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R 221521Z MAY 07
FM USOFFICE PRISTINA
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RUCNDT/USMISSION USUN NEW YORK 1161

C O N F I D E N T I A L PRISTINA 000405 
 
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DEPT PLEASE PASS TO EUR/SCE EUR/ACE 
STATE PLEASE PASS TO USAID FOR EE/ECA AND EE/DGSR 
STATE PLEASE ALSO PASS TO TREASURY-EMEYER 
 
E.O. 12958: DECL: 05/16/2017 
TAGS: ECON KPRV ENRG PGOV PREL YI
SUBJECT: KOSOVO: POOR POE BOARD NOMINATIONS RAISE CONCERNS 
ABOUT THE INTEGRITY AND OVERSIGHT OF PUBLIC UTILITIES 
 
REF: A. PRISTINA 260 
 
     ¶B. 06 PRISTaP\r-to the board of 
directors for the publicly-owned enterprises (POEs) on May 14 
has raised concerns about the government's commitment to 
sound corporate governance practices, as well as UNMIK's own 
commitment to exercise proper oversight of POEs.  There are 
clear divisions within UNMIK between the senior leadership, 
who want to pull back and give the PISG more authority to 
make decisions, and the Kosovo Trust Agency (KTA) and UNMIK's 
Pillar IV, which want to exercise greater oversight to 
protect POEs and other economic sectors from political 
influence.  On a positive note, the European Commission will 
provide an advisor to Kosovo to help draft legislation to 
establish corporate governance structures in accordance with 
OECD principles.  Until this legislation is drafted and 
enacted, USOP will continue to remind both UNMIK and the PISG 
to take seriously their respective responsibilities in order 
to protect the integrity and viability of POEs, which are 
important to Kosovo's economic development because they will 
attract serious foreign investment.  End Summary. 
 
UNMIK RELUCTANT TO EXERCISE ITS AUTHORITY DUE TO ITS 
SHORT-TERM STATUS AND RELATIONS WITH PISG... 
 
¶2. (C) Prior to a May 14 Kosovo Trust Agency (KTA) board 
meeting to approve nominees to Kosovo's publicly owned 
enterprises (POEs), Econoff met on May 9 with Paul Acda, Head 
of UNMIK's Pillar IV, and Andreas Wittkowsky, Deputy Head of 
Pillar IV, to raise concerns about nominating overtly 
political or unqualified candidates and to urge UNMIK to 
exercise its authority to enforce KTA's guidelines.  Acda 
said that at a recent meeting with the SRSG Joaquim Ruecker 
and PDSRSG Steven Schook to discuss the nominations, he was 
told by Ruecker not to be "too purist" regarding this 
process.  Despite concerns from the U.S., World Bank and 
others that the proposed presence of Minister of Energy and 
Mines (MEM) Ethem Ceku on the Kosovo Energy Corporation (KEK) 
board violated good governance practices, Acda noted that the 
SRSG and PDSRSG were in favor of electing Ceku to the board 
due to the precedent already established in 2005, when 
Ruecker (as Head of Pillar IV) and the minister were allowed 
to sit on the KEK board temporarily due to "emergency 
circumstances," which they argued were still in place. (Note: 
 Ceku's presence on the board presents conflict of interest 
issues regarding his ministry's involvement in the large 
"Kosovo C" energy sector development tender and the 
internationally-recognized public policy practice of not 
allowing a ministry to administer a public utility.  Ceku is 
also actively involved in politics as a high-ranking member 
of the Alliance for the Future of Kosovo (AAK) party. End 
Note)  Acda maintained that h%4QTQQsive posture on this issue 
because, as they put it, 
QQ]fg_the final status process reaches a 
conclusion, and senior UNMIK leadership does not want create 
any unnecessary problems with Kosovar leaders." 
 
...BUT OTHER UNMIK OFFICIALS BELIEVE THAT THEY HAVE A 
RESPONSIBILITY TO DO THEIR JOBS 
 
¶3. (C) There are UNMIK officials who disagree, however, and 
believe that the UN should take a more forceful role, even 
its waning days, to ensure proper governance standards are 
upheld in Kosovo.  Jim Wasserstrom, Head of UNMIK's Office of 
Oversight for POEs, noted to USOP that he has raised concerns 
about overtly political and unqualified POE board nominations 
with the SRSG's Office, the Office of Legal Affairs, and 
Pillar IV.   He noted disappointment with UNMIK's weak 
posture, saying that what the UN does (or does not do) now to 
ensure proper POE governance will impact public utilities in 
the next few years.  In another conversation, Chiara Bronchi, 
Pillar IV's (economic policy) Director of Fiscal Affairs and 
a KTA Board member, expressed her frustration with senior 
UNMIK leadership on this issue and described them as being in 
"check-out mode" on nearly all relevant economic concerns, 
including for example providing KEK serious support to 
improve electricity bill collection rates. 
 
KTA BOARD APPROVES QUESTIONABLE PISG NOMINEES FOR POE BOARDS 
WITH LIMITED UNMIK OVERSIGHT 
 
¶4. (C) With this as background, the KTA held its 
extraordinary May 14 board of directors meeting to approve 
new boards of directors for the following POEs, based on PISG 
recommendations:  KEK, Post and Telecom of Kosovo (PTK), 
Pristina International Airport (PIA), and Kosovo Railways. 
The KTA guidelines require that board members have at least 
five years of relevant experience in that particular field or 
another comparable profession, and that POE board member 
candidates have no active involvement in politics.  The KTA 
Board approved the nominations of MEM Ethem Ceku, Minister of 
Finance and Economy Haki Shatri, Rexhepi, and two KTA 
officials (internationals) as KEK board members.  According 
to an internal KTA memo which vetted each candidate and made 
recommendations about their eligibility as board members, 
neither Ceku or Rexhepi met KTA's qualifications based on the 
two criteria of relevant professional experience and no 
active involvement in politics.  (Note:  Shatri was appointed 
to the KEK board via general consensus because of the 
importance of KEK as a consumer of Kosovo budgetary 
resources.  End Note) 
 
¶5. (C)  Mindful that they were violating the guidelines for 
nominating POE boards of directors and that this was not a 
best practice, the KTA board purposely passed a resolution 
stating that the selection of the new KEK board was based on 
an emergency situation in the energy sector and noting that 
the nominees would serve only until the end of the year and 
that this decision would not serve as a precedent.  The KTA 
board also voted to provide special oversight of the KEK 
board in order to try to prevent any heavy-handed political 
interference in the running of the energy utility. 
 
¶6.  (C)  On other POE board nominee decisions, the KTA board 
rejected two PISG nominees for the PIA board and recommended 
two reputable internationals, but one questionable Kosovar 
was elected:  Nasser Osmani, a member of the Kosovo Assembly 
(Democratic League of Kosovo (LDK) party) and chairman of the 
Budget and Finance Committee.   Regarding the PTK board, the 
KTA board rejected two questionable nominees, in particular 
Ramiz Lladrovci, a USG E.O. listee, after quiet and early 
USOP intercession with KTA board members.  The KTA board 
rejected two nominees for the Kosovo Railways board and 
recommended one qualified Kosovar Albanian professional, one 
minority candidate (ethnic Turkish leader Mahir Yagcilar, 
also a member of the Kosovo Assembly) and KTA Managing 
Director Jasper Dick.  On June 7 the KTA board will vote to 
approve the replacement nominees for the PTK, PIA and Kosovo 
Railways boards. 
 
EUROPEAN COMMISSION TO PROVIDE TECHNICAL ASSISTANCE TO HELP 
DRAFT LAW ON POE CORPORATE GOVERNANCE 
 
¶7. (C) On a positive note, Wasserstrom said that the European 
Commission (EC) will hire an expert to help Kosovo draft a 
law on POE governance in accordance with Organization of 
Economic Cooperation and Development (OECD) principles of 
corporate governance.  He said that the expert would be in 
Kosovo by late May or June.  He noted that there is still an 
ongoing debate within UNMIK and the PISG as to whether the 
POEs should be overseen by an independent holding company 
under the authority of the Kosovo Assembly, or if the public 
utilities should be administered by the PISG, with 
anti-corruption structures and oversight requirements in 
place to ensure that they follow best practices in corporate 
governance (ref C). 
 
COMMENT 
 
¶8. (C)  While the outcome of this series of POE board 
appointments was not ideal, USOP engagement did focus UNMIK 
and PISG attention on the issue and prevent the worst 
excesses.  We welcome the EC's assistance to help Kosovo 
draft legislation to ensure that corporate governance best 
practice principles guide the administration and oversight of 
the public utilities.  Until this legislation is drafted and 
enacted, USOP will continue to urge both UNMIK and the PISG 
to take seriously their respective responsibilities to 
protect the integrity and viability of POEs, which are 
 
 
 
important to Kosovo's economic development because they will 
attract serious foreign investment once they are concessioned 
or fully privatized. 
 
¶9.  (C) COMMENT, Cont.  It is increasingly apparent that 
UNMIK is m^QeMQ3fjsition 
efforts ranging widely from protection of cultural heritage 
sites to corporate governance.  We will step in where 
possible, coordinating our approaches with the International 
Civilian office and other international missions to maximize 
leverage whereever possible.  END COMMENT. 
KAIDANOW