Half of 1.2 billion Euros is only 600 million Euros (Besa Shahini)

Opinion piece by Besa Shahini, ESI Analyst,

Former Executive Director of Kosovar Stability Initiative

In Brussels on 11 July 2008, the world’s richest countries pledged €1.2 billion for Kosovo’s continuing reconstruction. As a newly independent country, recognized by 20 of the 27 EU members, Kosovo needs financial support to kick-start its economic development. However, will the funds actually be used where they are most needed – for economic development?

According to its critics, Kosovo has already received more than generous financial support. In the first 6 years after the NATO intervention, more than €5 billion was spent on repairing infrastructure, building government institutions and maintaining the UN Mission in Kosovo. With so much expenditure on a relatively small territory, su

rely Kosovo should be ready to stand on its own feet by now?

However, a closer look at the expenditure reveals a very different picture. Of this €5 billion, 42% went on the salaries of international officials, and another 16% went to their local assistances. The balance was contracted and subcontracted through an alphabet soup of international agencies and NGOs, who kept another 20% for their own administrative overheads. So at best, only 20% of these funds was actually available for the reconstruction of Kosovo (For more information on Kosovo’s reconstruction process please see IKS Papers, ‘Reconstruction Survey: Kosovo 2007’ at www.iksweb.org).

But even this 20% – a mere €1 billion – needs closer scrutiny. More than half of this was eaten up by the energy sector, mainly on rehabilitating Pristina’s aging and troubled coal-fired power plant. This has been a highly questionable investment – the electricity utility is able to recover only 30% of its costs from customers, with the result that, even in these hot summer days, power cuts are frequent. The energy sector has crowded out spending on other urgent development priorities – like agriculture (60% of Kosovo’s population lives off subsistence farming) and education (Kosovo has one of the youngest and least educated populations in Europe). Each of these sectors has received less than 5% of donor funding.

In short, when one subtracts the massive costs of the international mission itself, the actual sums invested in the development of Kosovo are very modest indeed.

So how much can we expect of the €1.2 billion pledged to Kosovo last week? Lets take a look at where the money is likely to go.

First, Kosovo has inherited a share of Yugoslavia’s debt to the World Bank, dating back to the 1970s. Some of the money pledged at this donor conference by the United States will be redirected immediately to the World Bank. Of course, this is a great help to a Kosovo government that is struggling to balance its public finances. Yet once again, this is foreign aid that is not available for spending on the development of Kosovo.

Second, a good share of the funds pledged by the EU will go to EULEX , the new EU police mission. This is more about safeguarding Kosovo’s political stability, than it is about promoting development.

At the end, only a fraction of the money pledged will be spend on Kosovo’s economic development. If the international community is serious about helping Kosovo, they must not provide more ‘boomerang’ aid that ends up back in the pockets of highly paid international officials. In addition, if this aid is meant to cover sectors which are not efficient or bring no benefits to the citizens of the recipient country, it should not count as money dedicated for development. If this distinction is not made then the expectations of what can be achieved with the aid are raised, but the results will be ever more disappointing.

Arigona, Europe and Kosovo (Pristina)

A conference in Pristina, Monday, 8 October. The topic is the future of Kosovo. Those still present are struggling with their tiredness, as on many an afternoon at such a conference.

Then a Japanese representative of the EBRD (the European Bank for Reconstruction and Development) gets up and – though soft-spoken – manages to awake the audience. “It is frustrating”, he begins, pointing out that in other countries of the region the EBRD has an annual project envelop of between 60 and 200 million Euro. In Kosovo the total value of EBRD investments is 17 million. This has to do with the unresolved status, he notes. After him an Irish consultant gets up to speak about how to attract FDI. His message is the same: uncertainty deters investors, this needs to be sorted out. Then attention needs to turn to a long list of other problems, from weak infrastructure to a badly educated work force. It is a familiar argument, and as I look around the room I wonder if there is anybody here who has not heared this many dozens of times before.

Then it is my turn. I present some of the results of previous ESI research. My ESI colleagues and myself have done so many times in the past year, to audiences of Kosovo students, to the Washington think tank community, to European officials, at conferences from Paris to Istanbul. Our analysis is compelling and alarming, or so we thought when we first presented it. At the heart of it is an idea that is deeply unattractive to European policy makers, however: that Kosovo, to develop, will continue to require serious work migration to EU countries and that EU countries should find a way to organise schemes of managed work migration in the near future.

As I speak I feel a sense of futility is rising from within: I survey the half empty room and I wonder for a moment whether anybody is ever listening to such arguments. Even if people listen, if arguments are picked up in the international press, even if the head of UNMIK and the head of the EU office (whom I will meet the next day) read and like our reports on Kosovo, does it matter? Do any of these conferences, meetings, debates, articles, reports make any difference?

Making the case for managed work migration from Kosovo to other European countries seems like tilting at windmills. Saying that Kosovo cannot afford to waste any more time and must focus on the explosive social crisis in its countryside and its medium term development is no less Quixotic.

We published our report on the crisis of rural Kosovo in September last year. Since then the diplomatic games surrounding Kosovo’s future have only become more complicated, a dance seemingly without movement.

It is October 2007 and UNMIK is still the supreme authority in Kosovo. An often announced international donors conference has just been postponed without a new date. Most of the Kosovo political elite I meet in Pristina is still spending its days preparing for meetings to discuss the status of the province.

To complete the picture, there is news from my home country, Austria, where a young Kosovar woman named Arigona went into hiding to escape deportation. Her’s is not an isolated story, unfortunately, as Austria appears ready to send back significant numbers of often already integrated refugees from Kosovo.

The story of Arigona connects the blindness of European (in this case Austrian) policies with the plight of rural Kosovo. But will even this case – which received a lot of media attention in Austria – change policy?

A friend calls me and asks me to write an op-ed on the issue for an Austrian magazine. To try to shake of the sense of futility, I agree. One never knows, and certainly an eloquent and pretty Albanian teenager is able to reach more people with her arguments than the best policy paper disseminated through the internet.