EU DONOR COORDINATION IN THE BALKANS (KOSOVO)

UNCLAS SECTION 01 OF 02 BRUSSELS 000034

SIPDIS

SIPDIS

USAID FOR E&E AND ODP; STATE FOR EUR/ACE, EUR/SCE, EUR/ERA

E.O. 12958: N/A
TAGS: EAID PREL EUN XH ZL
SUBJECT: EU DONOR COORDINATION IN THE BALKANS (KOSOVO)


1. SUMMARY: Kosovo generated the most interest at an all
day donor coordination meeting hosted by the European
Commission (EC) on December 13 to solicit bilateral input in
advance of a new EC strategy for the Balkans. The meeting
was attended by representatives from individual European
Union (EU) countries as well as other bilateral donors such
as Norway, Switzerland and the US. At the end of the
meeting, EC representatives affirmed that they would work
with the World Bank to co-sponsor a donor conference once the
"final status" of Kosovo is resolved, emphasizing that "when
conditions are ready, the donor conference will be launched"
and "please convey back to your capitals the need to
prepare". END SUMMARY


2. BACKGROUND: The EC recently hosted an all-day meeting in
Brussels with a view toward seeking bilateral donor input as
part of their development of a new assistance strategy for
the Balkans. Opened by Michael Leigh, Director-General for
Enlargement, the event was partly a "show and tell" involving
contributions from individual donors. The USAID
Representative to the EU attended on behalf of the US; other
non-EU members represented included Switzerland and Norway.
This is the first of a series of cables summarizing current
programs and future plans for various donors now working in
the Balkans.


3. EUROPEAN COMMISSION (EC): Provisional funding levels for
a new three-year program cycle for Kosovo are estimated at
around 258 million euros, including 124 million euros for
2008, 66 million euros for 2009 and 64 million euros for

2010. Once the "final status" for Kosovo is resolved, the EC
expects to join with the World Bank to co-host a major
international donor conference. Planning teams are underway
or planned. Expectations are high that a "goodly amount"
will be pledged, with those present urged to "please convey
back to your capitals the need to prepare".


4. Looking ahead to future programs in Kosovo, the EC
identified low capacity and an inability to effectively
absorb large amounts of international aid as a central
concern. Other important issues include vulnerable groups
and good governance. Likely EC programs include legal and
policy advice, business development, energy, food safety
standards, cultural heritage, local governance, education and
return and reintegration.


5. Finally, EC officials noted that any future donor
conference needs to emphasize (1) key constraints in Kosovo
and how to address them; and (2) "lessons learned" from
elsewhere in the Balkans that could be usefully applied in
Kosovo. Ensuring Kosovo "ownership" of all future donor
assistance is a vital concern. Major EC objectives for any
future strategy period include support to help Kosovo meet
international commitments, including maintenance of a
multi-ethnic society. With regard to international
commitments, the USG was specifically commended for its
interest in debt relief.


6. ITALY: The Italian aid representative described Kosovo
as an "unprecedented challenge" for the EU. He also noted
ongoing Italian support for cultural heritage programs,
including church restoration. Current programs include 1.4
million euros for public utilities as well as support for the
university polyclinic in Pristina. Areas of future interest
include capacity building, health, education and cultural
heritage.


7. FINLAND: The Finnish view Kosovo as a "major priority."
The Finnish representative noted that current Finnish
programs focus on special needs education; health, including
training for nurses; disabled populations; vulnerable groups,
including both women and minorities; and local governance.
Finland anticipates providing 13 million euros for Kosovo
over the next four years, with another 2.2 million euros
available for civil-military projects. Any future programs
will almost certainly maintain a strong interest in special
education and municipal development.


8. SWEDEN: The Swedish aid budget for Kosovo, now estimated
at 80 million Swedish kroners annually, is expected to
increase. A new strategy is being prepared. Currently, the
aid program is managed by five staffers based in Pristina who

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focus on democracy, governance and economic growth. Specific
programs include support for municipal property taxes,
probation services, civil society, rural credit, land
administration and an ombudsman office. Major Swedish
concerns include corruption, absorptive capacity and a
potentially "very weak" state.


9. DENMARK: The current Danish programs focus on vulnerable
groups, returnees and economic development, especially
microfinance. A new 10 million euro vocational training
initiativ will be launched shortly. Also, the Danes are
working with the Swiss on a credit facility. The new Danish
aid strategy for the Balkans accords "highest priority" to
Kosovo.


8. NORWAY: Ongoing Norwegian programs focus on democracy,
capacity building and minority rights. Funding is mostly
channeled through the United Nations as well as local groups
and Norwegian NGOs. Specific programs include legal
assistance for returning refugees and a housing program
focused on the Roma community. Other areas of interest
include support for the Kosovo Property Agency, small
business, animal husbandry and the Kosovo Institute for
Journalism and Communications. As with many donors,
institutional capacity is a central concern. Looking ahead,
Norway wants to retain "flexibility" but anticipates that
"funding levels will almost certainly increase".


10. SWITZERLAND: In terms of its aid to the Balkans,
Switzerland assigns Kosovo its "highest priority." Swiss
funding for 2008 is estimated at 13 million euros, with more
planned once "final status" is settled. Areas of interest
include good governance, decentralization, rural development,
entrepreneurship, vocational training, water supply and
minority protection.


11. UNITED KINGDOM (UK): The UK strongly endorsed "one EU
development strategy for Kosovo," emphasizing in particular
the need for "radical unification" among EU donors. It
welcomed the EU emphasis on economic growth. Repeating
absorptive capacity as a huge concern, it suggested that new
programs should have "less technical assistance and more
investment." The UK representative noted that their current
program through DFID is around three million pounds annually,
with another three million pounds provided through a
"conflict assistance" mechanism.


12. More broadly, the UK urged that all donors working in
Kosovo adopt a cohesive, unified strategy. Urging donors to
look for "less project-like" mechanisms, it stated that
Kosovo would be "overwhelmed" by too many delivery systems.
It noted governance and public administration as areas of
particular concern. Also, the UK emphasized the importance
of "extractive industry transparency," especially related to
a new lignite mine. Finally, the UK indicated that it would
be involved in Kosovo for at least the next three years, with
programs focused on economic growth (including energy, skills
and commercial law),good governance (including
decentralization and statistics),rule of law and improved,
government-led donor coordination systems.


13. COMMENT: Although basically a working level meeting, the
uniformity of views on the importance of Kosovo for bilateral
donors working in the Balkans was striking, with virtually
everyone present affirming Kosovo as their "most important
priority." Similarly, there is widespread consensus that weak
institutions and limited absorptive capacity will be key
concerns in Kosovo during the coming years. More broadly,
the sense that significant funds will be made available for
development purposes in Kosovo is tinged with some skepticism
about the extent to which these funds will be effectively
programmed and utilized.

MURRAY