* This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo declaration of independence.

TABLE OF CONTENTS

1........... Introduction. 3

1.1........ Preface. 3

1.1........ Context 3

1.2........ Relations between the EU and Kosovo. 3

1.3........ Normalisation of relations between Kosovo and Serbia. 5

2........... Political criteria. 6

2.1........ Democracy and the rule of law.. 6

2.2........ Human rights and the protection of minorities. 16

2.3........ Regional issues and international obligations. 22

3........... Economic criteria. 24

3.1........ The existence of a functioning market economy. 24

3.2........ The capacity to cope with competitive pressure and market forces within the Union. 28

4........... European standards. 29

4.1........ Internal market 30

4.1.1. Free movement of goods. 30

4.1.2. Movement of persons, services and right of establishment 31

4.1.3. Free movement of capital 32

4.1.4. Customs and taxation. 32

4.1.5. Competition. 33

4.1.6. Public procurement 34

4.1.7. Intellectual property law.. 35

4.1.8. Employment and social policies, public health policy. 35

4.1.9. Education and research. 37

4.1.10. WTO issues. 38

4.2........ Sectoral policies. 38

4.2.1. Industry and SMEs. 38

4.2.2. Agriculture and fisheries. 39

4.2.3. Environment and climate change. 40

4.2.4. Transport policy. 41

4.2.5. Energy. 42

4.2.6. Information society and media. 44

4.2.7. Financial control 45

4.2.8. Statistics. 45

4.3........ Justice, freedom and security. 46

4.3.1. Visa, border management, asylum and migration. 46

4.3.2. Money laundering. 48

4.3.3. Drugs. 49

4.3.4. Police. 50

4.3.5. Fighting organised crime and terrorism.. 50

4.3.6. Protection of personal data. 52

Statistical Annex. 53

1. Introduction 1.1. Preface

The Commission reports regularly to the Council and Parliament on the progress the countries of the Western Balkans region are making towards European integration, assessing their efforts to comply with the Copenhagen criteria and the conditionality of the Stabilisation and Association Process.

This progress report, which largely follows the same structure as in previous years:

- briefly describes relations between Kosovo* and the European Union;

- analyses the situation in Kosovo in terms of the political criteria;

- analyses the situation in Kosovo on the basis of the economic criteria;

- reviews Kosovo’s capacity to implement European standards, i.e. to gradually approximate its legislation and policies with the acquis, in line with the Stabilisation and Association Process.

This report covers the period from October 2013 to September 2014. Progress is measured on the basis of decisions taken, legislation adopted and measures implemented. As a rule, legislation or measures which are under preparation or awaiting parliamentary approval have not been taken into account. This approach ensures equal treatment across all reports and enables an objective assessment.

The report is based on information gathered and analysed by the Commission. Many sources have been used, including contributions from the Kosovo authorities, the EU Member States, the EU rule of law mission (EULEX), European Parliament reports[1] and information from various international and non-governmental organisations.

The Commission draws detailed conclusions regarding Kosovo in its separate communication on enlargement,[2] based on the technical analysis contained in this report.

1.1. Context

To date, Kosovo has been recognised by 110 UN member countries, including 23 EU Member States.

During the reporting period, the UN Secretary-General continued to provide regular updates on the implementation of the UN’s mission in Kosovo (UNMIK). He reported on progress made in the implementation of the First agreement of principles governing the normalisation of relations of 19 April 2013, the local elections and developments in the north. He welcomed the decision of the Council to authorise the negotiations on a Stabilisation and Association Agreement with Kosovo.

The NATO-led Kosovo Force (KFOR) has continued to help ensure a safe and secure environment in Kosovo. During the reporting period, it had some 5, 000 personnel.

1.2. Relations between the EU and Kosovo

Negotiations on the Stabilisation and Association Agreement (SAA) between the EU and Kosovo started in October 2013 and were completed in May 2014. The chief negotiators initialled the agreement in July 2014. The Commission is now preparing proposals for Council decisions on signature and conclusion. The future SAA will be an ‘EU-only’ agreement. Its main elements are enhancing trade between the EU and Kosovo, the obligation for Kosovo to align its legislation with the EU acquis in a broad range of sectors, and the possibility to develop a political dialogue between the EU and Kosovo. The development of trade and investment and modernisation of the legal and institutional setup are crucial to Kosovo’s economic restructuring and modernisation. The SAA anchors Kosovo into the mainstream of EU relations with Western Balkan countries and confirms Kosovo’s European perspective in the context of the 1993 Copenhagen criteria.

Kosovo has continued to address priorities set out in last year’s progress report and in the feasibility study for a Stabilisation and Association Agreement.[3] In particular, progress has been made on the electoral process and on requirements of the visa liberalisation dialogue. The role of the Assembly and the government’s capacity to coordinate complex negotiations such as on the SAA and on trade issues, have been strengthened. However, electioneering throughout the year and the complex process of government formation after the June elections has affected progress in some areas.

Kosovo’s commitment to the EU-facilitated dialogue and normalisation of relations with Belgrade has been key for the advancement of its European ambitions. Kosovo needs to continue focusing on the implementation of agreements reached with Serbia and on progress in the areas identified by the feasibility study to meet its obligations under an SAA.

In the context of the Stabilisation and Association Process, Kosovo has remained engaged in the Stabilisation and Association Process Dialogue (SAPD). The structured dialogue on the rule of law continued. Discussions focused on political interference in the judiciary and on further developing Kosovo’s capacity to assume responsibilities to be transferred by EULEX.

The visa liberalisation dialogue has been one of the key priorities for Kosovo. To date, the Commission has issued two reports on Kosovo’s efforts in this process (February 2013 and July 2014). Expert missions took place in December 2013 and in March 2014. The fourth meeting of senior officials took place in June 2014.

The European Investment Bank has been discussing public investment projects with the government. In 2014, it launched a scheme of loans for small or medium enterprises (SMEs) with a local private bank. The European Bank for Reconstruction and Development supports Kosovo’s SMEs through the Western Balkans Investment Framework. Kosovo became a member of the Council of Europe Development Bank in November. In June, Kosovo became a member of the Venice Commission of the Council of Europe.

The EU has provided financial assistance to Kosovo under the Instrument for Pre-accession Assistance (IPA) for 2007-13, with a total allocation of € 673.9 million. An additional € 38.5 million was provided through IPA in 2013 to support the Pristina-Belgrade dialogue, normalisation and integration processes in Kosovo, including the visa dialogue. Under IPA II, Kosovo will continue to benefit from pre-accession assistance for 2014-20, with a total indicative allocation of € 645.5 million. On 20 August the Commission adopted an indicative strategy paper for the years 2014-20, drafted in partnership with Kosovo and in consultation with all relevant stakeholders. IPA support will focus on support for the sectors democracy and governance; the rule of law and fundamental rights; competitiveness and innovation; education, employment and social policies; energy; and agriculture and rural development. Kosovo continues to benefit from support under the IPA multi-beneficiary and regional programmes and it participates in three cross-border cooperation programmes with neighbouring Western Balkan countries. The implementation of IPA is managed by the EU Office in Kosovo.

The Commission’s proposal to sign and conclude the framework agreement on Kosovo’s participation in EU programmes is pending Council approval.

In April, Kosovo agreed to the new mandate for EULEX until June 2016 and to the establishment of a specialist court. The court is to hear cases arising out of the investigation led by the Special Investigative Task Force (SITF). Under the new EULEX mandate, all rule of law institutions are headed by Kosovo officials. EULEX judges and prosecutors are embedded in Kosovo institutions, and mixed panels are in principle composed of a majority of Kosovo judges, with a Kosovo judge presiding. EULEX does not take on new investigations except in exceptional circumstances. During the reporting period, Kosovo has supported the work of EULEX and the Special Investigative Task Force. This needs to continue through amending key legislation, including the Constitution, to set up the specialist court and its prosecution office.

1.3. Normalisation of relations between Kosovo and Serbia

Serbia and Kosovo have remained engaged in the EU-facilitated dialogue, but progress has markedly slowed down since March 2014. Early general elections were held in Serbia in March and in Kosovo in June. Six high level meetings attended by both Prime Ministers were held between September 2013 and March 2014. Work continued throughout the reporting period at technical level.

As a result of intense work in the first months of the reporting period there has been progress in the implementation of the agreements reached in the dialogue, in particular the April 2013 ‘First agreement of principles governing the normalisation of relations’. For the first time, local elections were held Kosovo wide with the facilitation of the OSCE in November 2013 (and repeated in North Mitrovicë/Mitrovica in February 2014) and, again for the first time, municipalities in the north of Kosovo were inaugurated in conformity with Kosovo law. Kosovo Serbs from both north and south of the Ibar river took part in the early general elections in June 2014. The establishment of the Association/Community of Serb majority municipalities is still pending. There has been progress in the dismantling of the Serbianstructures on police and justice. Serbia took measures to facilitate the integration of the police and judiciary following the adoption of an amnesty law by Kosovo. Integration has been completed as concerns police officers, while integration of other Serbian Ministry of Interior personnel is still pending. An agreement in principle has been reached regarding the judiciary, but its finalisation and implementation are still pending. Integration of civil protection personnel is also pending.

Some progress has been made in other important areas. Serbia played a constructive role in ensuring Kosovo’s participation in the South-East European Cooperation Process (SEECP) at the Bucharest summit in June 2014. Nevertheless, the implementation of the agreement on representation and participation of Kosovo in regional fora continued to be problematic. Preparation for the implementation of the energy and telecoms agreements reached in September 2013 has continued leading up, in the energy sector, to the signing of an inter-TSO agreement, together with the approval of an action plan in September 2014.

As concerns the north of Kosovo, a development fund has been set up to collect revenue at the northern crossing points. It has received over € 2.9 million to date, but its board has yet to decide on its use. Implementation of the freedom of movement arrangements has allowed the use of Serbian and Kosovo ID cards by residents to enter and exit both Serbia and Kosovo. An agreement was reached to allow residents in Kosovo to use their ID cards to travel to third countries through Serbia via six border crossing points. The setting up of new roadblocks on the north side of the main Mitrovicë/Mitrovica bridge in June 2014 increased tensions. Despite an agreement by both sides on the need for a joint solution, the roadblocks known as the ‘Peace Park’ are still in place. Kosovo and Serbian insurance bureaus have defined the parameters for a commercial agreement on mutual vehicle insurance cover between Serbia and Kosovo. This progress should now be confirmed by means of a signed agreement.

Implementation of other agreements has continued, albeit at a slower pace. Regarding IBM, the six joint interim crossing points have continued to be operational and technical agreements on the exact locations and on draft layouts of the permanent IBM crossing points were reached. However, illegal crossing roads/ by-passes, in particular in the north of Kosovo, continue to be regularly used to smuggle substantial amounts of goods, as reported by EULEX. Additional measures need to be taken by Serbia to stop illegal crossings.

As concerns cadastre, Serbia continues to implement the pilot project, but legislation necessary to implement the agreement is still pending in Kosovo. The copying of Kosovo civil registry books located in Serbia has been successfully completed. The implementation of the agreement on acceptance of university diplomas has had limited results. The certification of diplomas by the European University Association has progressed well and 387 diplomas have been certified. However, Serbia has accepted only five certified diplomas so far, following an additional nostrification process. The deployment of liaison officers has had limited impact.

Serbia has continued to cooperate with EULEX, especially on war crimes, but legal cooperation on the fight against organised crime needs to improve significantly. Criticism of the handling by EULEX of several criminal cases against Kosovo Serbs is counterproductive. The Serbian authorities should refrain from statements undermining the rule of law. Kosovo needs to continue the good cooperation with EULEX.

The Serbia Constitutional Court judged the form in which some dialogue agreements have been transposed unconstitutional. Serbia needs to find legal solutions for the implementation of agreements that are sustainable over time and not vulnerable to legal challenges.

Overall, Serbia and Kosovo have remained engaged in the dialogue and committed to the implementation of the April 2013 First agreement of principles governing the normalisation of relations and other agreements reached in the dialogue, leading to irreversible changes on the ground. However, progress has slowed down. Early general elections were held in both Serbia and Kosovo. New momentum needs to be generated to tackle key outstanding issues and open a new phase in the normalisation of relations. Progress in this area remains essential for advancing the European future of both Serbia and Kosovo.

2. Political criteria

This section examines Kosovo’s progress towards meeting the Copenhagen political criteria, which require stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities. It also monitors regional cooperation, good neighbourly relations with enlargement countries and Member States and compliance with international obligations such as cooperation with the International Criminal Tribunal for the former Yugoslavia.

2.1. Democracy and the rule of law

Constitution

No amendments were made to the Constitution during the reporting period. Kosovo needs to change its Constitution to reflect its commitment to the establishment of the specialist court. The Constitution also needs to be modified to ensure that a majority of Kosovo Judicial Council members are elected by their peers, in line with Venice Commission recommendations.

Elections

The past year was marked by the mayoral and municipal elections in the autumn of 2013, and the early parliamentary elections of 8 June 2014. For the first time general elections took place throughout Kosovo, including in the four northern municipalities.

The mayoral and municipal assembly elections also took place throughout Kosovo according to Kosovo law. Elections in the north were facilitated by the Organisation for Security and Cooperation in Europe (OSCE), in line with the First agreement of principles governing the normalisation of relations. With the exception of northern Kosovo, where there were several incidents involving violence, no irregularities were reported. A re-run of the election was necessary in Mitrovicë/Mitrovica North after ballot boxes were found to have been destroyed. On 11 January, municipal assembly members in the four northern municipalities took the oath of office and municipal bodies were formally established. The mayor-elect of Mitrovicë/Mitrovica North refused to take the oath, necessitating a re-run of mayoral elections on 23 February.

The overall turnout for the mayoral and municipal elections was a little above 46 % (just above 45 % in 2009 elections). The overall turnout for the four northern municipalities was above 25 %. Candidates from the Citizen’s Initiative Srpska won the mayoral positions in all four municipalities.

Polling and counting for the parliamentary elections were transparent and well-organised, consolidating the positive trend set by the 2013 municipal elections. Election day passed without incident and voters were able to cast their votes freely. Participation decreased from 46 % in the 2010 general elections to just over 42 %. The Democratic Party of Kosovo PDK received just above 30 %, the Democratic League of Kosovo (LDK) about 25 %, Vetëvendosje (VV) above 13 %, the Alliance for the Future of Kosovo (AAK) above 9 %, Srpska and the Initiative for Kosovo (NISMA) just above 5 % each.

However, the general elections were held under a highly compressed preparatory timeframe. The short preparation time (30 days) negatively affected certain aspects of the technical process, such as raising voter awareness. It also reduced the time available to file complaints and appeals prior to election day. The elections were held under the existing (2008) legislative framework. A series of shortcomings, including improved delineation of primary and secondary legislation on elections, adequate timelines for complaints and appeals, and accuracy of voters’ lists, remain to be addressed to better reflect best practice and international standards. Kosovo’s recent membership of the Venice Commission can help in this regard.

Overall, Kosovo held successful general and local elections. The electoral process in both cases improved compared to previous elections. The Central Election Commission managed its responsibilities well, considering the challenging time schedule for the general elections and the political context in which the local elections took place. However, Kosovo still needs comprehensive electoral reform to address recommendations from election observation missions and experts.

Parliament

The Assembly continued to support Kosovo’s efforts on European integration and demonstrated political and institutional unity on some issues of key importance, such as the dialogue with Serbia, the EULEX mandate and reform efforts. During the first half of 2014, electoral campaigning ahead of the general elections increasingly affected the work of the Assembly.

The Assembly made progress on oversight of the executive and consultation with civil society. The number of monitoring activities and level of oversight of implementation of legislation increased. The Assembly regularly reviewed committee reports on the implementation of laws and adopted recommendations to improve implementation. The practice of ministers reporting to the Assembly committees increased. The number of staff supporting the committees has gone up. The Assembly increased the number of consultations with civil society and the public through hearings. The Assembly recruited an NGO liaison officer.

Following the June elections, several attempts were made to constitute the Assembly and enable the process of government formation to begin. Disagreement on which party should have the right to nominate the Speaker of the Assembly has led to political stalemate. The Constitutional Court ruling on the outcome of the first constitutive session did not break the impasse.

The new Assembly needs to build on the positive steps taken by the previous legislature. The Assembly needs to avoid failures to reach a quorum and boycotts of plenary sessions, which result in delays in decision-making and the adoption of legislation. The Assembly and its committees still need to expand their cooperation with line ministries in the legislative and oversight process to improve the quality of legislation and ensure its implementation. Draft laws and amendments to legislation need better screening to ensure compliance with the acquis. The Assembly needs to further develop standards for public consultation and its committees need to apply them consistently when conducting hearings.

Further efforts by the Assembly and its committees are required to ensure control of the budget, especially in areas such as health, agriculture, social assistance, culture and education. More attention needs to be paid to the reports of the Office of the Auditor General. The committee on oversight of public finances needs to develop a mechanism to follow up the implementation of its recommendations.

The Assembly needs to improve the supervision of public companies, independent institutions and regulatory authorities. In this regard, adequate mechanisms need to be put in place, such as clear legal bases for reporting and accountability. Among the key challenges that need to be addressed are delays in the selection of board members for these institutions and authorities, and the failure to determine mechanisms for board members’ accountability. Many appointments are made on the basis of political preferences rather than professional qualifications, or are delayed due to political disagreements.

The new legislature needs to adopt new rules of procedure quickly. These rules need to be in line with EU best practice and be based on the recommendations of the EU-funded twinning project. The function of the EU integration committee needs to be further enhanced to reflect its key role in Kosovo’s European integration process. The independence of the Assembly’s IT infrastructure still has not been ensured. Preparations of the annual budget need to reflect the need for budgetary independence of the Assembly. New legislation, including a law on the Assembly, would be helpful in this regard.

The secretariat of the Assembly needs to continue to build its expertise on technical issues to support effective policy making and the capacity to improve scrutiny of draft legislation and its implementation. The secretariat needs to ensure better coordination of input from its various departments into the work of the committees. High staff turnover remains an issue of concern.

Overall, the Assembly continued to gradually develop its capacity further and improved its role in democratic governance. The new Assembly should focus on minimising political and institutional crises. The numerous boycotts of plenary sessions became an obstacle in this regard. The failure to constitute the new legislature smoothly and in a timely manner has been a setback. The new legislature provides a good opportunity to improve oversight of the executive and supervise the legislative process. It should also be a chance to clarify the Assembly’s role with regard to the supervision of independent institutions and regulatory authorities, to develop clear rules of procedure, and to improve monitoring of the budget.

Government

Following the general elections, and the protracted negotiations on the formation of a new government, the previous government remained in office in an acting capacity.

In the course of negotiations on the SAA, the government, and in particular the Ministries of European Integration and Trade and Industry, demonstrated their capacity to coordinate technically and legally complex negotiations with the EU. The government also reached out to the Assembly and the opposition by inviting the chair of the European integration committee to take part in the negotiations.

The government continued to implement EU integration priorities. To support this process, it adopted an action plan for an SAA in December. The National Council on European Integration has continued to meet and discuss the main objectives and policy obligations of further integration with the EU. The Executive Commissions in charge of the coordination and implementation of SAP Dialogue conclusions continued to meet. The government has introduced an obligation to prepare a compliance table to cross-check draft legislation with the EU acquis and issued a guidance paper on the use of the tables. However, the government needs to do more to improve strategic planning and coordination among ministries. The government’s agenda needs to better reflect available resources.

Efforts to further improve capacity of local government have continued. Following the local elections, most new municipal assemblies were constituted in a timely manner and started to carry out their duties. The Ministry for Local Government Administration (MLGA) has improved its guidance for municipalities by cross-checking the compliance of municipal acts with the overall legal framework. The legal guidance is easily accessible on the webpage of the ministry. The MLGA drafted implementing legislation on the calling and conduct of municipal assemblies and the composition of municipal assembly committees. It also prepared an administrative instruction on the review of municipal acts at central level. In the north, the conformity of municipal statutes with Kosovo law has been ensured. However, the integration of these municipalities into Kosovo’s legal framework is making only gradual progress.

Municipal efforts to increase transparency in decision-making need to continue. A new administrative instruction on transparency in municipalities has been implemented in only two municipalities. At the municipal level, the capacity to budget in line with policies and implementation plans is still underdeveloped, causing diversions from planned expenditure. Priority setting and the allocation of financial resources do not always reflect strategic guidance. The implementation of decentralisation, ensuring adequate support and budget to municipalities, needs to continue. Municipalities continue to face challenges with regard to creating conditions for their successful economic development. A culture of user-friendly public service delivery needs to be developed. Further guidance from the central level on the obligations of municipalities in the European integration process is required.

Overall, the Kosovo government gave clear proof of its ability to coordinate the European integration agenda, notably with regard to negotiations on the SAA. The government also improved guidance to municipalities on implementation of legislation. Following the municipal elections, all main structures at municipal level have been put in place across Kosovo. However, at both central and local levels, Kosovo needs to focus on improving strategic planning and the links between planning and budgeting on the basis of collected data, policy coordination and financial impact assessments. The executive needs to turn its focus to ensuring that legislation and policies are implemented in practice. Good communication with the Assembly, including regular responses of the government to parliamentary questions and strong inter-ministerial coordination will be key in this regard.

Public administration

Kosovo has a strategic framework for public administration reform in place with the 2010 public administration reform strategy and the action plan for the period 2012-14. The strategy is comprehensive, including the main aspects such as policy management, budgetary planning and execution, organisation of public administration and human resources management. The government adopted a roadmap for 2014 to address the remaining key reform challenges in the current action plan. The coordination structure for strategy implementation and its monitoring mechanism were reformed in 2013 to improve the tracking of policy implementation and legislation in this area. A Special Group on Public Administration Reform, established as a forum for policy dialogue between the Commission and Kosovo, met in December to discuss and monitor implementation of the reform strategy.

The implementation of the strategy has been a major challenge and there have been very limited results. In designing the new strategy, the new government needs to set more realistic objectives. These should be backed up with strong political support, clear implementation and budget planning, and be supported by adequate numbers of qualified staff.

Kosovo has made some progress regarding policy development and coordination. It prepared standards for public consultation on legislation and adopted a regulation on financial impact assessment. It also introduced a new action plan for the partnership for open governance (2014-16). The Office of the Prime Minister and the Ministry of European Integration are jointly responsible for ensuring sufficient policy coordination. This structure ensures a basic level of preparedness for the increase in workload related to the European integration process. The government’s annual work plan has become a platform enabling the government to plan and coordinate its agenda. The structure of this document has improved, and so has ministerial input.

However, the plan needs to be made more strategic. Information included in the work plan needs to be better linked to government priorities, to sector strategies, the medium-term expenditure framework and the budget available. The capacity in ministries to plan and budget, and to scrutinise draft proposals remains limited. The work of the Office for Good Governance, Human Rights, Equal Opportunities and Non-discrimination needs to be streamlined. The main challenges for the government and other relevant institutions remain the implementation of policies and legislation, and respecting commitments under the future SAA. The government needs to build on good practices established during the SAA negotiations to address these challenges. Linking policy and legislation with budgets, and the availability of qualified staff are key to delivering on this task. In general, the interinstitutional coordination mechanisms in place need to be used better and the recommendations of the Special Group on Public Administration Reform need to be implemented.

With regard to public service and human resources management, political interference in public administration persists, both at central and local level. Further efforts are needed to fully implement relevant provisions on the prevention of corruption and promotion of integrity in the civil service, in particular by providing targeted training for civil servants. Secondary legislation to the laws on the civil service is still outstanding. Pending completion of the job classification catalogue, there have been further delays in implementing the laws on civil servants and on salaries of civil servants. The share and distribution of civil servants belonging to minorities across ministries and institutions need to be in line with the legislation. A salary increase of 25 % for all public servants without any performance assessment, as introduced in the run-up to the general elections, is an issue of concern. According to the International Monetary Fund, the increase in salaries will result in significant pressure on the budget.

Very limited progress has been made to further improve accountability and service delivery. The laws on administrative procedures and normative acts are still to be adopted. Implementation of the law on access to public documents remains unsatisfactory. Kosovo also needs to review the organisation of public administration at municipal level, notably delegated competences and the appointments of directors.

Kosovo has not addressed public financial management reforms systematically, as part of a comprehensive reform plan. Rather, there have been isolated reform efforts in different public finance sub-systems, such as in revenue administration or public internal financial control, with modest results. In April, Kosovo adopted its medium-term expenditure framework, which covers the years 2015-17. The document lacks a strategic approach. The annual budgeting process is based on the line-item approach. Debt management policy has yielded some results, as debt is still low and sustainable, although domestic borrowing has increased. Implementation of public internal financial control is still at an early stage, as the managerial accountability principle has not yet been embedded in management culture. The Office of the Auditor General has continued to play an important role as an independent institution in promoting change in public financial management through its audit reports.

Overall, there has been very limited progress in this area. The new government needs to make a serious political commitment to public administration reform. The slow pace of reform in this area continues to pose one of the greatest challenges in Kosovo’s European integration process. The setup and structure of the central coordinating institutions provide only a basic level of preparedness for the increase in the workload due to the implementation of the SAA. Better strategic planning and improved links with budgeting are required. Kosovo needs to finalise the legislative framework for the civil service and ensure its implementation, in particular the job catalogue and performance appraisal. Kosovo needs to adopt and enforce a law on general administrative procedures. Kosovo would benefit from engaging in more comprehensive public financial management reform.

Ombudsman

The Ombudsperson Institution in Kosovo has continued to perform and act as a defender of the rights of Kosovo citizens vis-à-vis the administration. The annual report of the Ombudsperson states that 2 047 cases were received, 23 % more than the previous year. The government has taken the positive step to allocate a budget for a much needed new building for the institution.

The politicisation of the selection procedure has stalled the appointment of an Ombudsperson. The institution is currently led by an Acting Ombudsperson and the mandates of the five deputies will expire in October 2014. Pressure has been mounting in municipalities to expel the field offices of the institution from municipal buildings. This is a serious concern. Kosovo authorities both at central and local level need to ensure that the Ombudsperson’s inquiries and recommendations are adequately followed up. The new government needs to ensure the budgetary independence of the institution when preparing next year’s budget.

Overall, the Ombudsperson Institution of Kosovo continued to gradually improve its work across Kosovo. However, other authorities and institutions in Kosovo need to improve the quality of their responses to the institution’s inquiries. A new Ombudsperson needs to be selected on the basis of a fair and depoliticised selection process. Budgetary independence needs to be ensured.

Civilian oversight of the security forces

There has been moderate progress in the work of the Parliamentary Committee on Internal Affairs, Security and Supervision of the Kosovo Security Force. The committee increased the number of meetings and its members were better prepared. Ministers were more frequently invited to public hearings and answered concerns of parliamentarians. The committee also prepared a monitoring report on the implementation of the Law on the Kosovo Police and on expenditure by the police and the Ministry of Internal Affairs. The intelligence agency still issues security certificates to members of the committee, although the committee is responsible for the agency’s supervision. In general, concerns related to unprofessional and partisan security vetting by the service remain. The Assembly needs to increase its capacity and improve its expertise to supervise this area.

Civil society

An empowered civil society is a crucial component of a democratic system and should be recognised and treated as such by Kosovo institutions. Civil society continued to participate in the work of the National Council on European Integration. The Assembly appointed an NGO liaison officer, and the Assembly’s relations with civil society have improved. The government’s capacity to implement the strategy for cooperation with civil society (2013-17) is still weak. The Joint Advisory Council which is to monitor its implementation only started its work in April 2014. The government has appointed its participants to the advisory council, and civil society has opened a call for expressions of interest. Cooperation and consultation between civil society and the Kosovo institutions, notably with the government, continue to be ad hoc and unsatisfactory. Civil society involvement, if requested at all, comes only at the end of the legislative process rather than at its beginning. Civil society does not systematically receive feedback on its recommendations. This needs to be improved. Plans to include provisions in the Law on Money Laundering, obliging civil society to request dispensation for all donations above € 1 000 from one single source and for all spending above € 5 000 from one single source, are a cause for concern, especially since criteria for granting dispensation are not included.

Judicial system

Kosovo’s judicial structures adapted well to the 2013 structural reform. In April 2014, Kosovo agreed to the new EULEX mandate. As a rule the mixed panels (EULEX and Kosovo judges), now have a majority of Kosovo judges, and a Kosovo presiding judge. Pending full integration of the judicial system in the north, the trials at Mitrovicë/Mitrovica basic court continued to be held with panels consisting exclusively of EULEX judges and prosecuted exclusively by EULEX prosecutors.

In July, the Constitutional Court ruled that the selection process of a new chief state prosecutor, finalised in June, had to be repeated. An acting chief state prosecutor has been appointed for the following the retirement of the previous chief state prosecutor in August. Proper legal remedies against decisions of the prosecutorial and judicial councils should be introduced to avoid that the only resort against their decisions is the Constitutional Court.

Preliminary findings of the criminal justice review initiated by the Ministry of Justice concluded that discrepancies or gaps in various criminal laws would be followed up in a second report before decisions on possible amendments would be made. In cooperation with all stakeholders the Ministry of Justice prepared a rule of law assistance strategy.

Regarding judicial independence, budgets for both councils increased compared to the previous year. The 2014 budget for the judicial council is € 20.8 million, and for the prosecutorial council € 6.8 million.

Public statements by politicians about high-level corruption and war crimes cases have decreased, in particular after an open discussion in the structured dialogue on the rule of law. Harassment of judges and prosecutors in the media and the absence of an effective response from the relevant institutions continue to be a serious concern. Attempts to influence ongoing investigations and court cases need to be effectively sanctioned. This needs to be strongly supported by political will.

The new legislature needs to ensure the appointment of judicial council members. The previous legislature did not meet its constitutional obligation to appoint the last two members of the council, leaving the council with eleven instead of thirteen members. In August 2014, the mandate of three additional council positions expired. The council is now without the legal quorum of nine members. The Assembly needs to urgently appoint the five council members. A majority of the judicial council members should be elected by their peers, in line with Venice Commission recommendations.

As regards the functioning and accountability of the judiciary, the judicial council adopted regulations on the performance of its disciplinary committee, on the promotion of judges, and on its strategic plan 2014-19. The prosecutorial council also adopted a regulation on the performance evaluation of prosecutors.

More needs to be done to ensure the functioning and accountability of the judiciary. In order to ensure full implementation of the laws on the judicial and prosecutorial councils, both councils still need to adopt several pieces of implementing legislation. The laws on courts, the state prosecutor, the judicial council and the prosecutorial council, also need to be harmonised to address inconsistencies on issues such as dismissal, appointment, transfer, disciplinary system and procedures for the review of decisions taken by the councils. Implementation of regulations on performance and evaluation and on disciplinary procedures is important, as are transparent and merit-based nomination and selection criteria.

The prosecutorial council faces delays in hearing appeals against decisions of the disciplinary committee due to difficulties in reaching a quorum. Assessment of the legislation on the composition, chairmanship and membership of the prosecutorial council may be necessary to overcome such obstacles. The disciplinary system for judges and prosecutors needs to be aligned to international standards.

Although obliged by law, there is neither a systematic publication of court decisions, nor a systematic development of jurisprudence, raising transparency and accountability concerns.

As regards efficiency, the judicial council adopted a new strategy to reduce the backlog of cases. The prosecutorial council increased the number of positions for local prosecutors in the special prosecution office by three to a total of eighteen, of which twelve are filled. A local special prosecutor is the acting head of the office, while EULEX prosecutors only take on new investigations in exceptional circumstances. Four basic courts and the appeals court are now equipped with special rooms for protected witnesses.

As regards judicial alternatives to the courts, there are now 68 certified and licensed notaries. Fourteen private enforcement agents have been certified. In addition, mediation centres are having a positive impact. The number of cases referred to mediation centres has increased considerably (699 in the period September 2013-March 2014, compared to 104 in the same period a year before). The same applies to the number of cases resolved (350 compared to 38). Public awareness of mediation and mediation centres needs to be improved.

Due to stricter provisions on electoral violations in the new Criminal Code and a very proactive approach by the prosecution prior to and during election time, the courts received fewer cases in 2013 (54) and 2014 (15). These cases were treated with priority and effectively than the 2010 electoral fraud cases, of which a considerable number are still pending in court.

Although the courts and prosecution offices adapted well to the 2013 structural changes, the full implementation of reforms that should lead to more efficiency, is still pending. The case backlog is one of the key concerns. The courts are not implementing the KJC instruction on the prioritisation of backlog cases. At the end of 2013, the courts completed 419 422 cases leaving 466 255 cases pending (a clearing rate of 80.3 %). The Fiscal Division of the Administrative Department of the basic court in Pristina was established only in January 2014 and is not yet fully operational. It is already facing a significant number of appeal cases against customs appeals sector decisions. The effectiveness of the special chamber of the Supreme Court (SCSC), handling privatisation cases, needs to be improved. Due to a lack of judges there are delays in the work of the SCSC; the number of active cases is around 18 000.

Neither case allocation nor case management IT systems exist, and there is no centralised criminal record database, which hampers the efficiency of the judicial system. Drafting, critical reasoning, and legal argumentation skills need to be improved and there is a lack of judges and prosecutors in key specialised areas such as financial crimes and procurement, war crimes and sexual violence. The difficulty to recruit prosecutors and judges from minority communities leaves those communities underrepresented in the courts and prosecution offices, at all levels.

As regards access to justice, out of a total of thirteen legal aid offices, the eight offices previously sponsored by the United Nations Development Programme (UNDP) have been closed. Kosovo authorities need to step up efforts to improve access to justice for children, women and victims of human trafficking. Implementing legislation related to the certification of court translators and interpreters needs to be adopted.

Kosovo established a network of focal points for international legal cooperation composed of eight prosecutors and seven judges. Implementing legislation on legal assistance was adopted. Bilateral agreements on legal cooperation are in place with five countries, and cooperation based on reciprocity takes place with many others. Cooperation with regard to non-recognising countries is facilitated by EULEX.

Overall, there has been some progress in the judiciary. Kosovo has started to address some of the priorities but there continue to be serious concerns regarding the independence, accountability, impartiality and efficiency of judges and prosecutors. Other challenges include the preparations for the transition of responsibilities from EULEX to Kosovo, the integration of the judicial system in the north into the Kosovo institutional structures, as well as the need for specialisation and improved quality of performance. The Kosovo judiciary needs to address the backlog, and, irrespective of public or political opinion, file indictments based on gathered admissible evidence and deliver well-reasoned judgments in a timely manner. Transparent and merit-based recruitment and evaluation of judges and prosecutors, as well as a properly functioning disciplinary mechanism, are important steps towards improving the functioning of the judiciary.

Fight against corruption

The President’s anti-corruption council met four times in the reporting period. All institutions and authorities involved in the fight against corruption, as well as civil society representatives are part of the council. Following comments in last year’s report its meetings are no longer held in public. The recommendations of this council merit systematic follow-up to ensure a harmonised and effective approach in the fight against corruption.

The implementation of the anti-corruption strategy and action plan fails to generate effective results, due to weak political support. The annual report shows that for the period June-December 2013, the Anti-Corruption Agency (ACA) considered that only 54 % of actions were being implemented or were partially implemented. The ACA’s oversight function regarding the implementation of the strategy should be strengthened. The agency lacks the necessary analytical capacity to conduct risk assessments in sectors vulnerable to corruption. The quality of pre-investigation reports needs to improve to ensure better follow-up, and the prosecution needs to continue to ensure and provide feedback to the ACA.

The Law on Declaration, origin and control of high public officials and declaration, origin and control of gift for all public officials has been aligned with the Criminal Code so that now the failure to declare assets and false declarations is classified as a criminal offence. Senior public officials are obliged to declare their property to the ACA before 31 March each year. Declarations are also required when taking or leaving office, or if the agency so requests. Out of a total of 3 869 senior public officials falling under the obligation, 99.25 % made a declaration. The agency has the capacity to verify the origin and veracity of the assets declared.

As regards corruption in procurement, the Anti-Corruption Agency selects and inspects procurement cases and has provided 28 opinions to the contracting authorities (public institutions) in 2013. All recommendations the agency provided on the cases it inspected were taken up and procurement activities were terminated.

The agency, in cooperation with civil society and municipalities, has developed a ‘hot line’ to report corruption through municipal websites. The agency needs to organise more awareness-raising campaigns encouraging citizens to report corruption.

The Law on Prevention of the Conflict of Interest in the exercise of public office still needs to be aligned with the Criminal Code. In 2013, the ACA found over 1 400 cases of senior officials holding multiple functions funded by the Kosovo budget, including as board members of public enterprises. This is not a criminal offence in itself, but could present a potential risk of conflict of interest, especially for judges, prosecutors and senior officials. Regarding the Law on Declaration, origin and control of high public officials and declaration, origin and control of gift for all public officials, the number of convictions is low and sanctions imposed do not deter. A standardised declaration form and verification guidelines with objective criteria should be developed. The sample quantity should increase, giving prioritisation to ‘risk groups’.

Political parties generally do not meet their obligations under the Law on Political Party Financing. Implementation and enforcement of the law is weak. The Central Election Commission office in charge of monitoring implementation lacks capacity and resources.

Relations between the criminal investigation authorities and the ACA have improved. In most cases, the ACA received confirmation from the prosecution and the Kosovo Police if criminal procedures were initiated on cases reported by the ACA.

With involvement of relevant stakeholders, the prosecutorial council developed a criminal offences case tracking mechanism and published its first annual report on 2013, including corruption cases. A report covering the period January-June 2014 included also economic crimes. The chief state prosecutor adopted an instruction defining ‘high-level corruption’ and assigned the special prosecution office to deal with such cases. In November 2013, the prosecutorial council made a decision to prioritise corruption cases and appointed anti-corruption focal points in each prosecution office. The judicial council issued a similar instruction to the courts.

The anti-corruption task force, consisting of four Kosovo Police officers and three special prosecutors, referred only five new criminal cases to the special prosecution office. The majority of corruption cases are handled in the prosecution office and the basic court in Pristina. It is important that these offices have sufficient staff willing to handle this extra caseload, especially with the high priority given to corruption cases. Despite the high priority, results have been limited, with very few corruption cases resulting in judicial rulings.

In the appointment procedure of the members of the Procurement Review Board the Assembly disregarded the recommendation of the Independent Selection Board, which had concerns on the list of appointees, including an ongoing corruption investigation.

Overall, Kosovo has made limited progress and is at an early stage in the fight against corruption. Even though Kosovo judicial and prosecutorial councils prioritised corruption cases there is no track record of convictions. Corruption remains prevalent in many areas, including in public procurement, and continues to be a serious problem that needs to be addressed urgently. Real political commitment is needed to translate efforts into actual results in the fight against corruption. There also needs to be further strengthening of interinstitutional cooperation. The judiciary needs to be enabled to fight this phenomenon effectively. At the same time prosecutors and judges need to demonstrate more accountability by handling cases more efficiently and delivering results.

Fight against organised crime

Kosovo has taken some steps to improve the fight against organised crime. It has continued to improve its legislative framework, notably by adopting implementing legislation on money laundering. The investigative capacity of the police is generally good. Cooperation with EULEX has intensified and is assessed as very good. The number of drug-related crime investigations has gone up and some human trafficking groups have been dismantled.

Kosovo is at an early stage of delivering results in the fight against organised crime, which continues to be a serious challenge. The total number of indictments and judgments in cases of trafficking in narcotics and trafficking in human beings remains low. Law enforcement agencies have been reluctant to initiate financial investigations. As a result, the number of confiscations and sequestrations ordered by the judiciary and executed by the police continues to be low. There is a lack of expertise among prosecutors and judges in specialist areas such as financial crime and procurement fraud. This expertise is essential to deal with corruption.

For a detailed analysis of developments in the fight against organised crime, see 4.3 — Justice, freedom and security.

2.2. Human rights and the protection of minorities

Through its Constitution many international human rights instruments are directly applicable in Kosovo and form an integral part of its legal framework. Kosovo’s reporting remains ad hoc, as it is neither party to any of the international human rights instruments nor a member of the Council of Europe.

On the promotion and enforcement of human rights, Kosovo’s next steps need to draw on the reform proposal on non-judicial human rights institutions from a joint EU/Council of Europe project. Kosovo needs to simplify the institutional framework, strengthen its capacities and clarify the roles of various civil and public service actors, reinforce the Ombudsperson Institution and ensure effective, consistent monitoring and reporting mechanisms, including with civil society. Kosovo needs to adopt the laws on anti-discrimination, Ombudsperson and gender equality as a package, so as to ensure coherence and complementarity in human rights legislation. The human rights strategy needs to be updated, including implementing mechanisms as set out in the human rights law package, to provide for a sustainable, long-term strategic approach. Human rights issues at all levels need to be put higher on the political agenda, in particular as concerns enforcement. The government needs to become less donor-dependent in this sector.

As regards the prevention of torture and ill-treatment in prisons, an inspection programme that monitors the work of correctional services has been established. No violations against internationally recognised human rights standards have been identified in the reporting period. There is no systemic ill-treatment of detainees in the prison system. Implementing legislation has been brought in line with EU standards. The first high security prison was taken into official use in May 2014. Unjustified prolonged detention continues to be a challenge for the criminal justice system. EULEX took over three cases as the local judiciary did not finalise proceedings within the legal timeframe for detention. The detention centre in Mitrovicë/Mitrovica is still used as a prison. Corruption in the correctional services is a growing concern. The government needs to take decisive action to address it. Some detainees continued to enjoy ‘privileges’, for instance by opting for regular hospitalisation outside the correctional facility. These events had an adverse impact on significant judicial cases. Internal investigations against correctional staff involved have led to disciplinary sanctions.

On freedom of expression, elementary pluralism of the media landscape is provided by independent dailies and several broadcasters. The Assembly adopted a law on protection of journalistic sources and appointed four new members to the board of the Independent Media Commission, giving the board a total of five members, out of the seven envisaged. This provides the board with the quorum required to carry out its tasks. The candidates selected met the legal requirements, even if the appointment process favoured political affiliation rather than independence. These appointments ended almost two years during which the commission was without proper governance, which compromised its authority and ability to ensure market transparency. It also delayed a number of key decisions, such as digitisation of analogue broadcasts.

A verdict was reached in the ‘Kosovo 2.0’ case, in which a launch party for a special issue of the magazine on sex, sexual orientation and gender identity was attacked. All three defendants were found guilty and received suspended sentences. One of the charges was withdrawn as it was covered by the law on amnesty. There were a few defamation cases, but the journalists involved were acquitted.

There has been a change in the leadership of the local journalists’ organisation. This has the potential to improve the reputation of the organisation. Kosovo’s press council is recognised as a platform capable of further developing professional self-regulation.

However, the legislative and institutional framework in this area remains fragmented and ineffective. Issues such as the autonomy of journalists and editors, protection of professional standards in journalism, the right to conscientious objection for journalists, and the right to reply and correction for the public remain unregulated by law. Editorial codes of conduct at individual media outlets would also be helpful in this regard. Threats and attacks, also from the police and public officials, on journalists persist. Instances of hate speech continue, mostly online, including in the social media.

Economic sustainability of the media is not ensured. Kosovo does not have effective rules for media ownership transparency. This results in excessive concentration and breaches of independence. Government advertisements have had an impact on the editorial policies of some of the media. The long-term financial sustainability of Kosovo’s public broadcaster (RTK) continues to be uncertain. Its current funding comes predominantly from the state budget, which undermines its editorial independence. The RTK union has pointed to corruption and a lack of transparency in RTK’s employment and recruitment policy. (See also 4.2.6 — Information society and media)

Kosovo citizens have continued to exercise their freedom of assembly and association throughout Kosovo. There were several public protests against various levels of government during the reporting period.

There has been sustained progress in the field of freedom of thought, conscience and religion. The Orthodox seminary continues to function well in its historical premises in Prizren, and its student population is growing. Kosovo remains ready to support the reconstruction of Serbian Orthodox Church sites left unfinished by the Reconstruction Implementation Commission. Interaction among religious leaders of all faith traditions has become more regular. There have been no reports of serious incidents linked to the protection of historical and religious sites, for which the Kosovo Police took over responsibility from KFOR. One incident was reported at the Visoki Dečani Monastery, which is still protected by KFOR. The delay in finding a solution to an ongoing land dispute between the municipality of Deçan/Dečane and the Visoki Dečani Monastery is a concern. It contributes to persistent tensions between the monastery, the municipality and the local community. Numerous incidents of petty theft and vandalism at religious heritage sites, including Serbian Orthodox monasteries and churches and Orthodox and Muslim cemeteries, continue to be a challenge for Kosovo’s authorities. These incidents need to be followed up systematically and adequately. The Law on Religion needs to be adopted.

With regard to women’s rights and gender equality, in January the government adopted an action plan for the implementation of the UN Security Council Resolution 1325 on Women, Peace and Security. In March, the Assembly amended legislation with a view to recognising survivors of conflict-related sexual violence. In September 2013, standard operating procedures for protection from domestic violence were created by the Agency for Gender Equality and the National Coordinator against Domestic Violence. In March 2014, the Office of Good Governance launched a protocol on the prevention of violence in institutions of pre-university education. Three municipalities established coordination mechanisms on domestic violence with civil society representatives. The issue of sexual violence during the conflict is getting more attention from politics and the public. A petition on sexual violence during the conflict, asking the UN Secretary General to report about these crimes, was signed by more than 100 000 people.

Challenges remain in the field of domestic violence and gender-based violence. Kosovo needs to establish a system of regular data collection on gender-based violence across all institutions. Women’s practical access to inheritance of property remains a challenge, although the law provides for it. Cadastral and registration officers need to register all co-owners of property, including women, to improve protection of their rights. Kosovo needs to develop a long-term reintegration programme to address the needs of women (and children), including relocation, subsidised housing, employment and counselling. Women’s representation remains low, especially in senior positions, both in the public and the private sector. There is also a need for further training and awareness-raising, notably in rural areas. The law on gender equality needs to be adopted as part of the human rights laws package.

As regards children’s rights, juvenile departments established in the courts and prosecutors’ offices are operational. This contributes to a continuing, sustainable trend of using alternative educational measures by the probation service. Child protection case management roundtables and coordination mechanisms need to be scaled up. Child protection services need more municipal budget to help prevent and protect children from all forms of violence. The government needs to take into account the recommendations from a joint EU/UNICEF project on juvenile justice. The government should not delay payments for social schemes dedicated to children in foster care and children with permanent disabilities. The Ministry of Education, Science and Technology needs to ensure the availability of personal assistants for children with disabilities, in line with the commitment made in its strategy.

Kosovo has improved its legal framework for the socially vulnerable and/or persons with disabilities. In December, the government adopted a programme on the provision of sign language (2013-16). A law on paraplegics and tetraplegics is to be adopted. Equal access to quality education for persons with disabilities and persons from the Roma, Ashkali and Egyptian communities remains very limited, despite the commitment to inclusive education. In the absence of adequate medical facilities, health care and rehabilitation services for persons of very low income, in particular persons with disabilities and elderly persons living in poverty, are inadequate. Implementing legislation for a law for blind persons is still to be adopted. The government needs to address the lack of assistant teachers for children with special needs. With stronger support from the Office for Good Governance, the disability council needs to improve its coordinating role in implementing the strategy for the rights of people with disabilities (2013-23) and its action plan (2013-15).

The Law on Anti-discrimination needs to be adopted and aligned with the laws on the Ombudsperson and gender equality. Cases of hate speech, targeting mainly members of sexual minorities and ethnic minorities, are rarely investigated. Preventive measures such as awareness raising remain scarce. Kosovo’s political leaders need to do more to promote tolerance.

In December, the government adopted a decision to establish an advisory and coordinating group for the rights of the lesbian, gay, bisexual, transgender and intersex (LGBTI) community. The group still has to prove its practical impact. Threats against LGBTI activists continue. A first pride walk was held in Pristina on 17 May to mark the day against homophobia.

In the area of labour and trade union rights, the government and the Social Economic Council signed a General Collective Agreement that lays down rights and obligations of employers and employees. With limited human resources (50 inspectors covering both labour, and health and safety issues) the labour inspectorate carried out over 8 000 inspections and issued more than 120 fines amounting to about € 274 000 in 2013. This number is very low, considering the number of registered active businesses in Kosovo (53 335). The implementation of the Law on Labour remains unsatisfactory. Participation of women in the workforce is low and there continues to be maternity-related discrimination. Implementation of the Law on Strikes also remains unsatisfactory, due to the lack of communication between strike organisers and authorities. The representation of employees within the Social Economic Council does not have the support of the vast majority of trade unions and is therefore not representative. (See also 4.1.8 — Employment and social policies, public health policy)

Progress on property rights remains slow. The office of the property rights coordinator has been strengthened. The Law on Treatment of Construction without a Permit was promulgated in December. There has been some improvement in compliance with legal obligations during the expropriation process. Regarding the Kosovo Property Agency (KPA), which resolves property claims resulting from the armed conflict, out of a total of 42 684 claims, 1 357 remain to be adjudicated by the Property Claims Commission. The number of implemented decisions stands at 29 871. Implementing decisions in difficult cases (i.e. where illegal construction occurred) is problematic. The KPA, as highlighted in a case before the Constitutional Court, needs to develop legal mechanisms and procedures for the solution of such cases. More than 900 evictions remain outstanding, of which over 350 cannot be executed because they are in the north of Kosovo. Illegal re-occupation of properties remains a significant challenge. The funding of the KPA continues to be unsustainable.

The compensation scheme for conflicting successful claims foreseen under the regime of the KPA’s predecessor is still not in place, raising human rights concerns given that most cases were filed and decided many years ago.

The strategy to regularise informal settlements still needs to be adopted. The new Law on the Kosovo Property Comparison and Verification Agency is still pending.

The (civil) courts regularly dismiss the many unresolved property compensation claims (‘stayed cases’) referring to the armed conflict. Other property disputes are often sent back to first-instance level for re-trial. Inter-ethnic property disputes are unduly prolonged. Overall, the courts are overburdened by the large number of pending claims.

Overall, Kosovo has made some progress on the protection of human rights. The Independent Media Commission became functional after a period of almost two years without proper governance. The perpetrators of violence against the Kosovo 2.0 journal were convicted. In general, human and fundamental rights continue to be broadly guaranteed in Kosovo. However, the main challenge is implementation of the legal framework, including at local level. The conditions for freedom of expression and media need to be put in place. Kosovo needs to effectively address persistent threats and attacks on journalists and LGBTI activists. Property rights need to be enforced effectively. The package of human rights laws needs to be adopted. Kosovo urgently needs to simplify the system of numerous bodies and institutions dealing with the protection of human rights.

Respect for and protection of minorities, cultural rights

Kosovo has a good legal framework for safeguarding and protecting its minorities but implementation needs to improve. In August 2014, the new members of the Community Consultative Council under the President’s Office were appointed. They should continue to meet on a regular basis to discuss and address the main issues affecting communities in Kosovo. The public broadcaster’s channel in the Serbian language (RTK 2) continued to broadcast. The channel also reported objectively on municipal elections and gave equal air time to each political party, as envisaged in the Law on Elections and as reported by the European Union Election Observation Mission. The Office for Community Affairs needs to continue the process of improving the employment of non-majority communities within the Kosovo civil service and public enterprises. The office launched a process to address the issue of diploma acceptance by the University in Mitrovicë/Mitrovica for potential public servants or employees of public companies.

The Office of the Language Commissioner has continued to function. The office received 45 complaints already in 2014, against twelve in 2013; 36 were resolved through mediation. The office provided language classes in Albanian and Serbian for civil servants in fourteen municipalities with the aim of improving service to the public. The language policy measures need to be adopted. Kosovo authorities both at central and local level need to focus on further improvements in the overall implementation of the law on the use of languages. This needs to be underpinned by strong political support.

The security situation for non-majority communities has remained stable. However, the majority of ethnically-motivated incidents targeted Kosovo Serbs. Theft and damage to properties were reported as the most frequent types of incidents, while those directly involving persons decreased. In Kosovo Serb return areas, the perceived or real threat to security remains an issue of concern, especially in some rural communities. Kosovo authorities need to do more to bring the perpetrators of inter-ethnic incidents to justice. The Municipal Community Safety Councils have been established throughout Kosovo. Their functioning and efficiency differ widely. The councils need to do more to address security concerns and ensure participation of all ethnic and religious communities.

A conference was held on the Roma, Ashkali and Egyptian communities in November. Kosovo now needs to accelerate the implementation of the action plan of the strategy (2009-15), taking into account priorities as identified in the Priorities Framework (2014-15) of April and the conclusions of the November conference. This includes applying a new framework enabling evidence-based monitoring of results achieved and developing new policy commitments for the period beyond 2015. In December 2013, the main building of Leposaviq/Leposavić camp was closed, following the resettlement of 31 families.

In general, Roma, Ashkali and Egyptian communities continue to face major challenges, notably difficult socio-economic circumstances, a lack of education, weak health care and discrimination. Regarding equal access to quality education, students from the Roma, Ashkali and Egyptian communities have lower registration rates, higher dropout rates, and poor levels of academic performance. Statistics on the dropout rates need to become more reliable. Mediators continued to engage with these communities to reduce dropouts, especially in schools with a higher concentration of pupils from these communities. Access to civil registration continues to be a concern and needs to be ensured. Kosovo needs to strengthen coordination and interinstitutional cooperation at central level and between central and local levels. The authorities need to make better use of the expertise of the relevant civil society groups. Adequate budget allocation is needed to make tangible progress in the implementation of the strategy and action plan. Allocating land in municipalities to returning Roma, Ashkali and Egyptian communities is crucial for their successful integration.

Regarding refugees and internally displaced persons (IDPs), there has been some progress. In 2014, the municipalities of Klinë/Klina and Gjakovë/Djakovica allocated land to some of the IDPs from the Konik camp in Montenegro. This needs to be followed by additional government funding to facilitate the actual return and reintegration of the families concerned. The adoption of the strategy for communities and return (2014-2018), and subsequent trainings for municipal officers, marked a positive development towards sustainable solutions for returnees. The return and reintegration in some minority-managed municipalities (such as Novobërdë/Novo Brdo, Partesh/Parteš and Shtërpcë/Štrpce) have shown that returnee families are finding it easier to reintegrate in such communities.

However, the number of voluntary returns decreased in 2013 (close to 800, compared to 1 040 in 2012). The low number of returns during 2013 can be largely attributed to a lack of funding and socio-economic prospects in Kosovo. The Ministry for Communities and Returns and Municipal Offices for Communities and Return are still not collecting and maintaining data on the number and location of returnees.

Regarding cultural rights, the Implementation and Monitoring Council continues to facilitate cooperation between the Kosovo authorities and the Serbian Orthodox Church. Meetings have continued to take place, albeit not always regularly. Concerns of the Church and the Kosovo authorities have been addressed resulting in a number of concrete actions. An ongoing challenge for the Council is to build on results achieved to establish sustainable trust between the parties. To this end, it is key that confidential matters are not exploited for political gains by either side. An online cultural heritage database was established, providing information on monuments, archaeological sites, spiritual or movable heritage.

The special unit of the police protecting Serbian religious and cultural heritage sites in Kosovo continues to function well, covering four regions and employing 203 Kosovo Police officers. The immediate challenges facing this unit are to improve communication with the resident Orthodox clergy in monasteries and to ensure the availability of sufficient and adequate equipment, such as vehicles, camera surveillance, generators and lighting at sites.

Implementation of the Law on the Historic Centre of Prizren has been hampered by a lack of support from the municipality. Meetings of the Cultural Heritage Council took place and it has reached a number of decisions related to building permits. However, the municipality needs to provide the Council with the necessary remuneration, equipment and staff, in order for it to function as foreseen by the law. The recently established Task Force set up to deal specifically with illegal construction in Prizren is encouraging, but its effectiveness is still to be proven. There has been no progress in the implementation of the Law on the village of Velika Hoča/Hoçë e Madhe. The village council has yet to be established and in August it was decided to further postpone the implementation of the law, even though the original deadline for implementation was February 2013. Administrative instructions were distributed in April to both municipalities to help with the implementation of both laws. Continued close guidance from central level is needed to ensure full implementation of these laws, since capacity at the municipal level is weak.

In general, frequent breaches of legislation across Kosovo negatively affecting religious and cultural heritage sites have continued. Implementation of the general legislative framework governing the protection of cultural heritage remains weak. Illegal construction is a major concern, particularly within Special Protective Zones. Punitive measures against those in breach of laws need to be applied consistently, and illegal construction which has already taken place should be dealt with in accordance with the law. Kosovo authorities, particularly at the local level, need to demonstrate a stronger commitment to protecting cultural heritage. The new government needs to engage actively in this process.

Overall, there has been some progress in the area of respect for and protection of minorities. Land has been allocated to some internally displaced persons from Montenegro. The Implementation and Monitoring Council has facilitated better protection of the cultural and religious heritage of the Serbian Orthodox Church. However, Kosovo needs to step up its efforts to ensure implementation of legislation and the policy framework, such as the Laws on the Historic Centre of Prizren and on Velika Hoča /Hoçë e Madhe and the action plan on the integration of Roma, Ashkali and Egyptian communities. Realistic policy commitments on Roma, Ashkali and Egyptian communities beyond 2015 need to be developed. Security incidents and crimes targeting persons belonging to minorities and their property need to be investigated and prosecuted thoroughly and promptly.

2.3. Regional issues and international obligations

In relation to war crimes, on 24 April the Assembly of Kosovo ratified the exchange of letters between the President and High Representative Ashton on the EULEX mandate. It also provided for the relocation of sensitive judicial proceedings to hear cases arising out of the investigation led by the Special Investigative Task Force, addressing the allegations of the 2011 Council of Europe Parliamentary Assembly report. Amendments to key legislation, including the Constitution, need to be adopted by the new legislature to establish the specialist court and its prosecution office. EULEX continues to investigate and prosecute war crimes. The local judiciary is still unable to fully pursue cases of this kind. Cooperation continued with the International Criminal Tribunal for the former Yugoslavia (ICTY), in investigating and prosecuting war crimes.

The government needs to approve the rules of procedure of the inter-ministerial working group on dealing with the past and reconciliation and it needs to adopt a transitional justice strategy. In general, there continues to be insufficient political support and a lack of proper mechanisms to gather information relevant for investigations regarding war crimes and missing persons. Witness intimidation continues to be a concern, although the police has made good progress establishing a witness protection directorate.

The unresolved fate of missing persons from the conflicts of the 1990s remains a humanitarian concern in the Western Balkans. As of August, a total of 11 155 persons were still missing according to the International Committee of the Red Cross (ICRC). Of these, 7 282 cases relate to the conflict in Bosnia and Herzegovina, 2 163 to the conflict in Croatia and 1 710 to the conflict in Kosovo. Ascertaining the fate of missing persons remains vital for reconciliation and stability in the region. Greater political commitment and renewed efforts are needed.

The working group on missing persons, chaired by the ICRC, remained the framework within which Kosovo pursued commitments and maintained a dialogue with Belgrade. Since October 2013, the two delegations have met three times. Exhumations in Rudnica, Raska (Serbia) started in April and were completed on 22 August 2014. It is expected that a number of additional missing persons’ cases will be solved this year. The handover of identified human remains to the families concerned should be swift and professional.

The lack of information on new sites and difficulties in identification of exhumed human remains continue to be key obstacles. A lack of political support seems to underlie the fact; no new information on the fate and whereabouts of missing persons was provided by the governmental commission on missing persons. The Kosovo delegation to the working group needs engage more proactively.

The Kosovo Department of Forensic Medicine (DFM) does not have the full capacity to meet the required standards for sustainable forensic practice. The government needs to recruit and develop the necessary expertise. Concrete steps are needed to identify human remains stored at the Pristina morgue. There needs to be more and better coordination and cooperation between the Office on Missing Persons and DFM. Specific efforts are needed to integrate staff from non-Albanian minorities into both departments. The adoption of implementing legislation on the establishment of a central register, and on the closure of cases, is urgent.

Regional cooperation and good neighbourly relations form an essential part of Kosovo’s process of moving towards the EU. The Kosovo authorities have continued to be active in this regard. Since June, Kosovo participates in the Migration, Asylum, Refugees Regional Initiative. Kosovo takes part in the Central European Free Trade Agreement.

Kosovo takes part in a number of regional meetings in line with arrangements on its regional representation and participation agreed between Pristina and Belgrade in 2012. For example, Kosovo takes part in the Regional Cooperation Council and is invited to participate in meetings of the South-East European Cooperation Process at all levels on a permanent basis and on equal terms. However, the agreed formula has not led to Kosovo’s inclusion in all regional organisations and fora.

Regarding bilateral relations with other enlargement countries, Kosovo has continued to have very good relations with Albania, with which it signed a declaration on cooperation and strategic partnership aiming to boost economic growth. Bilateral agreements were concluded in the areas of health, tourism, culture, taxation, use of joint border customs points, energy, unification of the employment market, the opening of joint consular offices, and on collaboration on the use of the EU acquis translated into Albanian.

Bosnia and Herzegovina has not changed its stance on the recognition of Kosovo. Short-stay visas for Kosovo citizens are issued only by invitation from foreign diplomatic missions and international organisations accredited in Bosnia and Herzegovina, or for humanitarian reasons. As a reciprocal measure, Kosovo introduced a visa obligation for the citizens of Bosnia and Herzegovina as of January. In August, Kosovo blocked the imports of food of animal origin from Bosnia and Herzegovina; in this regard, Kosovo should not impose requirements going beyond those agreed in the context of the Central European Free Trade Agreement.

Cooperation with the former Yugoslav Republic of Macedonia has continued on the basis of a large number of bilateral agreements. Agreements on mutual recognition of pensions and on strengthening cultural cooperation entered into force. An agreement for the opening of a new joint border crossing point in Belanovce-Stančik was ratified.

Concerning Montenegro, an agreement on recognition of pension rights was signed in December, while agreements on police cooperation, on the opening of joint border crossings, on local border traffic as well as protocols on joint border patrols and border cooperation were signed in March. The joint commission on border demarcation continued its work. A protocol on cooperation in the fight against trafficking in human beings was signed in April.

Kosovo has maintained very close relations with Turkey.

Overall, some progress has been achieved on war crimes and missing persons, notably with regard to excavations in Rudnica, Raska (Serbia). Ascertaining the fate of missing persons remains vital for reconciliation and stability in the region. Greater political commitment and proactive engagement is necessary. On regional cooperation, Kosovo has made further progress and has maintained good relations with its neighbours. Kosovo needs to continue to be pragmatic and constructive in these efforts. Delineation of the border with Montenegro needs to be finalised.

3. Economic criteria

In examining economic developments in Kosovo, the Commission’s approach was guided by the conclusions of the European Council in Copenhagen in June 1993, which stated that membership of the Union requires the existence of a functioning market economy and the capacity to cope with competitive pressure and market forces within the Union.

Monitoring of the economic criteria needs to be seen in the context of the increased role of economic governance in the enlargement process, as welcomed by the General Affairs Council of 17 December 2013 and the Council Conclusions of 18 February 2008, where the Council asked the Commission to use community instruments to promote economic and political development for Kosovo.

3.1. The existence of a functioning market economy

Although Kosovo’s economy grew uninterruptedly since 2001 much of its growth can be attributed to the low base effects as genuine sources of sustainable growth remain absent. High and persistent external imbalances, somewhat mitigated by significant inflow of worker remittances, showcase a weak production base and lack of international competitiveness. Inefficient and heavily subsidised POEs, and ad hoc decision making, characterise Kosovo’s public sector. Although measures such as the introduction of the fiscal rule were enacted, their reinforcement mechanisms remain weak. The labour market is characterised by low participation and high unemployment rates. Large shares of youth, long term and unskilled unemployed show deeply embedded structural rigidities. The widespread informal economy, weak rule of law and lack of fiscal predictability remain major obstacles to doing business and improving competition and productivity in the economy. Significant further efforts are needed to develop a competitive private sector and anchor fiscal sustainability.

Economic policy

Consensus on the essentials of key economic policies was broadly maintained, though dissent between the ruling coalition and the opposition on the privatisation process of Post and Telecom of Kosovo (PTK) led to a two-month deadlock in the assembly and also delayed the adoption of the 2014 government budget. Efforts to develop relations with international financial institutions were sustained. The European Investment Bank re-launched its operations in the second half of 2013 and Kosovo became a member of the Council of Europe Development Bank in November 2013. A 20-month precautionary IMF standby arrangement (SBA) was successfully concluded in December 2013. The 2014 budget plan was the first that complied with a fiscal rule. However, the government’s pre-election decision in March 2014 to increase salaries, pensions and other benefits to levels significantly higher than envisaged in the initial budget altered the structure of expenditure at the expense of growth-enhancing capital spending and raised questions regarding the transparency and credibility of fiscal policy. Overall, the pursuit of market-oriented economic policies slowed and the predictability of economic policies weakened as a result of ad hoc approaches in policymaking.

Macroeconomic stability

Economic growth rebounded in 2013 to 3.4 % from 2.8 % in 2012, driven by private consumption and a marginal improvement in net exports, with a negligible contribution from investments. Due to better economic performance of the main diaspora countries higher remittances underpinned private consumption. The positive net exports contribution was influenced by subdued domestic demand rather than an improvement in international competitiveness, as imports contracted substantially. A narrow and internationally uncompetitive production base, deficient infrastructure, particularly in the energy sector, discouraging business environment and significant skill gaps in the labour market impeded job creation, despite continuous positive growth. GDP per capita[4] reached € 2 800 in 2013, equal to 11 % of the EU-28 average. Overall, Kosovo’s economic growth accelerated, but long term sustainable sources of growth are lacking.

External accounts improved in 2013, but remained heavily imbalanced. The current account deficit narrowed to 6.4 % of GDP, 1.1 percentage points lower than in 2012. The trade deficit was brought down to 31.6 % of GDP (2.5 percentage points lower than in 2012) as a result of contracting imports due to weak domestic demand, lower energy prices and somewhat rising goods exports. Concerns that the narrowing of the trade deficit was only temporary rather than of structural nature were reinforced in 2014 as goods exports decreased 0.4 % and imports inched up 1.2 % thus increasing the trade deficit by1.4 % in the first seven months of the year.

Worker remittances rose by 6.4 % and together with higher current transfers to the non-government sector helped narrow the current account deficit. Financing of the current account deficit depended primarily on net foreign direct investment, which reached 4.5 % of GDP, up from 4.2 % of GDP in 2012. Economic uncertainty, credit tightening, and an increase in investment abroad led to a net outflow of portfolio and other investments of 2.9 % of GDP compared to the inflow of 3.6 % of GDP in 2012. Net errors and omissions, although notably improved (1.3 percentage points lower than in 2012), stood at 3.4 % of GDP still covering a substantial part of the total current account deficit. Overall, despite improvements in the trade deficit, significant imbalances persisted, largely due to a weak production base.

According to the 2013 labour force survey, the labour participation rate among the working age population somewhat increased but still remains unacceptably low at 40.5 %, indicating limited employment opportunities, together with low human capital endowment. Unemployment decreased slightly to 30 %, but remained highest in Europe. The total number of registered job seekers however rose by 3.1 % in 2013 and further 1.5 % by June 2014. The share of unskilled workers among the total unemployed (57.2 % in June 2014), showcases an urgent need for more active labour market policies, prequalification schemes and vocational trainings. In December 2013, the law on the Employment Agency (whose main task is defined as implementing employment and vocational training policies) was adopted. However, no budget allocation was made for the agency for 2014. Statistics regarding the labour market remained inadequate and outdated, hampering a sound analysis of the situation. Overall, there have been limited efforts to improve labour market conditions. More efforts and funding should be made to support active labour market policies, which remained insufficient, and to produce adequate data on employment.

The scope of monetary policy tools is limited, as Kosovo uses the euro as legal tender without access to European Central Bank facilities. The total assets of the financial system, (excluding Central Bank of Kosovo assets) expanded by 10.5 % and reached 83 % of GDP in 2013 from 78 % a year earlier. Due to a decline in demand and tighter bank standards, credit growth slowed down further to 2.4 % by the end of 2013 from 3.8 % a year earlier. Deposits growth continued at a rate of 8.3 %. The loans to deposits ratio decreased from 77.4 % in 2012 to 73.7 % in 2013 pointing to significant scope for deeper financial intermediation and abundance of liquidity in the banking sector. Both loan and deposit average interest rates declined throughout 2013 and 2014, reaching 10.8 % and 0.7 % respectively in July 2014.

The annual average rate of inflation continued to moderate to 1.8 % in 2013, owing to stagnant international food and energy prices. Core inflation (non-food, non-energy) remained unchanged at 1.2 %. The disinflationary trend continued in 2014, bringing down the annual rate of inflation to 1 % by the August.

Although fiscal performance deteriorated in 2013, compared to 2012, the budget deficit remained below the initial plan and stood at 3.1 % of GDP. Total revenues declined by 0.7 %, as border tax revenues contracted, due to lower volume of imports, and underperforming other own sources of revenue (administrative taxes, fines and penalties, participation fees, licences etc.) Total expenditure increased by 1.6 %, as spending cuts mostly at the expense of non-highway capital outlays offset the effect of rising current expenditure. As a result, non-highway capital spending stayed almost 25 % below its projected level. Capital expenditure decreased to 9.9 % of GDP from 10.9 % of GDP in 2012. To finance part of the deficit, and to take advantage of excess liquidity in the banking sector, the government continued issuing domestic treasury bills with progressively longer maturities. In March 2013 a two year maturity bond was issued for the first time. Thus, the total public debt (domestic and external) ratio increased by 0.8 percentage points to 8.9 % of GDP at the end of 2013 according to national data. As the PTK privatisation did not materialise, effectively stripping the government of an estimated 277 million EUR, the budget deficit was partly financed through the withdrawal of government deposits, which were reduced to 2.9 % of GDP, their lowest level since 2008, and well below the 4.5 % of GDP threshold implied by the fiscal rule.

The 2014 budget was to be the first one anchored by the new fiscal rule limiting the total deficit to 2 % of GDP. However, in March, the government adopted a decision to increase salaries of all civil servants as well as social pensions by 25 % (and for retired Trepça miners by 50 %) followed by spending initiatives for former political prisoners and war veterans. These increases in salaries and pensions, significantly higher than envisaged in the adopted budget, are to be funded by wage contingencies, cuts in goods and services expenditures, and by reassigning funds earmarked for civil service reform. As the financing of these initiatives relies to a significant extent on one-off effects, at the expense of delaying important reforms, it raises concerns over the accumulation of government arrears and rising government deficits in the future. These measures could also hurt Kosovo’s price competitiveness by pushing up economy-wide labour costs.

Overall, macroeconomic and fiscal stability was preserved in 2013, but the unbalanced pattern of public sector wage policies with large ad hoc hikes typically occurring in election years severely deteriorates the transparency, predictability and credibility of fiscal policy, complicates fiscal planning and shifts the composition of spending towards less growth-friendly expenditure. The fiscal rule should be strengthened with stricter enforcement mechanisms to avoid a repetition of pre-electoral spending excesses in the future.

Interplay of market forces

The private sector’s share in GDP has remained unchanged at an estimated 70 % in 2013. Amidst criticisms of corruption and lack of transparency in the sale of Socially Owned Enterprises (SOE) assets, the Privatisation Agency of Kosovo (PAK) continues to implement its mandate in expediting the sale and liquidation of SOEs under its administration. In 2013 PAK finalised only two liquidation processes and another six liquidation processes in 2014 (as of March). Following one failed attempt, and several delays in 2013, privatisation of the PTK was called off in December 2013, amid numerous corruption allegations and growing opposition by some opposition parties and the civil society. Furthermore, PAK’s ability to operate efficiently and in accordance with its mandate was brought into question, when by August 2014, a series of board member resignations and mandate terminations, which were not adequately addressed by the Assembly of Kosovo, resulted in the lack of a board quorum.

Among centrally managed enterprises, only Kosovo Energy Corporation and PTK continued to operate with a profit in 2013. Subsidies to Publicly Owned Enterprises (POEs) in the field of energy imports, central heating, transportation and water amounted to 0.5 % of GDP, a decrease of 0.25 percentage points compared to 2012. The government control and regulation of the electricity, central heating, water supply and waste, and post-telecommunications services prices, via independent agencies, remained unchanged.

Overall, very limited progress has been achieved in privatisation and liquidation of enterprises in PAK’s portfolio. The failure of the PTK privatisation and legal uncertainty surrounding PAK raise concerns regarding the future and transparency of the privatisation agenda. Some marginal improvements are exemplified by the reduction of subsidies to POEs.

Market entry and exit

Regulations adopted in 2013, and the establishment of one-stop shops, have reduced the time needed for company registration, to one day for individual businesses, and to three days for limited liability companies and joint stock companies. Kosovo would benefit from addressing numerous other obstacles to private sector development, such as weak administrative capacity, lack of access to finance, underdeveloped infrastructure especially in electricity supply, deficient rule of law, widespread informal economy and inadequate professional education. During 2013, the number of newly registered businesses declined by 1.8 % to 9 421 while the number of exits rose by 28 % to 1 508 compared to the previous year. The total number of active registered businesses stood at 68 309 in September 2014. Overall, amid some progress in simplifying business registration, private sector development remains hampered by numerous obstacles.

Legal system

The basic legal framework on the purchase of real estate by foreigners is compliant with EU rules. However, further efforts are required to review the civil code, and administrative practices are still an obstacle to equal treatment. Regarding the implementation of agreements in the framework of the Pristina-Belgrade Dialogue, all certified copies of civil registry books located in Serbia were handed over to Kosovo. Legislation required to imp