Identifier
Created
Classification
Origin
08PRISTINA388
2008-07-21 16:32:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Pristina
Cable title:  

KOSOVO: DONORS CONFERENCE HIGHLIGHTS PROGRESS,

Tags:  PGOV PREL EAID KV UNMIK 
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RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHPS #0388/01 2031632
ZNR UUUUU ZZH
O 211632Z JUL 08
FM AMEMBASSY PRISTINA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8373
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHNO/USMISSION USNATO PRIORITY 1047
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK PRIORITY
RUCNDT/USMISSION USUN NEW YORK PRIORITY 1507
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UNCLAS SECTION 01 OF 02 PRISTINA 000388 

SENSITIVE
SIPDIS

DEPT FOR INL, EUR/SCE, S/CRS, EUR/ACE,
NSC FOR HELGERSON, USAID/E&E FOR MENARCHIK

E.O. 12958: N/A
TAGS: PGOV PREL EAID KV UNMIK
SUBJECT: KOSOVO: DONORS CONFERENCE HIGHLIGHTS PROGRESS,
EXCEEDS EXPECTATIONS

UNCLAS SECTION 01 OF 02 PRISTINA 000388

SENSITIVE
SIPDIS

DEPT FOR INL, EUR/SCE, S/CRS, EUR/ACE,
NSC FOR HELGERSON, USAID/E&E FOR MENARCHIK

E.O. 12958: N/A
TAGS: PGOV PREL EAID KV UNMIK
SUBJECT: KOSOVO: DONORS CONFERENCE HIGHLIGHTS PROGRESS,
EXCEEDS EXPECTATIONS


1. (SBU) SUMMARY: The Kosovo Donors Conference held in
Brussels on July 11 garnered 1.2 billion euro to support
Kosovo's socio-economic development and gave the Kosovo
Government a high-profile opportunity to tell its story,
informing donors about progress made since independence and
of its future plans and commitments. The EU and U.S. led
pledging with 508 million euro and USD 402.9 million,
respectively. Other significant contributors were Germany
with 100 million euro, Switzerland with 50 million euro,
Turkey with 30 million euro and Saudi Arabia with a USD 50
million "soft loan." Some donors expressed interest in
providing budget support and other debt support through two
World Bank trust funds. Donors and international
institutions both urged the government to take quick and
decisive action on the critical energy sector and to improve
donor coordination. On the whole, the Donors Conference
exceeded expectations both in terms of the financial support
provided and the impressions donors came away with regarding
Kosovo's seriousness to build a democratic, multi-ethnic
state, squarely on the road to EU integration. We will work
closely with the government to ensure that these funds are
spent to keep Kosovo moving forward. END SUMMARY.


2. (U) The Government of Kosovo used the July 11 Donors
Conference -- the first large-scale public opportunity since
independence -- to inform the international community on
progress made and to present its future plans. Prime
Minister Hashim Thaci opened the conference, addressing an
audience that included USAID Administrator and Director of
Foreign Assistance Henrietta Fore, European Commissioner for
Enlargement Olli Rehn, International Civilian Representative
Pieter Feith, participants from all EU member states, members
of the European Parliament, international donors including
Switzerland, Korea, Norway, Japan, Canada, Israel, Kuwait,
Turkey and Saudi Arabia, international financial institutions
(IFIs),UN agencies, NATO, and other regional organizations.
Thaci told the group "Kosovo is a country of new hope, new
vision and new opportunities," and vowed to make Kosovo a

modern, democratic, multi-ethnic state. With the goal of
making promises a reality, he said that his government is
committed to fully implementing the Ahtisaari Plan, improving
governance, entrenching the rule of law, and enhancing social
stability. Thaci said Kosovo has the political will, but
significant assistance is needed to realize these goals. He
also acknowledged that achieving success would require
Kosovo's leaders "to show maturity and exercise restraint and
patience."


3. (U) Commissioner Rehn praised Kosovo's progress thus far
and said that the Donors Conference underscored the European
Union's commitment to Kosovo's future and that it is
important that Europe match its political engagement with
concrete funding. To this end, the EU pledged 508 million
euro over three years in support of Kosovo's socio-economic
development. Rehn lauded the GOK's work on the Medium Term
Expenditure Framework (MTEF),calling it a sound document
that effectively details the government's political and
funding priorities. Rehn voiced his concern, echoed by the
IFIs and other donors, that close coordination would be
necessary to ensure that Kosovo effectively utilize the donor
funds.

Kosovo's Reform Agenda
--------------


4. (U) Aside from confirming donor commitment to Kosovo, the
conference provided a venue for discussion of Kosovo's reform
agenda and financing needs. Key elements of revolved around
fostering an environment conducive to private sector growth
and employment generation in the formal sector, investing in
human capital (especially through better health and
education),and enhancing essential infrastructure
(particularly energy and transport) and public service
delivery. Education Minister Enver Hoxhaj underscored the
Government's commitment to provide equal access to education,
"necessary for building a cohesive and multi-ethnic state."

PRISTINA 00000388 002 OF 002


Donors and the IFIs expressed concern over the lack of
progress made in the energy sector and urged the Government
to take meaningful steps to stop theft and improve
electricity billing and collection as well as the overall
management of the Kosovo Electric Corporation (KEK). Donors
noted that the current situation is a strain on the public
budget and a major obstacle to economic growth. The World
Bank urged Kosovo to take decisive action on development of
the Sibovc lignite mine and on the construction of the large
Kosovo C lignite-powered plant to ensure a reliable energy
supply. Minister of Energy and Mines Justina Pula said her
government will work to make sure that Kosovo does this, and
said steps were underway to purchase new equipment, refurbish
KEK and develop the Sibovc mine.

Pledging
--------------


5. (U) USAID Administrator and Director of Foreign Assistance
Henrietta Fore opened the pledging session, in which the
United States committed USD 402.9 million. Thanking Congress
for bilateral support to Kosovo, she said the country is a
good investment and the USG is committed to helping it
realize its goals of economic development and integration
into Europe. She echoed Rehn's comments that donor
coordination is key to ensuring effective delivery of
assistance. Fore also said that more must be done to improve
targeting of assistance, strengthen monitoring capacity,
provide current information on programs, reduce transaction
costs, and provide greater amounts of budget support.


6. (U) The EU and the U.S. contributions comprised the bulk
of the 1.2 billion euro raised for 2008-2010. Other
significant contributors were Germany (100 million euro,
2008-10),Switzerland (48 million euro, 2008-10),Turkey (30
million euro, 2008-10),Sweden (12 million euro, 2008-10),
Saudi Arabia USD 50 million "soft loan" (long-term, low-rate
loan for health, infrastructure, education),United Kingdom
(23 million pounds, 2008-11) and Norway (16 million euro,
2008-11).

World Bank Trust Funds
--------------


7. (SBU) Prior to the conference the World Bank set up two
trust funds in support of Kosovo's development -- one for
budget support and the other for debt relief. A number of
countries said they would provide contributions to the budget
support trust fund. The USG will provide USD 150 million to
the debt trust fund, and Austria, Denmark and France said
they would consider contributions to this fund "if conditions
are met." (Comment: The World Bank speculates that since
"conditions" (novation of the debt by Serbia) are not likely
in the near term, these promises to contribute may never
materialize. End comment).


8. (SBU) COMMENT: Exceeding expectations, the Kosovo Donors
Conference not only garnered funds to meet the budget gap,
but provided the government with a welcome, high-profile
opportunity to demonstrate its commitment to make Kosovo a
functional and multi-ethnic state squarely on the path to
Europe. Also significant, the MTEF won large praise from the
IFIs and donors, who are now more confident that investment
in Kosovo is a sounder decision. Proof of this growing
confidence is that some donors indicated they will provide
direct budget support, rather than technical assistance,
believing that Kosovo has the tools to effectively manage and
spend this money. As evidenced by the ambitious MTEF, the
government has significant challenges to meet over the next
three years, including building new institutions, reforming
the energy and education sectors, improving infrastructure,
and addressing delivery of social services. We will work
closely with the Government to ensure that it makes the right
decisions to keep Kosovo moving forward.
YAZDGERDI