. (C) While the outcome of this series of POE board
appointments was not ideal, USOP engagement did focus UNMIK
and PISG attention on the issue and prevent the worst
excesses. We welcome the EC's assistance to help Kosovo
draft legislation to ensure that corporate governance best
practice principles guide the administration and oversight of
the public utilities. Until this legislation is drafted and
enacted, USOP will continue to urge both UNMIK and the PISG
to take seriously their respective responsibilities to
protect the integrity and viability of POEs, which are
important to Kosovo's economic development because they will
attract serious foreign investment once they are concessioned
or fully privatized.
9. (C) COMMENT, Cont. It is increasingly apparent that
UNMIK is m^QeMQ3fjsition
efforts ranging widely from protection of cultural heritage
sites to corporate governance. We will step in where
possible, coordinating our approaches with the International
Civilian office and other international missions to maximize
leverage whereever possible. END COMMENT.
KAIDANOW
SIPDIS
SIPDIS
DEPT PLEASE PASS TO EUR/SCE EUR/ACE
STATE PLEASE PASS TO USAID FOR EE/ECA AND EE/DGSR
STATE PLEASE ALSO PASS TO TREASURY-EMEYER
E.O. 12958: DECL: 05/16/2017
TAGS: ECON KPRV ENRG PGOV PREL YI
SUBJECT: KOSOVO: POOR POE BOARD NOMINATIONS RAISE CONCERNS
ABOUT THE INTEGRITY AND OVERSIGHT OF PUBLIC UTILITIES
REF: A. PRISTINA 260
B. 06 PRISTaP\r-to the board of
directors for the publicly-owned enterprises (POEs) on May 14
has raised concerns about the government's commitment to
sound corporate governance practices, as well as UNMIK's own
commitment to exercise proper oversight of POEs. There are
clear divisions within UNMIK between the senior leadership,
who want to pull back and give the PISG more authority to
make decisions, and the Kosovo Trust Agency (KTA) and UNMIK's
Pillar IV, which want to exercise greater oversight to
protect POEs and other economic sectors from political
influence. On a positive note, the European Commission will
provide an advisor to Kosovo to help draft legislation to
establish corporate governance structures in accordance with
OECD principles. Until this legislation is drafted and
enacted, USOP will continue to remind both UNMIK and the PISG
to take seriously their respective responsibilities in order
to protect the integrity and viability of POEs, which are
important to Kosovo's economic development because they will
attract serious foreign investment. End Summary.
UNMIK RELUCTANT TO EXERCISE ITS AUTHORITY DUE TO ITS
SHORT-TERM STATUS AND RELATIONS WITH PISG...
2. (C) Prior to a May 14 Kosovo Trust Agency (KTA) board
meeting to approve nominees to Kosovo's publicly owned
enterprises (POEs),Econoff met on May 9 with Paul Acda, Head
of UNMIK's Pillar IV, and Andreas Wittkowsky, Deputy Head of
Pillar IV, to raise concerns about nominating overtly
political or unqualified candidates and to urge UNMIK to
exercise its authority to enforce KTA's guidelines. Acda
said that at a recent meeting with the SRSG Joaquim Ruecker
and PDSRSG Steven Schook to discuss the nominations, he was
told by Ruecker not to be "too purist" regarding this
process. Despite concerns from the U.S., World Bank and
others that the proposed presence of Minister of Energy and
Mines (MEM) Ethem Ceku on the Kosovo Energy Corporation (KEK)
board violated good governance practices, Acda noted that the
SRSG and PDSRSG were in favor of electing Ceku to the board
due to the precedent already established in 2005, when
Ruecker (as Head of Pillar IV) and the minister were allowed
to sit on the KEK board temporarily due to "emergency
circumstances," which they argued were still in place. (Note:
Ceku's presence on the board presents conflict of interest
issues regarding his ministry's involvement in the large
"Kosovo C" energy sector development tender and the
internationally-recognized public policy practice of not
allowing a ministry to administer a public utility. Ceku is
also actively involved in politics as a high-ranking member
of the Alliance for the Future of Kosovo (AAK) party. End
Note) Acda maintained that h%4QTQQsive posture on this issue
because, as they put it,
QQ]fg_the final status process reaches a
conclusion, and senior UNMIK leadership does not want create
any unnecessary problems with Kosovar leaders."
...BUT OTHER UNMIK OFFICIALS BELIEVE THAT THEY HAVE A
RESPONSIBILITY TO DO THEIR JOBS
3. (C) There are UNMIK officials who disagree, however, and
believe that the UN should take a more forceful role, even
its waning days, to ensure proper governance standards are
upheld in Kosovo. Jim Wasserstrom, Head of UNMIK's Office of
Oversight for POEs, noted to USOP that he has raised concerns
about overtly political and unqualified POE board nominations
with the SRSG's Office, the Office of Legal Affairs, and
Pillar IV. He noted disappointment with UNMIK's weak
posture, saying that what the UN does (or does not do) now to
ensure proper POE governance will impact public utilities in
the next few years. In another conversation, Chiara Bronchi,
Pillar IV's (economic policy) Director of Fiscal Affairs and
a KTA Board member, expressed her frustration with senior
UNMIK leadership on this issue and described them as being in
"check-out mode" on nearly all relevant economic concerns,
including for example providing KEK serious support to
improve electricity bill collection rates.
KTA BOARD APPROVES QUESTIONABLE PISG NOMINEES FOR POE BOARDS
WITH LIMITED UNMIK OVERSIGHT
4. (C) With this as background, the KTA held its
extraordinary May 14 board of directors meeting to approve
new boards of directors for the following POEs, based on PISG
recommendations: KEK, Post and Telecom of Kosovo (PTK),
Pristina International Airport (PIA),and Kosovo Railways.
The KTA guidelines require that board members have at least
five years of relevant experience in that particular field or
another comparable profession, and that POE board member
candidates have no active involvement in politics. The KTA
Board approved the nominations of MEM Ethem Ceku, Minister of
Finance and Economy Haki Shatri, Rexhepi, and two KTA
officials (internationals) as KEK board members. According
to an internal KTA memo which vetted each candidate and made
recommendations about their eligibility as board members,
neither Ceku or Rexhepi met KTA's qualifications based on the
two criteria of relevant professional experience and no
active involvement in politics. (Note: Shatri was appointed
to the KEK board via general consensus because of the
importance of KEK as a consumer of Kosovo budgetary
resources. End Note)
5. (C) Mindful that they were violating the guidelines for
nominating POE boards of directors and that this was not a
best practice, the KTA board purposely passed a resolution
stating that the selection of the new KEK board was based on
an emergency situation in the energy sector and noting that
the nominees would serve only until the end of the year and
that this decision would not serve as a precedent. The KTA
board also voted to provide special oversight of the KEK
board in order to try to prevent any heavy-handed political
interference in the running of the energy utility.
6. (C) On other POE board nominee decisions, the KTA board
rejected two PISG nominees for the PIA board and recommended
two reputable internationals, but one questionable Kosovar
was elected: Nasser Osmani, a member of the Kosovo Assembly
(Democratic League of Kosovo (LDK) party) and chairman of the
Budget and Finance Committee. Regarding the PTK board, the
KTA board rejected two questionable nominees, in particular
Ramiz Lladrovci, a USG E.O. listee, after quiet and early
USOP intercession with KTA board members. The KTA board
rejected two nominees for the Kosovo Railways board and
recommended one qualified Kosovar Albanian professional, one
minority candidate (ethnic Turkish leader Mahir Yagcilar,
also a member of the Kosovo Assembly) and KTA Managing
Director Jasper Dick. On June 7 the KTA board will vote to
approve the replacement nominees for the PTK, PIA and Kosovo
Railways boards.
EUROPEAN COMMISSION TO PROVIDE TECHNICAL ASSISTANCE TO HELP
DRAFT LAW ON POE CORPORATE GOVERNANCE
7. (C) On a positive note, Wasserstrom said that the European
Commission (EC) will hire an expert to help Kosovo draft a
law on POE governance in accordance with Organization of
Economic Cooperation and Development (OECD) principles of
corporate governance. He said that the expert would be in
Kosovo by late May or June. He noted that there is still an
ongoing debate within UNMIK and the PISG as to whether the
POEs should be overseen by an independent holding company
under the authority of the Kosovo Assembly, or if the public
utilities should be administered by the PISG, with
anti-corruption structures and oversight requirements in
place to ensure that they follow best practices in corporate
governance (ref C).
COMMENT
8. (C) While the outcome of this series of POE board
appointments was not ideal, USOP engagement did focus UNMIK
and PISG attention on the issue and prevent the worst
excesses. We welcome the EC's assistance to help Kosovo
draft legislation to ensure that corporate governance best
practice principles guide the administration and oversight of
the public utilities. Until this legislation is drafted and
enacted, USOP will continue to urge both UNMIK and the PISG
to take seriously their respective responsibilities to
protect the integrity and viability of POEs, which are
important to Kosovo's economic development because they will
attract serious foreign investment once they are concessioned
or fully privatized.
9. (C) COMMENT, Cont. It is increasingly apparent that
UNMIK is m^QeMQ3fjsition
efforts ranging widely from protection of cultural heritage
sites to corporate governance. We will step in where
possible, coordinating our approaches with the International
Civilian office and other international missions to maximize
leverage whereever possible. END COMMENT.
KAIDANOW