IAC endorses 2001 budget and progress to self-sustainability

The nearly DM 740 million budget approved by the  Interim Administrative Council at its final meeting of 2000 is ambitious.

As elsewhere, the second full-year budget of the Joint Administration provides the wherewithall for the central administration, the administrative departments and the municipalities to deliver the public services expected of them.

But it is also a statement designed to assure Kosovo's friends and donors that the province's basic finances are fundamentally in good order, and that the adminstrative budget is properly balanced.

Good for Kosovo and donors alike, the General Budget 2001 relies significantly less on donor generosity than in 2000. DM 202 million (32 per cent of revenue compared to 50 per cent) will come from donor grants). And of that DM 40 million will be reserved for electricity imports and used only if required.

Drawn up by the Central Fiscal Authority (CFA), which worked closely with the departments, the budget document is a major step towards a truly consolidated budget. It recognizes the nexus between capital and operating costs, explains the Central Fiscal Authority Co-Head, Tony Preston-Stanley-the idea that investment in roads, buildings and vehicles this year will increase maintenance and running costs next year. In addition, preparating the budget itself, negotiating with donors, with UNMIK and with all levels of the JIAS, was a learning experience for the Kosovar professionals. Very probably it is they who will be in charge of the whole process in years to come.

Key features accepted by  the IAC include:
- A significant increase in Kosovo-generated revenue-from around DM 220 million in 2000 to DM 338 million in 2001. Revenue from taxes on businesses and VAT will match that from customs and taxes after mid-2001
- A rise in the general government budget from DM 430 million to DM 500 million, of which municipalities' share rises from 4.4 to 5.5 per cent.
- Education, health, social welfare and justice remaining the top priorities. Collectively and individually they maintain their share of total expenditure.
- A reduction in subsidies to the energy sector by almost 50 per cent.
- Salaries and numbers of civil servants similar to 2000, but some staff increases in smaller departments, e.g. the CFA, agriculture, labour and employment, public services and youth.
- Significant increases in spending on goods and services by nearly one third-including additional funding in a new budget category of Minor New Capital Outlays (e.g. cars, computers and refurbishment).

Priorities
Along with the budget, the IAC effectively endorsed all the priorities  proposed by UNMIK.
Top policy priority is to maintain progress towards self-sustainabilty: revenues have to improve, overall expenditure growth has to be contained. The  willingness of donors to support general recurrent budget financing-their contribution to rebuilding a stable, sustainable and autonomous Kosovo-is therefore crucial. Strengthening the revenue base is only part of it, CFA points out: the Joint Administration has to avoid making long-term commitments which the future Kosovo may not be able to afford.

Health, education, municipalities 
Health and social welfare together will spend 35 per cent of the general government budget. Welfare gets an increase of DM 15 million on the expected expenditure for 2000.  This will support up to 60,000 households, the elderly and very young, those unable to work for reasons of health or long-term problems, and war victims and their families. Health spending will rise nearly 54 per cent, to DM 104 million. Of the DM 35 million extra, some DM 12 million will be retained by the health system from a more transparent scheme of copayments and other revenue.

Additional resources for education and science (which get 24 per cent of the general government budget) are to improve educational outcomes and accommodate increases in the student population. While some outlays will go on improving professional standards of teachers, much of the increase is for goods and services-textbooks, scientific equipment and some school refurbishment.

Municipalities are to enjoy a 45 per cent increase in general grants. They will also be authorized to retain the first DM 6 million of their own revenues from fees, service charges and operation municipally-owned businesses, and to keep half of anything in excess of that.

For law and order, the Kosovo Police Service will be funded to recruit to its full level of over 4,000 police and 490 support staff. There is also provision for a possible improvement in pay and allowance structure that reflects the increase responsibility of the KPS for a 24-hour police presence throughout the year. The justice system will have an additional DM 3.1 million to pay for the 220 more judges and court officials. These are required for the planned 52 fully-functioning courts and 13 public prosecutor offices.

While the CFA was allocated additional funds to develop high quality, high integrity customs and taxation services, the Authority resisted domestic pressure for a general increase in public service salaries. Budget sector wages are already regionally competitive, it argues. Any increases should be offset by staff reductions. CFA admits that the public service is still small by regional standards. But numbers will grow in any case in 2002 and beyond-as international staff leave and the revenue base has to support their local replacements.

Risks
The CFA views its revenue forecast of DM 500 million as the limit of  "sensible estimates" given its dependence on passage of regulations-VAT in particular-and on some increase in compliance. There is also provision for DM 6 raised from property taxes, the feasibility of which is not yet clear.
On the plus side for wage earners, there is no provision for income tax. This is despite the tax base being about half that of Albania and one fifth of the majority of the region.

Briefs . . . .

A draft Regulation on Pledges endorsed by the Interim Administrative Council before the holiday break completes a package of four commercial regulations seen as fundamental for Kosovo's economic revival. Joining regulations on foreign investments, business organization and sale of goods, the Pledges regulation will provide Kosovo with a modern law regulating all forms of secured transactions. Once the necessary registration agency is established, Kosovars will be able to use all forms of movable property as security for loans and business or personal purposes.

Aid funding is now firmly on a development path, with no major direction changes expected, DSRSG Andy Bearpark told the last donors coordination meeting of 2000. From a donors perspective, three sectors were underlined: telecommunications would move into a second developmental stage (after the first one of restarting the networks);  a Kosovo Invest-ment Agency would help attract private investment now that the whole commercial law package is in place; and with initial work on Trepca rehabilitation now complete, strategic planning papers will be available in 4-6 weeks.  

Preparatory to Kosovo-wide elections this year, the Central Election Commission is being reconstituted with new members and extended responsibilities.  Regulation 2000/65, signed by the SRSG on 19 December amends 2000/21 but leaves the CEC's size and composition (9 Kosovars and 3 internationals) unchanged. The new members will reflect the outcome of the municipal elections last October, and will be empowered to prepare and conduct the central elections expected in 2001.

A new vision of NGOs' role and impact on public life will be needed in 2001 and beyond, the first annual Forum of Kosovar NGOs concluded. Sponsored by OSCE and the Kosovar Civil Society Foundation, the Forum highlighted the role of civil society, the self-empowerment of the NGO community and the participation of minority NGOs in the reconciliation process.

Electronic data entry of civil registration information started on a trial basis at the Central Processing Centre. Transmission of part of the data to the German firm contracted to produce Travel Documents was successful. Meanwhile all 30 Municipal Civil Registration Centres are fully staffed, equipped and open for business. Regulation 2000/13 sets out their scale of  work.
 
Help in setting up a company registry and to train judges and lawyers in commercial issues is being sought from the World Bank. Still undecided is the role of Commercial Court judges in the registration process. The Bank proposes training 13 judges in aspects of commercial law, including internships in neighbouring countries. Commercial law libraries may be sponsored for some courts.

Deaths, injuries and related social costs incurred with poor road safety and bad driving habits are to be highlighted in a joint campaign by the Department of Health and Social Welfare, KFOR and UNMIK. The health department is meanwhile surveying the preparedness of emergency services to handle victims of traffic accidents. A separate survey by a WHO specialist will form the basis of a policy for developing emergency health services.

The Turkish Community's aim is to be fully associated and integrated in efforts to reconstruct Kosovo society, while retaining its identity and culture, 11 of its representatives told a recent technical meeting organized by the Department of Local Administration. The meeting, which included the Office of the SRSG,  JIAS departmental representatives and other UN and international organizations, identified the community's main concerns as education, media, political representation in municipal assemblies and use of  the Turkish language in official documents.

Signs are that more Serbia health workers are prepared to accept UNMIK contracts, and more Albanan and Serb health care workers are prepared to work together. Gjilane hospital receives Serb patients on two days each week and its management is encouraging Serbs to seek employment. One ambulanta has a Kosovo-Albanian and Kosovo-Serb doctor working together. A Health House cooperates closely with two Kosovo-Serb doctors in an enclave. Neverthless, the Department of Health and Social Welfare is working out how to ensure delivery of health services to minority patients when some NGOs leave Kosovo this spring. NGOs currently take care of drug distribution, mobile clinics, transfer of responsibility for primary health care to municipalities and patient transportation to and from minority communities.

Responsibility for the minority bus service will pass from UNHCR to the Department of Transport and Infrastructure in a phased manner. A consignment of buses from Germany for this purpose will arrive next year. This partly responds to minority representatives' concerns that there are not enough bus seats in organized convoys to allow people to arrange for their basic needs, such as buying food or accessing education and health care. Some 400 people trying to catch a bus with only 60 seats exemplifies.

Learning how others handle the problems of youth disaffection, the Kosovar Department of Youth Co-Head recently spent a week at the University of Pennsylvania. Center for Young People's Health, Neighborhood, Growth and Ethnic Studies. Relevant issues and prevention methods included out-of-school youth, street and domestic violence, smoking, alcohol and substance abuse, and risky sexual behaviour.

The Department of Trade and Industry announced a tender on Llamkos, a manufacturer of galvanized steel products in Vushtrri/Vucitrn near Mitrovica. This brings the total of pending tenders to nine, most of which are expected to be awarded by February 2001.