Kosovo - half a step forward, three steps back

By bne IntelliNews August 2, 2011

Alex Young in Belgrade -

Talks between Serbia and the now independent province of Kosovo are never far from breakdown, and so a minor difference in opinion over state insignia quickly spiralled into a trade dispute, an abortive seizure of checkpoints on July 26 and deathly violence.

Despite reaching a tentative agreement in early-July on civil registry documents, the mutual recognition of academic diplomas and freedom of movement (which would see Serbia accept Kosovo ID cards), the latest round of talks between the two adversaries had to be postponed due to differences in opinion over the appearance of state insignia, in particular on Kosovo's customs stamps.

In apparent retaliation for the rejection of the "Republic of Kosovo" customs stamps, Kosovo government quickly moved to ban imports from Serbia and imposed a 10% tax on imports from Bosnia-Herzegovina. With 12% of Kosovo's imports (roughly €300m) coming from Serbia, its second-largest trading partner, the move hits the latter hard - particularly at a time when it is keen to demonstrate its credentials as a candidate for membership of the EU. Securing the aforementioned checkpoints in the Serb-dominated north of the country was deemed key to enforcing the decision, but prompted a stinging reaction by those opposed to Kosovo's independence.

The Kosovo Police Service's (KPS) heavy-handed attempts to seize control of the administrative line checkpoints at Jarinje and Brnjak on July 26 prompted clashes that led to the death of a KPS officer and an arson attack on the Jarinje checkpoint by protesting Serbs, leaving the Kfor peacekeeping force to take over management the crossings.

All this comes at a bad time for Kosovo, which finds itself under increasing pressure from the international community that did so much bring an independent Kosovo into the world, but which is now becoming increasingly irritated with its wayward prodigy.

Over the coming weeks, attention will again return to the alleged mismanagement of EU donor assistance and the controversial expropriation of public land to a private beneficiary without an open and transparent bidding process.


The European Court of Auditors (ECA) - with the European Parliament watching closely - is set to proceed with an audit of all EU-funded projects in Kosovo since 2007. The Kosovo Electric Corporation (KEK) and Pristina International Airport will certainly be in the spotlight, having previously come under close scrutiny. As the largest donor in Kosovo - having provided over €2bn of assistance since 1999 - the findings will lead to stricter conditions on future aid from an ever more financially cautious EU and increasingly financially strapped Kosovo.

If previous investigations into fraud accusations are anything to go by, however, progress will be slow and arduous. Numerous problems abound. Though the UN Mission in Kosovo (UNMIK) transferred pending cases to the Kosovo Special Prosecution Office - which is run by the EU's rule-of-law mission (Eulex) - the vast majority have remained untouched; though Eulex did pursue several cases concerning Kosovo Post and Telecom (PTK).

As Andrea Lorenzo Capussela, a former head of the Economics and Fiscal Affairs Unit of the International Civilian Office (ICO), Kosovo's main overseer, tells bne, "many EU-funded projects are implemented through the Kosovo budget and with the help of consultants, so the ECA might meet difficulties in gathering documents from the local authorities and interviewing consultants, who might have left for other assignments."

Capussela adds that, "the overall performance of the Kosovo Trust Agency [which manages Kosovo's socially-owned enterprises], and of the Privatisation Agency of Kosovo, was rather unsatisfactory, which might imply that they made inefficient use of the funds they received by the EU."

Aside from such obstacles, which are further compounded by a lack of human resources, there is a distinct lack of political will - on the part of both the international community and domestic political elites - to investigate possible instances of mismanagement, let alone pursue possible indictments.

Capussela has also vehemently criticised the expropriation of land from a publicly-owned company to allow the American University in Kosovo (AUK) to construct an educational complex, without a competitive bidding process and for compensation that is likely to be well below the plot's market value.

As Capussela explains, this deal was designed by the elite of Kosovo and involves powerful vested interests. "The deal is manifestly unacceptable, but the supervisor of Kosovo, the ICO [International Civilian Office], chose not to object to it, and the EU rule of law mission, Eulex, decided that no investigation about it was warranted. This implies that the system of international supervision established in Kosovo is unable, or unwilling, to confront powerful interests."

Capussela goes on to say that while the approach taken by ICO and Eulex might have been dictated by political realism given it involves interests linked to the US, such a choice merely further undermines the rule of law and aids the growing power of vested interests, which are constraints on economic growth and a serious obstacle to democratic development. "Accepting this deal undercuts the efforts to strengthen the rule of law," he says.

With Kosovo mired in accusations of corruption and struggling for international recognition - from states and foreign investors alike - the need to tackle the obstacles to democratic transition grow ever more acute. When quizzed on what the international community could do to strengthen the fight against corruption in Kosovo, Capussela insists that it should begin to demand action by the Kosovo authorities. "In three years, I have seen little more than lip service to the need of fighting corruption," he says.

Whilst the mantra about "improving the lives of all citizens" has underpinned negotiations between Pristina and Belgrade, the same does not seem to apply to international oversight of Kosovo.

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