VZCZCXRO2398
OO RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
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
RHFMIUU/AFSOUTH NAPLES IT PRIORITY
RHMFISS/CDR TF FALCON PRIORITY
RHEFDIA/DIA WASHDC PRIORITY
RUEKJCS/SECDEF WASHINGTON DC PRIORITY
RUEPGEA/CDR650THMIGP SHAPE BE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEAWJA/DEPT OF JUSTICE WASHDC PRIORITY
RUZEJAA/USNIC PRISTINA SR PRIORITY

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