Report from the Commission to the European Parliament and the Council - European Agency for Reconstruction - Annual Report 2001 According to Article 4.14 of Council Regulation (EC) 2667/2000 (as amended by Council Regulation 2415/2001)
Date: 2002-06-10
Institutions: European Commission
Subjects: EU aid, EU programme, European Agency for Reconstruction, Kosovo, Montenegro, Serbia, activity report, economic development, economic reconstruction, rule of law

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 10.6.2002
COM (2002) 288 final

REPORT FROM THE COMMISSION
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

European Agency for Reconstruction

Annual Report 2001

According to Article 4.14 of Council Regulation (EC) 2667/2000 (as amended by Council
Regulation 2415/2001)

REPORT FROM THE COMMISSION
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

European Agency for Reconstruction

Annual Report 2001

According to Article 4.14 of Council Regulation (EC) 2667/2000 (as amended by Council
Regulation 2415/2001)

TABLE OF CONTENTS

Preface ...................................................................................................................................... 4

1.

2.

3.

3.1.

3.2.

3.3.

3.4.

4.

4.1.

4.2.

4.3.

4.4.

5.

5.1

5.2

5.3

5.4

6.

6.1

6.2

6.3

Overview ...................................................................................................................... 5

Highlights..................................................................................................................... 8

Operations: the Federal Republic of Yugoslavia - The Republic of Serbia............... 11

Overall position.......................................................................................................... 11

Implementation of 2001 programmes ........................................................................ 12

Implementation of 2000 programmes ........................................................................ 15

Implementation of 1999 & 1998 programmes ........................................................... 16

Operations: The Federal Republic of Yugoslavia - Kosovo ...................................... 17

Overall position.......................................................................................................... 17

Implementation of 2001 programmes ........................................................................ 18

Implementation of 2000 programmes ........................................................................ 23

Implementation of 1998 & 1999 programmes ........................................................... 25

Operations: the Federal Republic of Yugoslavia - The Republic of Montenegro ..... 27

Overall position.......................................................................................................... 27

Implementation of 2001 programmes ........................................................................ 28

Implementation of 2000 programmes ........................................................................ 29

Implementation of 1998 & 1999 programmes ........................................................... 30

Programming.............................................................................................................. 33

Programming.............................................................................................................. 33

External co-ordination................................................................................................ 34

Evaluation .................................................................................................................. 34

2

7.

8.

8.1

8.2

Finance ....................................................................................................................... 36

General Services......................................................................................................... 39

Administration ........................................................................................................... 39

Information & communication................................................................................... 39

Annex A1 - Key statistics: the Republic of Serbia................................................................... 40

Annex A2 - Key statistics: Kosovo .......................................................................................... 41

Annex A3 - Key statistics: the Republic of Montenegro ......................................................... 42

Annex B - Agency Governing Board meetings 2001 .............................................................. 43

Annex C - Agency organisational structure chart .................................................................... 44

Annex D - Agency budget 2001............................................................................................... 45

Annex E - Agency contacts ...................................................................................................... 46

3

PREFACE

The European Agency for Reconstruction is responsible for the management of the main EU
assistance  programmes  in  the  Federal  Republic  of  Yugoslavia  (the  Republic  of  Serbia,
Kosovo, and the Republic of Montenegro) and the former Yugoslav Republic of Macedonia.

On  10th  December  2001  the  Council  decided  that  the  mandate  of  the  Agency  should  be
extended to the former Yugoslav Republic of Macedonia (fYROM). On 28th December 2001,
the European Commission formally conferred on the Agency the management responsibility
for  the  fYROM  2001  Emergency  Assistance  Programme  as  of  1st  January  2002,  with
responsibility for other programmes (past, present and future) to follow on 1st March 2002.

The  Agency  was  established  in  February  2000  and  has  its  headquarters  in  Greece  at
Thessaloniki,  and  operational  centres  in  Pristina,  Belgrade,  Podgorica  and  Skopje.  An
independent agency of the European Union, it is accountable to the European Council and the
European  Parliament,  and  overseen  by  a  Governing  Board  composed  of  the  European
Commission and representatives from the 15 EU Member States.

The total sum of EU funds newly delegated to the Agency for management in 2001 amounted
to  some  €525  million.  At  the  year-end,  the  Agency  oversaw  a  total  portfolio  of  some  €1.2
billion across its operational centres in Belgrade, Pristina and Podgorica.

Agency-managed  programmes  have  three  main  objectives.  These  are:  (i)  to  carry  out
immediate  physical  and  economic  reconstruction  (rehabilitation  and  repair  of  key
infrastructure  and  public  utilities,  such  as  energy,  housing,  water,  transport);  (ii)  to  lay  the
foundation for the development of a market-oriented economy and to foster private enterprise
(support to enterprise development, agriculture, health); and (iii) to support the establishment
of democracy, human rights and the rule of law (strengthening of local administration, NGOs,
the media and the judiciary).

The  Agency  plays  its  part  within  a  wider  European  Union  commitment  to  the  Federal
Republic of Yugoslavia and the former Yugoslav Republic of Macedonia. This - in turn - is
part  of  the  EU’s  process  of  ‘Stabilisation  and  Association’  with  the  five  countries  in  South
Eastern  Europe,  also  including  Albania,  Bosnia  &  Herzegovina  and  Croatia.  Other  EU
assistance  includes  macro-financial,  humanitarian,  democratisation,  customs  and  fiscal
planning  aid,  as  well  as  support  for  educational  exchange  programmes.  It  also  includes  the
bilateral contributions made by EU Member States.

4

1.

OVERVIEW

In 2001, the EC-funded programmes managed by the European Agency for Reconstruction -
across  three  operational  centres  in  the  Republic  of  Serbia,  Kosovo  and  the  Republic  of
Montenegro - continued to focus on three main areas of activity.

In physical and economic reconstruction (accounting for some 60% of funds newly delegated
to the Agency in 2001, as against 76% in 2000) … it continued to meet the most fundamental
of needs of citizens in the realms of energy and water supply, housing and transport. This task
is far from over, and substantial funding will continue to be allocated to it.

In  laying  the  foundation  for  the  development  of  a  market-oriented  economy  and  fostering
private enterprise (accounting for some 25% of new funds in 2001, as against 19% in 2000)
…. it continued to support enterprise development (largely through assistance to the banking
sector and to the  growth  of small  and medium-sized enterprises, for  which  it  also  disburses
small  loans),  as  well  supporting  agriculture  and  rural  communities,  and  better  delivery
through national and regional health systems.

In supporting the establishment of democracy, human rights and the rule of law (accounting
for some 15% of new funds in 2001, as against 5% in 2000) it continued to provide training
and vision for local administrations, while nurturing NGOs, the media and the judiciary.

The  Agency  is  therefore  seeing  a  gradual  shift  away  from  its  first  main  area  of  activity,
towards  the  second  and  the  third.  This  reflects  the  fact  that,  above  and  beyond  the  task  of
reconstructing  physical  infrastructure,  the  Agency  has  been  entrusted  with  the  additional  -
harder, more complex - task of helping to reconstruct societies and economies. This involves
work  which  is  of  necessity  long-term  and  sustainable,  as  well  as  being  less  quantifiable,  in
that  it  embraces  the  ‘reconstruction’  needed  within  communities  themselves,  within
frameworks  for  a  business  environment,  within  a  free  press,  within  a  functioning
administration and public institutions.

***

The  Agency  was  originally  set  up  with  an  emphasis  on  speed  of  delivery.  It  continues  to
disburse  the  funds  for  which  it  is  responsible  –  in  effect,  it  continues  to  deliver  on  EU
promises – to great effect. At the end of 2001,  85% of the EU  funds under its management
were contracted, and 66% paid out.

However,  its  ultimate  success  must  be  measured  by  the  impact  of  its  programmes  on  the
ground,  and  by  the  improvements  they  bring  to  human  lives.  In  this  respect,  the  Agency’s
work and its impact in 2001 do not stand alone: they must be seen in the political, social and
economic context of the region in which it operates, and in the perspective of a massive EU
and international commitment in the Federal Republic of Yugoslavia. Equally,  however, the
Agency’s work and impact do stand alone, when reviewed against their original objectives.

In the Republic of Serbia, the Agency helped to stabilise an emergency situation, ensuring a
sufficiency of  electricity  and  fuel  oil,  basic  foodstuffs  and  essential  medical  supplies,  while
carrying out small-scale infrastructural projects in towns and schools across all municipalities.
In the new 2001 programme it consolidated its work in the energy sector – not by importing
electricity, but by rehabilitating Serbia’s home grown  energy  capacity – while continuing to
supply essential drugs and healthcare equipment. It imported agricultural seed and fertiliser to

5

help revitalise  the  rural  economy,  it  provided  credits  to  galvanise  the  small  business  sector,
and  it  launched  smaller  programmes  to  promote  a  free  press,  and  to  support  civil  and
environmental regeneration specifically in Southern Serbia.

In Kosovo, the Agency continued to meet the most basic needs of physical rehabilitation: in
works  on  the  main  power  plants  and  the  coal  mines  feeding  them;  in  rebuilding  damaged
houses, roads and bridges; in ensuring reliable water supply and waste disposal. At the same
time,  it  successfully  disbursed  loans  for  small  and  medium-sized  businesses  and  for  small-
scale farmers,  and boosted productivity in the rural economy through  the provision of basic
agricultural inputs. Its projects also paid particular attention to bequeathing longer-term best
practice in Kosovo, by giving technical assistance and building institutional capacity. Smaller
projects were launched to encourage a free and professional press, and to support small NGO
initiatives – particularly for women and for minorities of all descriptions.

In  the  Republic  of  Montenegro,  the  Agency  accelerated  key  improvements  in  basic
infrastructure  –  buildings roads, bridges, and schools.  Increasingly,  it  gave  more  impetus  to
the reform of central and local administration.

Many of the Agency’s actions to date can be quantitatively measured. Increasingly, however,
its actions are more difficult to quantify, in that the results are less visible. The effects of its
longer-term actions – in promoting good governance and building institutions, in creating the
conditions for a stable  and  flourishing market economy, and  in  developing  a  civil  society  –
need  time  to  take  root.  The  Agency  designs  programmes  for  recipients’  long-term  benefit,
fully realising that the road to recovery and reform is long and winding. The process requires
patience, and will be marked by gains, which are painstakingly won.

Agency-managed  programmes  will  continue  to  play  a  key  role,  as  the  EU  sees  through  its
commitment to reintegrate stable and prosperous partners from South Eastern Europe into the
European family of nations.

***

The  year  2001  also  combined  rapid  change  with  fundamental  constancy  for  the  European
Agency for Reconstruction.

Change …

… in that the sum of the EU funds for which it was given management responsibility trebled,
while it established two new operational centres and also doubled the size of its staff.

Constancy ...

…  in  that  it  continued  to  keep  its  administrative  costs  to  a  minimum,  while  adhering  to
standard EU tendering procedures to maintain the speed of its delivery.

As  December  drew  to  a  close,  the  need  to  combine  the  two  elements  became  even  more
pronounced,  following  a  Council  Decision  to  extend  the  Agency’s  mandate  to  cover  the
former  Yugoslav  Republic  of  Macedonia  (fYROM).  The  European  Commission  then  asked
the Agency (which had assisted it in implementing emergency programmes since September
2001)  to  assume  full  management  responsibility  for  the  2001  Emergency  Assistance
Programmes  in  fYROM  as  from  January  2002,  with  the  other  main  EU  assistance
programmes in fYROM (past, present, future) to follow in March 2002.

6

***

2001  was  also  a  year  in  which  the  Agency  combined  its  degree  of  independence  with  its
clearly defined EU framework.

Independence …

…  in  that  it  has  the  freedom  to  prepare,  launch,  contract,  manage  and  evaluate  its  own
tenders, and to recruit its own staff.

Framework …

…  in  that  it  follows  standard  EU  tendering  guidelines  and  avoids  simplified  or  accelerated
procedures;

…  in  that  -  within  EU  structures  -  its  activities  fall  within  the  European  Commission’s
strategic  framework,  are  closely  monitored  by  the  European  Court  of  Auditors,  and  are
regularly reported to the European Parliament and the European Council of Ministers;

…  in  that  its  activities  stand  firmly  within  the  overall  context  of  the  European  Union’s
process  of  deepening  political  and  economic  dialogue  with  the  countries  of  South  Eastern
Europe.

This  EU  strategic  context  is  of  paramount  importance.  Its  broadest  manifestation  is  the
Stabilisation and Association Process, now launched with five countries in the region, which
is designed to  promote  integration with EU  norms  and  structures,  and  ultimately  to  provide
the perspective of membership of the European Union itself.  Its more specific manifestation
lies  in  medium-term  Country  Strategy  Papers  and  Multi-Annual  Indicative  Programmes
developed  by  the  European  Commission,  which  provide  the  strategic  framework  for  the
delivery  of  the  CARDS  (Community  Assistance,  Reconstruction,  Development  and
Stabilisation) Programme for the five countries in South Eastern Europe over the period 2002-
2006.

The  European  Union  has  made  an  open  commitment  to  the  region,  and  continues  to  offer
assistance in a multitude of ways, and through a multitude of channels. Within this context,
the  Agency  manages  the  body  of  its  assistance  programmes  for  the  Federal  Republic  of
Yugoslavia and, as from 2002, also for the former Yugoslav Republic of Macedonia.

7

2.

HIGHLIGHTS

FRY – the Republic of Serbia
(cid:1)  Despite severe winter weather, the energy programme (spare parts, works,  and electricity
imports) has had  a noticeably  positive effect in  meeting  demand  and reducing  blackouts.
Many  other  inputs  (fertiliser,  locally  produced  and  sold  drugs)  have  been  procured  and
distributed. There is a strong demand for medium-term credit by SMEs.

(cid:1)  The  2000  Emergency  Assistance  Programme,  which  the  Agency  took  over  in  January
2001, has been completed, with 94% of funds disbursed at the year-end. It has successfully
stabilised  an  emergency  situation,  with  actions  in  the  fields  of  energy,  health,  food  and
local infrastructure

(cid:1)  The  2001  Programme  is  under  rapid  implementation.  At  the  year-end,  92%  of  the  first
tranche (€143.5 million) had been contracted, and  51% disbursed. More than 30% of the
second tranche of €50.3 million, made available in November, had also been contracted.

FRY – Kosovo
(cid:1)  While  continuing  with  major  physical  rehabilitation  works  in  Kosovo’s  power  stations,
coal mines and public utilities, and with the reconstruction of housing and main roads, the
2001  programme  had  a  much  increased  emphasis  on  institutional  capacity-building
measures  across  most  of  its  sectors.  The  provision  of  credit  lines  is  supporting  general
economic  development,  including  that  of  the  agriculture  and  enterprise  sectors.  Other
measures are being implemented to support the rule of law and civil society. Funding was
also provided to support the November 2001 general election for Kosovo’s new Assembly.

(cid:1)  Although  Kosovo  has  made  substantial  progress  in  the  period  since  the  1999  conflict,
major  challenges  remain  -  including  the  need  to  rehabilitate  further  the  existing
infrastructure  (in  particular  in  the  energy  and  transport  sectors),  deal  with  critical
environmental  issues,  support  trade  and  private  sector  development,  reform  the  training,
education and health delivery systems, and strengthen civil society and governance.

(cid:1)  The  2001  programme  funding  reached  €315  million,  following  the  commitment  of  an
additional €44.5 million in October 2001. Of the €695 million committed in Kosovo since
1998, 85% had been contracted and 66% paid out by 31 December 2001.

FRY – the Republic of Montenegro
(cid:1)  On  8th  January  2001  the  Agency  assumed  management  responsibility  for  the  main  EU-
funded  assistance  programmes  in  Montenegro.  The  Agency’s  office,  based  in  Podgorica,
was established in March 2001 and has been fully staffed and operational since June.

(cid:1)  The  bulk  of  the  2001  programme,  worth  some  €13.3  million,  was  agreed  in  October.  A

further €3 million was agreed in December.

8

(cid:1)  In 2001, the Agency concentrated on contracting some €19 million out of €24 million of
funds  inherited  from  the  1999  and  2000  programmes.  At  the  year-end,  97%  of  the  1999
projects  had  been  contracted,  and  77%  paid.  For  the  2000  programme,  72%  had  been
contracted.

FRY- the Republic of Macedonia, fYROM
(cid:1)  From September 2001, the Agency  assisted  the European  Commission in the preparation
and  management  of  an  Emergency  Assistance  Programme  for  fYROM.  The  programme
has two main aims: the reconstruction of areas affected by the conflict in the first half of
the year; and support to confidence-building measures to bolster the implementation of the
Framework Agreement of August 2001.

(cid:1)  In December 2001 the Agency was formally  asked to assume management responsibility
for the main EU assistance programmes in fYROM. At 1st January 2002, the Agency then
took over full responsibility for the management of the Emergency Assistance Programme,
and established an operational centre in Skopje.

Programming

(cid:1)  During 2001 the Agency prepared programme proposals in several instalments. Within the
framework of the FRY Country Strategy Paper and Multi-Annual Indicative Programme, it
also developed draft 2002 Annual Programmes  for  discussion  in  the Governing  Board in
January 2002.

(cid:1)  The  evaluation  team  carried  out  nine  interim  evaluations  during  the  year,  with  its

recommendations for project improvement being incorporated.

Finance

(cid:1)  Of the  €1.15  billion managed by  the  Agency,  as  at  the end of  2001 some 85% had  been

contracted and 66% disbursed.

(cid:1)  Using standard EU tender procedures, the Agency awarded €0.5 billion of new contracts in
2001,  of  which  87%  were  awarded  through  open  tenders  and  grants,  and  13%  through
simplified procedures.

(cid:1)  In 2001, the Agency contracted more funds than were newly allocated to it, (excluding the
funds  allocated  to  Kosovo  at  the  very  end  of  the  year).  The  average  time  taken  by  the
Agency to make a payment, after receipt of an invoice, was 17 days.

(cid:1)  The Agency’s running costs for its first two years of activity (2000, 2001) amount to €25.9

million, i.e. 2.4% of the total of the years’ final budgets.

(cid:1)  In November 2001, the European Court of Auditors published a  favourable report on  the

Agency’s 2000 financial accounts, and on the impact of its programmes in Kosovo.

9

General services

(cid:1)  At 31st December 2001  the Agency employed 97  international and 144 local  staff,  at  its
headquarters  in  Thessaloniki  and  its  three  operational  centres  in  Belgrade,  Pristina  and
Podgorica.

(cid:1)  The Agency began to set up a new operational centre in Skopje.

(cid:1)  The  Agency’s  Governing  Board  met  four  times  in  the  year,  and  continued  to  play  an
important  strategic  role  in  debating  specific  financing  proposals  for  Serbia,  Kosovo  and
Montenegro, as well as a variety of programme-related and administrative issues.

10

OPERATIONS:  THE  FEDERAL  REPUBLIC  OF  YUGOSLAVIA  –  THE  REPUBLIC  OF

3.
SERBIA

3.1. 

Overall position

On  January  8,  2001  the  European  Agency  for  Reconstruction  assumed  management
responsibility for the 1998, 1999 and 2000 EU assistance programmes in Serbia, which were
previously being implemented by the European Commission in Brussels, and its Delegation in
Belgrade. In particular, the €180 million 2000 Emergency Assistance Programme has proved
to  be  a  crucial  factor  in  helping  to  stabilise  an  emergency  situation.  (This  emergency
programme  was  prepared  and  substantially  contracted  by 
the  Commission  during
October/November 2000, with the help of staff from the Agency in Kosovo.)

The practical benefits of the 2000 emergency programme were widely felt across Serbia. The
impact was felt, for instance, through heating oil for some 1,000 schools, hospitals and district
heating  systems  in  municipalities  covering  some  80%  of  the  population;  through  electricity
imports which prevented major power cuts; through the supply of essential drugs (e.g. insulin)
and food commodities (sugar, cooking oil).

For  Serbia,  the  break-up  of  the  former  Yugoslavia  and  the  ensuing  armed  conflicts  and
economic  mismanagement  of  the  1990s  resulted  in  hyperinflation  and  a  ruined  economy.
Established  markets  were  lost,  and  traditional  production  and  trade  relations  disrupted.  The
international  community  imposed  sanctions,  and  critical  infrastructure  was  either  badly
maintained or destroyed. By 2000 GDP had dropped to about 40% of its 1990 level.

By  early  January  2001,  the  new  Federal  and  Serbian  authorities  had  moved  quickly  upon
taking office. They focussed their efforts on three main areas: (i) stabilising the economy; (ii)
meeting  the  urgent  needs  of  the  most  vulnerable  parts  of  the  population,  and  (iii)  re-
integration within the international community.

Good  progress  was  made  in  all  areas.  The  new  FRY/Serbia  governments  are  implementing
comprehensive  structural  reforms  in  order  quickly  to  introduce  a  market  economy.  For
example,  they  have  introduced  significant  tax  reforms,  privatised  a  number  of  enterprises,
begun to restructure the banking sector, while increasing electricity, district heating and other
public  utility  tariffs.  Encouraged  by  the  breadth  of  the  governments’  commitment,  the  June
2001  donors’  conference  held  in  Brussels  resulted  in  pledges  of  assistance  of  some  €1.5
billion.  A  successful  and  necessary  Paris  Club  debt  rescheduling,  with  66%  of  debt  written
off, was subsequently agreed in November 2001.

Within  a  fragile  macro-economic  environment,  Serbia  is  pursuing  a  bold  economic  reform
programme.  It  is  anxious  to  avoid  becoming  dependent  on  foreign  assistance.  Given  the
enormous  weight  of  the  past,  Serbia  will  continue  to  require  significant  support  from  the
international community if it is to succeed.

Whereas  the  2000  programme  had  focused  largely  on  providing  emergency  assistance
(heating oil, electricity imports, basic food staples, etc.), the 2001 assistance programme for
Serbia  represented  the  first  step  away  from  an  emergency  programme  toward  longer-term
development  assistance.  Serbia  is  emerging  from  a  long  period  of  economic  decline
compounded by conflict and international isolation, and significant support from international
institutions and the EC is needed to support the transition to a fully-fledged market economy
and democracy.  The EC’s  programme took into account the need  to  provide  support  in  key

11

sectors  of  fundamental  economic  and  social  importance,  in  particular  with  a  view  to
strengthening institutional development and creating the basis for long-term investments and
for the development of civil society.

The  EC’s  2001  assistance  programme  helped  to  stabilise  the  economy  and  society  by  (i)
supporting the rehabilitation efforts in the energy sector, (ii) providing critical inputs for the
agricultural and health sectors to revitalise production activities, (iii) providing credit to help
the  banking  and  enterprise  sectors,  and  (iv)  providing  technical  assistance  to  begin  to
undertake critical reforms in the productive sectors and to begin the process of rapprochement
towards European structures.

An assistance envelope of some €171 million is forecast for implementation by the Agency in
2002.  This  will  largely  concentrate  on  the  sectors  of  institution  building  (e.g.  public
administration,  justice,  European  integration),  economic  reconstruction  (energy,  transport,
and agriculture), civil society (NGOs, media), and integrated border management.

See two key tables in Annex A1

(cid:1)  EC funds delegated to the European Agency for Reconstruction for implementation in the

Republic of Serbia, at 31/12/2001 – by sector

(cid:1)  EC funds delegated to the European Agency for Reconstruction for implementation in the

Republic of Serbia, at 31/12/2001 – by amounts committed, contracted, paid

See also Evaluation, section 6.3

3.2. 

Implementation of 2001 Programmes

Energy (€107.7 million)

The first tranche of funds for the 2001 Energy programme,  totalling €80 million, was made
available at the beginning of May 2001.  The  immediate objective  of  the programme  was to
stabilise and secure the domestic electric power supply before the winter 2001/2002. The aim
was  to  bridge  the  gap  until  such  time  as  major  investments  from  international  financial
institutions become available, so as to rehabilitate the system fully. The programme includes
activities in the electric power generation system, the transmission network and the coalmines
sector.

In the electric power generation sector, the programmes have targeted four main units where
the  investment  will  secure  improved  reliability  of  1,250  MW  of  capacity  and  extend
remaining  lifetime.  Works  in  these  four  units  commenced  in  September  2001  for  the
overhaul, maintenance and repair. About 50% of the works were completed at the end of 2001
and  three  units  are  now  operational  for  the  winter.  Further  work  will  continue  until  April
2002. The fourth unit is scheduled to be fully operational before the middle of 2002.

In  December  2001  works  started  on  the  rehabilitation  of  transmission  overhead  lines  for
domestic supply, and on import connection. They will continue into 2002.

About 260 contracts have  been  placed for the  supply of  spare parts, tools and equipment to
enable  the  most  urgent  repairs  and  overdue  maintenance  of  the  remaining  5,800  MW
hydropower and thermal power plant, as well as substations and transformers. Deliveries on
site commenced in August 2001, and will continue into 2002.

12

The support being given to the coalmines covers the two main open cast coalmines that feed
the  coal-fired  power  stations  in  Serbia.  The  programme  includes  the  purchase  of  major
equipment  for  overburden  removal  and  coal  production,  as  well  as  replacement  of  essential
parts for the  mines  operations that failed, such as mobile  cranes,  excavators,  etc.  Deliveries
commenced in August 2001 and will continue until February 2002.

In  recognition  of  the  importance  of  the  energy  sector  in  Serbia,  further  funding  for  €12.7
million  was  made  available  in  November  2001  to  enhance  the  impact  of  the  ongoing
rehabilitation  and  maintenance  programme  by  supplying  additional  urgent  equipment.  The
tenders for procurement were published before the end of 2001.

In addition, in light of the scheduled overhauls and associated shut downs associated with the
initial 2001 programme, further funding of electricity imports was provided for €15 million.
Imports started in December 2001 and will last until the end of winter 2002.

More  strategic  medium-term  sector  reform  programmes  were  also  introduced  following
extensive  consultation  with  the  Ministry  of  Energy  and  the  Serbian  energy  utility,  EPS.
Feasibility studies have been launched for the  establishment of a Serbian  Energy Efficiency
Agency and for an Energy Regulatory Agency. Recommendations are expected in early 2002.
A cost cutting and management study requested by EPS will also be ready by spring 2002. In
addition, a study of the coal sector has been commissioned by the Agency and will be ready
by early 2002.

Enterprise development (€16 million)

The first €10 million tranche for the enterprise assistance programme had two components: (i)
technical assistance and training to the Ministry of Economy and Privatisation for SME policy
development;  and  the  establishment  of  regional  SME  business  advisory  service  centres
including one Euro Info Correspondence Centre (EICC) for about €5 million; and (ii) a credit
line  (€5  million)  to  foster  SME  investment  and  expansion  and  re-establish  sound  local
commercial banking activities. The regional business support centres as well as an EICC will
become  operational  in  the  first  half  of  2002.  Demand  by  SMEs  for  credit  is  stronger  than
anticipated.  As  at  the  end  of  December  2001,  a  total  of  €3.5  million  in  loans  had  been
approved. As a consequence, an additional €5 million was added to the SME credit line in the
second 2001 tranche.

Finally,  given  the  longer-term  imperatives  related  to  market  reform  and  enterprise
restructuring,  technical  assistance  (approximately  €1  million)  will  be  provided  for  the  first
stages of financial and corporate restructuring for three socially-owned enterprises (a producer
of  trucks  employing  about  2,900  people;  a  producer  of  tractors  and  agricultural  equipment
employing  3,600  people;  and  a  producer  of  harvesters  and  maize-pickers  which  currently
employs 2,500 people). The tender to appoint the technical assistance team was launched in
November, after second tranche Board approval. The team is expected to be deployed in early
March 2002.

Agriculture (€20 million)

In the 2001 agriculture programme, the Agency took a two-pronged approach: providing key
inputs (fertiliser and animal feed) to help regenerate agriculture production while beginning to
lay the foundations for harmonisation with EU standards and norms for food products.

13

Deliveries  of  fertiliser  (NPK)  began  at  the  end  of  August  and  were  completed  by  the
beginning of October. Animal feed  imports began soon  after and  deliveries were  completed
by the end of October. The last component, Urea, will be delivered during January 2002, in
time for top dressing of crops. All inputs are sold or exchanged in kind at market prices and
receipts are placed into a specific counterpart fund.

A service  contract was signed  in  December  2001  to  assist  Serbia  in  developing  agricultural
policy  reforms,  an  overall  strategy  and  a  sector  master  plan.  This  contract  also  contains  a
component  for  harmonisation  with  EU  standards  and  norms  for  agricultural  and  food
products. The expert team begins work in January 2002.

Health (€31.5 million)

The  first  tranche  provided  €26.5  million  to  improve  the  availability  of  essential  drugs
throughout  Serbia  and  introduce  related  sector  reforms,  such  as  establishing  treatment
protocols and the rationalisation and restructuring of the pharmaceutical industry. Deliveries
of  drugs  began,  as  scheduled,  in  November  and  expert  teams  began  their  work  in  October
(protocols) and November (pharmaceuticals).

An  additional  €5  million  of  funding  was  approved  in  the  second  tranche  of  2001.  It  will
improve  the  quality  of  some  basic  services  in  hospitals  and  health  centres  by  rehabilitating
and supplying priority equipment.

Integrated border management (€5 million)

Given  the  importance  of  the  Trans-European  road  network  and  the  need  to  help  Serbia  re-
integrate  physically  with  the  rest  of  the  region,  high  priority  is  placed  on  improving  the
facilities and management on the FRY side of the Horgos border crossing with Hungary (on
the Pan-European Transport Corridor 10). The project will facilitate the passage of people and
goods, whilst improving sound and secure border clearance procedures. The Agency’s Board
approved this project in November 2001. Tenders will be launched in mid-February 2002 and
the  project  should  be  completed  by  the  end  of  2003.  Funding  from  this  project  is  from
CARDS regional funds.

Media (€2 million)

The  2000  programme  in  support  of  the  independent  media  continues,  with  two  additional
activities funded in November 2001. The first component provides small grants and training
to  independent  media  in  order  to  ensure  their  medium-term  financial  sustainability.  The
related implementation contract will be signed in early January 2002. The second component
will fund a full management audit of the Serbia State Radio and Television Company (RTS)
and is currently being tendered. A team is scheduled to be in the field by mid-February 2002.

Policy & legal advice centre (€5 million)

The policy and legal advice centre aims to provide advice in a consistent and accessible form
to  the  FRY/Serbia  governments  on  key  macro-economic  issues,  e.g.  transition  to  a  market
economy, regulatory framework, EU harmonisation of legislation, standards, norms and WTO
accession. It is a small but important element to assist FRY/Serbia’s rapprochement towards
European and other international institutions (e.g. WTO).

Since  the  beginning  of  November  2001,  a  team  of  experts  has  been  mobilised  to  assist
relevant Federal and Republican authorities to develop strategies and identify key priorities.

14

Regional  development  in  the  Presevo  Valley  –  Rapid  employment  and  rehabilitation
programme (€4 million)

In response to a tense political situation in Southern Serbia, this project was developed by the
Agency in conjunction with UNDP. In early 2002 a UNDP team will be in place, which will
implement  the  project  for  rapid  employment  of  local  people  to  undertake  municipal  and
environmental improvements.

According to estimates, approximately 1,260 workers will be employed in four municipalities
beginning in January/February 2002.

Technical Expertise Facility (€2.6 million)

This  fund  allows  the  Agency  to  proceed  with  project  preparation  and  implementation  in  an
efficient and effective manner. The funds authorised under this proposal are used to provide
short-term  technical  expertise  in  highly  specialised,  punctual  aspects  of  project  design,
implementation, feasibility studies, evaluation, etc.

3.3. 

Implementation of 2000 Programme

Energy (€103.7 million)

The “Energy for democracy” programme helped Serbia get through the winter of 2000/2001.
Final deliveries were completed in April 2001 with the provision of a total of 144,000 tonnes
of  fuel  and  heating  oil  to  power  and  district  heating  plants,  public  institutions  in
municipalities  throughout  the  country.  A  contingency  reserve  of  €900,000  from  the  1999
programme was used for additional deliveries, which took place in November 2001.

Half of the total budget of the 2000 energy programme was allocated for electricity imports
for the winter 2000/2001. EU-funded imports met 70% of total electricity imports. By the end
of August 2001 all programme funds were fully disbursed.  In this context  it is important to
note that electric heating devices are used widely by Serbian households due to the previously
very low price of electricity.

Moreover,  in  order  to  ensure  a  sufficient  supply  of  coal  for  the  functioning  thermal  power
generation  plants,  the  programme  also  provided  spare  parts  to  improve  coal  production  in
Kolubara and Kostolac open cast mines. Deliveries began in February and were concluded by
late November 2001.

Food (€26.7 million)

The emergency programme to provide sugar and cooking oil at an affordable price to Serbian
consumers is completed.

In total, 15,000 tonnes of sugar and 15,000 tonnes of cooking oil were supplied to the local
market. Deliveries to supermarket shelve started in February 2001 and were completed by the
end of October. The counterpart fund income from the sale of sugar and oil amounted to €6
million  by  December  2001.  A  memorandum  of  understanding  was  signed  with  the  Serbian
Government  in  May  2001  specifying  usage  of  the  counterpart  fund.  It  was  agreed  that  all
funds  would  be  used  for  the  import  of  farm  inputs.  By  the  end  of  2001,  a  further  15,000
tonnes of maize and 10,000 tonnes of NPK had been imported.

15

Health (€20 million)

Amongst  the  most  urgent  needs  were  affordable  medicines  for  acute  medical  conditions.  In
response,  a  programme  was  developed  to  supply  emergency  medicines,  laboratory  supplies
and consumables (syringes, needles) which would otherwise have been seriously lacking. The
project was finished in August 2001, and the programme is now closed. Distribution of drugs
and medical supplies was completed by June 2001 to about 300 different health institutions,
including State pharmacies, hospitals and health centres.

Further  activities  in  support  of  the  health  sector  are  now  continuing  under  the  2001
programme.

Media (€1 million)

During  the  Milosevic  years,  the  independent  media  in  Serbia  was  repressed.  The  European
Union helped the opposition  media  for  many  years  and - after the ousting Mr.  Milosevic in
the  October  2000  elections  -  it  decided  to  continue  to  provide  this  vital  assistance.  The
programme  included  emergency  support  to  independent  media  operators  to  cover  their
immediate requirements for equipment, technical assistance and operating costs, as well as the
identification  of  long-term  priorities.  The  programme  continued  through  2001  and  will  be
completed by early spring 2002. One of the key activities was the development of a new legal
framework for the media. The new draft law should be submitted to the Serbian Parliament in
early 2002.

Schools and Towns for Democracy (€28.8 million)

The  “Schools  for  Democracy”  programme  also  began  under  the  Milosevic  regime.  It  was
designed to cover repairs, renovations and essential equipment to schools, kindergartens and
other  educational  institutions  in  34  opposition-run  municipalities.  The  “Towns  for
Democracy”  programme  developed  later  and  extended  funding  to  all  160  municipalities  for
municipal  infrastructure  such  as  repairs  to  water  supplies,  waste  collection  and  disposal,
public  transport,  etc.  Under  the  first  programme,  all  school  renovation  projects  (136)  were
completed  by  September 2001.  Funded  activities  under the  second  programme  were  largely
(90%) completed at the end of 2001. All remaining activities will be finished by April 2002.

The  second  programme  signed  157  grant  contracts,  which  were  implemented  in  726
construction sites. In addition, contracts for €4.8 million were signed to supply furniture and
equipment  for  schools  as  well  as  equipment  for  municipal  waste  disposal  and  collection.
Deliveries of schools’ equipment were completed at the end of 2001. All other deliveries will
finish in spring 2002.

3.4. 

Implementation of 1999 & 1998 programmes

Funds  for  the  1999  programme  are  largely  contracted  (98%),  while  about  79%  have  been
disbursed.  It  provided  assistance  to  the  media,  as  well  as  for  the  Energy  for  Democracy
programme.  The  1998  programme,  providing  support  to  the  media,  is  fully  contracted  and
74% disbursed.

16

4.

OPERATIONS: THE FEDERAL REPUBLIC OF YUGOSLAVIA - KOSOVO

4.1. 

Overall position

On its establishment in February 2000, the Agency took over all the 1998 and 1999 funding
commitments  and  programmes  of  the  former  European  Commission  Task  Force  for  the
Reconstruction  of  Kosovo.  Initially,  the  Agency  concentrated  funds  on  four  main  sectors
(energy, water, housing and transport), that continue to be essential to the reconstruction and
rehabilitation process. While in 2001 the Agency continued to focus on a limited number of
high priority sectors to ensure maximum impact with the resources available, EC funding to
the  sectors  of  good  governance  and  civil  society,  enterprise,  rural  economy  and  health
expanded, in response to the importance of these sectors to sustainable economic, institutional
and social development in Kosovo.

In  2001,  EC  funding  further  advanced  the  rehabilitation  of  the  energy  sector  through  the
successful  overhaul  of  the  two  generating  units  in  the  main  coal-  fired  power  station,  the
delivery of essential equipment to the coal mines, the provision of expert technical assistance
to the energy management body KEK, repairs to the Pristina district heating system and the
emergency import of electricity.

The  housing  programme  has  assisted  the  reconstruction  of  over  15,600  houses  since  1999,
including some 3,600 with 2001 funding. EC funds also supported UNMIK in the resolution
of property claims.

The  local  government  and  civil  society  sector  focused  on  strengthening  government
institutions, support to the  justice sector, the  funding  of civil  society initiatives,  building up
management  capacity  at  the  Kosovo  radio  and  television  network,  and  supporting  the
successful November 2001 general election for the new Kosovo Assembly.

By the end of 2001, the EC had funded the rehabilitation of 330 km of main roads, including
150 km funded in 2001, and repairs to a number of bridges.

In  the  agriculture  sector,  loans  have  been  provided  to  agro-enterprises,  while  the  import  of
seeds and fertiliser has enabled farmers to access these commodities at affordable prices and
thereby increase yields by 30% above the 2000 crop levels.

Enterprise  development activities have  focused  on  support  to  small  and  medium  enterprises
(SMEs) and large socially owned enterprises (SOEs). To date, EC revolving credit funds have
provided nearly 900 loans, totalling over €8.5 million, to SMEs while loans with a total value
of  €2.1  million  were  provided  to  SOEs  in  the  industrial  sector.Activities  also  included
institutional  support  to  the  Department  of  Trade  and  Industry,  the  formation  of  an  SME
Advisory Council, the establishment of a Euro Info Correspondence Centre, and the opening
of three regional enterprise agencies.

The  Agency  completed work on 14 municipal dumpsites, started work on two new  sanitary
landfill sites, initiated institutional support to the waste sector, delivered 38 waste collection
trucks,  and  supported  public  information  campaigns.  All  of  these  actions  are  essential  to
improve solid waste and water management services.

17

EC funds assisted in the further rehabilitation of health care systems, including assistance to
the Department of Health and Social Welfare, the training of middle and senior health service
management, and support to the pharmaceutical and blood transfusion services.

As  a  result  of  the  crisis  in  the  first  half  of  2001  in  fYROM,  and  associated  problems  with
importing  goods  across  the  fYROM  border,  there  were  some  delays  in  Agency  programme
implementation in  Kosovo, particularly in agriculture  and  housing. However,  good  progress
in the second half of the year ensured that the overall impact on the Kosovo programme was
minimised.

The  Agency  continues  to  examine  key  cross-cutting  issues,  particularly  those  of  gender,
ethnic  minorities  and  poverty  alleviation.  Social  impact  assessments  and  studies  have  been
carried out to determine the level of access and participation of the overall population - and of
the  more  socially  vulnerable  -  to  the  Agency’s  programmes.  Study  recommendations  are
being used in designing strategies for targeting areas of social vulnerability and exclusion.

An assistance envelope of some €134.5 million is forecast for implementation by the Agency
in 2002. This will include support to the provisional institutions for self-government, support
for  energy  and  other  public  utilities,  and  support  for  economic  development,  transport,
housing, vocational training, justice and civil society.

See two key tables in Annex A2

(cid:1)  EC  funds  delegated  to  the  European  Agency  for  Reconstruction  for  implementation  in

Kosovo, at 31/12/2001 – by sector

(cid:1)  EC  funds  delegated  to  the  European  Agency  for  Reconstruction  for  implementation  in

Kosovo, at 31/12/2001 – by amounts committed, contracted, paid

See also Evaluation, section 6.3

4.2. 

Implementation of 2001 programmes

Energy (€132.8 million)

The €48 million overhaul of one of the two generating units at the Kosovo B coal fired power
station  was  completed,  with  the  B1  unit  being  restarted  in  early  October.  The  €20  million
second  phase  overhaul  of  unit  B2  was  also  completed,  and  the  unit  was  restarted  in
September.

The  contract  with  the  consortium  of  engineers  providing  technical  assistance  to  the  energy
sector  and  Kosovo’s  energy  management  body  (KEK)  was  extended  for  a  further  three
months  to  cover  the  period  to  April  2002.  This  will  allow  time  for  a  proposed  new
management support contract to be tendered, and for a handover period.

For  the  coal  mines,  which  provide  the  fuel  for  the  power  stations,  contracts  relating  to
specialist equipment, spare parts and safety inspections have been awarded with a total value
of €6.3 million.

A  €3  million  contract  to  provide  an  information  technology  and  computerised  accounting
system  for 
the  electricity  management  body,  KEK,  has  been  signed  and  project
implementation began in late 2001.

18

Making use of extra funding  committed in  October  2001,  a  €6  million tender for three new
power  transformers  has  been  prepared.  A  tender  for  mobile  equipment  and  machinery  for
KEK’s principal maintenance workshop is being prepared for launch in early 2002.

The  tender  for  the  €2.5  million  high  voltage  metering  project,  which  will  significantly
improve the ability to measure the cross boundary/border exchange of energy, is expected to
be launched in early 2002.

A grant agreement for €20.3 million for the emergency import of energy during the first three
months of 2001 was completed with UNMIK.

Agriculture (€28 million)

Agricultural processing and marketing credit (€10 million)

The  Agro-Business  Development  Unit  (ABU)  was  founded  by  the  Agency  to  provide  a
dedicated credit line for the restructuring and commercialisation of Kosovo’s Socially Owned
Enterprises  (SOEs)  engaged  in  agro-processing  and  to  support  private  businesses  in  this
sector. Operational since May 2001,  ABU  had by the  end of  2001  extended  half of its loan
capital  to  two  wineries,  a  dairy  farmers  association,  a  vegetable  oil  mill,  an  enterprise
exporting dried mushrooms and medicinal herbs to the EU, and a dairy.

Seed import programme and seed regulatory services (€6 million)

The  Agency’s  seed  import  programme  for  2,000  MT  of  high  quality  hybrid  maize,  hybrid
sunflower and seed potatoes yielded positive results at harvest, with field surveys suggesting
that average  yields of these crops  are 30%  above  2000  crop levels. The complementary EC
fertiliser import programme - and good rains - further assisted yields. The impact extends to
ethnic  minority  areas  where  seed  had  been  distributed  on  a  grant  basis  in  response  to  the
restricted access that these  populations  had to fairly  priced seed.  With 90% of the imported
seed sold at affordable price levels to farmers through agricultural traders, proceeds from the
sale have been channelled to the Rural Micro-Credit scheme for rural communities and to the
ABU for on-lending.

The contract for a seed regulatory services’ project (€0.9 million) was signed in September to
assist  the  Transitional  Department  of  Agriculture,  Forestry  and  Rural  Development  in  the
development of an enabling regulatory framework for seed production and trade in Kosovo,
thereby laying the foundation for both the resumption of domestic production of seeds and the
import of proven quality seed appropriate to Kosovo’s agro-climatic conditions.

Irrigation sector rehabilitation (€12 million)

The programme, which commenced in March 2001, aims to:

(cid:1)  rehabilitate  the  irrigation  water  supply  infrastructure  covering  20,000  ha  (or  40%  of
Kosovo’s publicly administered irrigation schemes) to benefit 10,000 smallholders directly

(cid:1)  reform public irrigation water utilities.

It is expected  that  approximately half of  the irrigation  works  will  be  completed  prior  to  the
commencement  of  the  next  irrigation  season  in  May  2002,  with  final  completion  of  the
project scheduled by the end of the year.

19

Housing (€37.6 million)

The  2001  housing  sector  programme  involves  the  reconstruction  of  some  3,630  conflict-
damaged  houses  (80%  of  which  had  been  completely  destroyed)  for  vulnerable  families.
Around  3,100  houses  were  completed  and  2,400  families  (16,700  people)  had  moved  into
their homes by the end of 2001. About 6% of the assisted families are from an ethnic minority
background, including families that have recently returned to Kosovo.

The  Agency’s  NGO  partners  identified  vulnerable  families  according  to  rigorous  social
selection  criteria.  Elected  Village  Reconstruction  Committees,  with  a  built-in  50:50  gender
balance,  assisted  the  NGOs  and  helped  ensure  transparency  and  local  accountability  in  the
selection  process.  Local  municipality  committees  also  assessed  and  then  approved  the
selected  families.  The  NGOs  are  working  to  support  the  ‘self-help’  inputs  of  beneficiary
families to ensure the successful completion of this programme.

The final report for a feasibility study on a Kosovo Housing Loan Programme was completed
and  shared  with  EU  Member  State  representatives  on  the  Governing  Board,  with  a  view  to
considering a co-funded programme in 2002.

Since March 2001, a €2 million grant agreement is in place with UNCHS Habitat to support
the  UNMIK  mandated  Housing  &  Property  Directorate  (HPD),  which  deals  with  the
resolution  of  residential  property  claims.  The  EC-funded  Mitrovica  regional  office  has
registered  over  2,100  claims  made  by  Kosovo  Albanians,  Serbs  and  others.  Following
detailed interviews  by staff of  mixed ethnicity, over  250  claims  have  had  legal  proceedings
initiated.  The  HPD  is  actively  addressing  the  need  for  improvements  in  several  operational
areas, as jointly identified by the Agency and the HPD in a September review.

The  cultural  heritage  project  to  rehabilitate  five  traditional  stone  Kulla  houses  in  western
Kosovo  is  underway.  The  project  is  to  receive  co-funding  from  Sida,  and  is  being
implemented in co-operation with the UNMIK Department of Culture and Kosovo’s Institute
for Preservation of Monuments. This project will be ongoing until July 2002.

Local government & civil society (€38.9 million)

The  programme  activities  have  been  supporting  the  executive,  the  judiciary  and  civil
society/media through:

(cid:1)  assisting, equipping and building the capacity of local government

(cid:1)  contributing to the fair and accessible administration of justice

(cid:1)  enhancing the participation of the civil society in the electoral and democratic process

(cid:1)  strengthening civil society and the independent media as key actors in the promotion of a

democratic and a human rights culture.

Municipal technical advisors from the EU (€3 million)

As of the end of 2001, some 21 EU advisors were supporting the municipalities of Kosovo in
a number of areas including general administration, reconstruction, property and finance.

20

Support  to  the  establishment  of  the  Auditor’s  General  Office,  and  improvement  of  public
financial management (€5 million)

A grant agreement is being  negotiated  with  the UNMIK Central  Fiscal  Authority for  (i) the
implementation  of  a  general  audit  of  the  2001  Kosovo  Consolidated  Budget,  (ii)  the
establishment  of  an Auditor’s General Office,  and  (iii)  a  skills’  audit  of  municipalities  with
regard to the devolution process from central to municipal level.

Municipal and Local Investment Fund (MLIF), Phase 2 (€3 million)

Following on the success of MLIF 1, a second phase is being implemented. Under a contract
for  technical  assistance  and  a  grant  agreement  signed  with  UNMIK,  34  small-scale
infrastructure  projects  have  been  approved,  17  of  which  are  were  completed.  The  second
phase of the training for municipality technical staff, including minorities, is near completion.

Public buildings (€19 million)

Buildings targeted within this project include courts, prisons, municipal offices and university
facilities. A total of 34 projects have been regrouped into 11 tenders, four of which have been
contracted.

Support to the rule of law (€2.5 million)

Under the programme for legal aid, implemented through a grant agreement with the Kosovo
Chamber of Advocates, 43 legal aid desks were in place and some 1,470 people had benefited
from the programme by the end of 2001.  A  grant  agreement was signed with the OSCE for
training  Bar  Exam  candidates  (exam  for  entering  the  professions  of  judge,  prosecutor  and
lawyer).  The  first  training  period,  attended  by  60  candidates,  was  completed.  A  new  grant
agreement is being finalised with  UNMIK  for the  establishment of  IT  systems in  the  courts
for case tracking and a legal database. In addition, an agreement is being finalised to support
the Kosovo Judicial Institute, responsible for initial and continuous training of magistrates.

Civil society (€1 million)

Under  a  grant  agreement  signed  in  March  2001,  a  grant  policy,  a  financial  policy  and
procedures were established within the Kosovo Civil Society Foundation, a local NGO. Funds
committed for grant making were channelled through this Civil  Society  Foundation  to  local
NGOs  focusing  on  areas  including:  minorities’  rights,  gender,  culture,  reconciliation  and
capacity building.

Support to Radio Television Kosovo (RTK) (€2.9 million)

A grant agreement was signed with the RTK in March. RTK is completing the transition from
international to local management. A Management Board has been established and a Director
General has been selected to assume the post from January 2002.

Support to provincial elections 2001 (€2.5 million)

A grant agreement was signed with the OSCE in October 2001 for support to the November
general election for the new Kosovo Assembly. Activities were developed in the pre-election
period  with  further  actions  planned  for  the  post-election  period  in  the  areas  of  civic
awareness,  media  capacity  building,  media  coverage  and  empowerment  of  different  groups
within society to participate in the democratic process. The activities have a special focus on

21

vulnerable  groups  of  the  population  (women,  ethnic  minorities,  rural  areas  and  physically
disabled persons).

Transport (€18 million)

With 2001 funds, works were undertaken on 150 km of main roads connecting the south and
west, and on the main access road to the boundary crossing with Serbia. The reconstruction of
two more priority bridges is well underway and should be completed on schedule by March
2002.

Feasibility/technical studies have been completed for the rehabilitation of bridges on the main
route from Pristina to the border with the fYROM. A final draft final report was submitted in
December. Preparation of a ‘master plan’ for road maintenance in Kosovo has started  and a
final document is due to be issued by May 2002.

to 

Technical  assistance 
the  UNMIK  Transitional  Department  of  Transport  and
Communications is ongoing, including support to strengthen the civil aviation department, the
financial  auditing  of  Pristina  airport,  and  the  drafting  of  concession  procedures  for  the
operation of a bus service in Kosovo.

Drawing  on  the  Sida  railway  management  recommendations,  a  grant  agreement  was  signed
with UNMIK for support to the railways.

Water and solid waste management (€20 million)

The  dumpsite  upgrading/closure  programme  progressed  well,  with  14  sites  completed  and
five others ongoing. Contracts have been signed for the construction of two regional landfill
sites (up to five, which are to EC standards, are planned) and work is expected to start in early
2002.

A contract was signed for international waste experts and they started the implementation of
an  institutional  support  programme  in  July.  EC  funds  supported  a  Kosovo-wide  public
awareness programme on household waste management that also commenced in July.

The  contract  for  the  refurbishment  of  the  Pristina  water  pumping  station  was  awarded  in
November, and work is due to start in early 2002.

A  study  for  the  rehabilitation  of  the  ash-dumps  at  Obilic/Obiliq  was  completed,  as  was
another study for the institutional development of water utilities.

Enterprise development (€20 million)

Achievements of the integrated interventions of the EC in the Small and Medium Enterprise
(SME) sector included:

(cid:1)  institutional strengthening of the Department of Trade & Industry

(cid:1)  the  formation  of  an  independent  SME  Advisory  Council  to  represent  the  sector  to

government

(cid:1)  the  Euro  Info  Correspondence  Centre  was  established  in  2001  (within  the  Kosovo
Chamber  of  Commerce)  and  is  part  of  the  wider  EICC  network  supported  by  the  EU,
providing links to the SME sector in Europe

22

(cid:1)  the  opening  of  three  regional  enterprise  agencies  to  directly  support  new  and  growing

enterprises with training and business advice.

The  Industrial  Development  Programme,  which  deals  exclusively  with  socially  owned
enterprises  in  the  industrial  sector,  provided  technical  assistance  and  made  two  loan
agreements (via ABU) for a total of €2.1 million.

To  assist  in  the  changeover  to  the  Euro  in  Kosovo,  the  Central  Bank  (BPK)  was  supported
through the financing of new money handling equipment and publicity materials.

Health (€14 million)

The  Agency  continued  with  implementation  of  the  programme  to  further  rehabilitate
Kosovo’s health care systems. Initiatives undertaken in 2001 included:

(cid:1)  a  local  Kosovo  technical  assistance  team  being  contracted  to  assist  the  UNMIK
Department  of  Health  and  Social  Welfare.  In  addition,  a  training  scheme  was  devised  to
enable the members of the team to become competent for potential employment in a future
Ministry of Health.

(cid:1)  the  initiation  of  procurement  procedures  for  the  purchase  of  essential  medical  and
information  technology  equipment  for  Pristina  University  Hospital  and  the  regional
hospitals

(cid:1)  provision of EC support to a World Bank project to implement a social insurance system

(cid:1)  a  baseline  survey  for  a  health  information  system  was  conducted  and  six  pilot  sites  for

training in health information technology are being established.

4.3. 

Implementation of 2000 programmes

Most  of  the  2000  programme  funding  has  been  contracted  and  the  majority  of  projects  are
either completed or well underway. The remaining projects that made significant progress in
2001 include:

Energy (€122 million)

Of the €30 million allocated to the coal mines, including €20 million made available in late
2000 for additional interventions, 89% was contracted by the end of 2001.

A second tender for a €10 million contract for new electricity substations is under preparation
for launch in early 2002. The first tender was cancelled following the failure of offers to meet
the Agency’s technical specifications.

A  €3.5  million  contract  was  signed  for  the  refurbishment  of  the  district  heating  system  in
Pristina  –  while  urgent  repairs  commenced  in  October,  the  main  works  will  be  undertaken
from spring 2002 onwards, with commissioning expected to be completed in 2002.

A grant agreement, signed with UNMIK, for €28 million for the emergency import of energy
during the winter 2000/2001 season was completed.

23

Agriculture (€10 million)

In early 2001, the Agency delivered 17,500 MT of urea fertiliser for the top-dressing of wheat
and other field crops. EC funding had already supported the 2000 winter planting season with
the  distribution  of  20,000  MT  of  imported  NPK  fertiliser.  Some  10%  of  the  total  fertiliser
imports  were  distributed  free  of  charge  to  vulnerable  families,  including  ethnic  minorities.
Approximately 90% was auctioned or sold at discounted prices to local dealers of agricultural
inputs on a credit basis to ensure  affordable prices for  the  farmer  end  users.  Of  the  amount
sold, 75% of the funds have been recovered to date and have been re-utilised to finance both
the import in 2001 of approximately 9,000 MT of NPK fertiliser through the Agro-Business
Development Unit (ABU), and the Rural Micro-Credit scheme.

Housing (€59.9 million)

The  programme  for  the  reconstruction  of  some  8,440  houses  (56%  of  which  had  been
completely  destroyed)  for  vulnerable  families  is  in  the  final  phase,  with  finishing  works  on
some 300 houses being the responsibility of beneficiary ‘self-help’ labour contributions.

Transport (€15 million)

In 2001, the reconstruction work on two key bridges (Vranido and Milosevo) was completed.
Improvements were undertaken at the Blace border crossing to fYROM and enlargements to
the  main  access  road  on  the  Kosovo  side  and  the  truck  parking  area  were  completed.  The
tender for the connection road to fYROM and enhanced custom facilities will be contracted as
soon as an official request is received from UNMIK (expected in early 2002).

Water & solid waste management (€14.6 million)

Having started in late 2000, the €10 million programme for the rehabilitation of water supply
and  sanitation  systems  in  the  urban  areas  of  all  11  targeted  municipalities  progressed  well,
with  contracts  completed  for  chlorination  equipment  installation  and  projects  ongoing  for
pipe-laying  in  Pristina.  All  projects  have  been  prioritised  and  agreed  upon  by  the  local
authorities. A contract was awarded for mechanical and electrical improvements in reservoirs
and  pumping  stations,  and  a  tender  was  launched  for  the  supply  and  installation  of  water
meters throughout Kosovo.

Access  roads  to a  number  of  municipal  waste  disposal  sites  have  been  improved,  and  basic
equipment  has  been  delivered  to  these  sites.  In  November,  38  waste  collection  trucks  were
received and are being distributed to municipalities. Also, 2700 industrial-size waste bins (1.1
m3 ‘Eurobins’) have been received and distributed to municipalities. Nine weighbridges and
16  offices  have  been  installed  at  municipal  dumpsites,  and  protective  clothing  has  been
provided  to  the  waste  utility  workforce.  In  addition,  nine  hospital  incinerators  have  been
constructed, and several heavy landfill machinery items have been repaired.

Enterprise development (€15 million)

As  regards  the  supply  of  credits  to  the  market  economy,  846  loans  with  a  total  value  of
approximately €5.8 million were  dispersed  to small sized enterprises through  the  joint EU /
World Bank European Financing Fund via the Micro Enterprise Bank.  In addition, 20 loans
with a total value of €2.6 million were provided via the EC funded Interim Credit Unit. There
have  been  no  defaults  on  the  loans  and  independent  audits  of  the  funds  have  given  clean
reports.

24

The €3.5 million provided under a grant agreement with UNMIK for an environmental clean-
up of the Trepca mining complex has been disbursed.

Health (€10 million)

A  €4  million  contract  was  implemented  for  capital  investment  and  a  credit  loan  for  the
distribution  and  retailing  of  pharmaceuticals.  Support  to  the  pharmaceutical  sector  has
resulted in a substantial decrease in drug prices (approximately 50% compared to the average
cost in 2000). The Kosovo Pharmaceutical Cooperative received further support to ensure the
reliable distribution of essential drugs.

To  build  a  safe  and  central  blood  transfusion  service,  the  Agency  has  provided  equipment
valued at €0.5 million to the blood bank  at  Pristina University.  A new software  programme
for the blood transfusion service is due to be installed in January 2002.

Initiatives  undertaken  as  part  of  the  Agency’s  health  sector  capacity  building  programme,
included:

(cid:1)  the creation of an EC-funded centre for health management at the University of Pristina

(cid:1)  the completion of the first year of training for general practitioners

(cid:1)  the initiation of mid-level management training for 250 nurses

(cid:1)  the development of ten medical specialist groups, which partially completed new curricula

for their respective fields

(cid:1)  preparations  for  the  MSc  course  in  health  services’  management,  which  entered  the  last
preparatory phase. The course is scheduled to commence in January 2002. Funded by the
EC, it is a joint venture by the Faculties of Medicine and Economics at Pristina University

4.4. 

Implementation of 1998 & 1999 programmes

Projects funded in 1998/1999 are mostly either well underway or completed. Those projects
that made significant progress in 2001 include:

Telecommunications (€8 million)

Contracted  work  for  the  restoration  of  the  transit  and  subscribers’  exchange  (land-line
telephony)  was  completed.  The  tender  for  completion  of  the  local  loop  network  covering
northern Pristina has been published and works are expected to begin in spring 2002.

Local government: Municipal & Local Investment Fund, MLIF Phase 1 (€8 million)

The  original  69  local  infrastructure  projects,  covered  by  a  Grant  Agreement  with  UNMIK,
have now been completed. An additional 14 projects are being funded from savings made in
the  MLIF  Technical  Assistance  component  and  in  the  Enterprise  Development  programme.
The technical training component for control and supervision of works for municipality staff
has been concluded.

25

Village Employment & Rehabilitation Programme, VERP (€7.5 million)

This  programme,  in  which  basic  village  level  infrastructure  improvements  identified  by
community  leaders  in  collaboration  with  the  municipal  authorities  were  carried  out  by  local
people, has been successfully completed. UNDP was the Agency’s implementing partner.

Kosovo Protection Corps, KPC (€5 million)

The objective of this 1999 project is to support UNMIK and KFOR in the establishment of the
Kosovo  Protection  Corps  (KPC)  as  a  civil  emergency  organisation.  EC  funds  enabled  the
KPC  to  be  provided  with  a  range  of  vehicles,  tools  and  fire-fighting  equipment,  including
specialised  equipment  and  clothing  for  demining  activities.  Final  equipment  deliveries  are
anticipated to take place in the period up to early 2002.

Demining (€6 million)

The final contracts - for €3 million - have been signed with three NGOs, for work focusing on
demining training for the KPC.

Agriculture/rural economy: Rural Micro-Credit Scheme (€1 million)

An  extension  of  this  successful  project  is  being  financed  from  proceeds  of  the  EC’s
agricultural  commodity  inputs  import  programme.  A  total  of  eight  Savings  and  Credit
Associations (SCAs) have been created in two municipalities, serving some 1,800 members.
Some 1,400 loans worth €1.6 million have been extended with a repayment rate of over 99%.

Health (€0.5 million)

Following  the  cancellation  of  remaining  works  for  the  €1  million  1999  project  for
rehabilitation of the hospital in North Mitrovica, approximately €0.5 million was re-allocated
to create a Department of Family Medicine at the University of Pristina.

The Kosovo-wide Clean-up Campaign (€0.9 million)

A fleet of waste collection vehicles assisted local waste collection services around Kosovo in
a  one-off  clean-up  of  a  large  number  of  waste  piles  accumulated  over  the  last  five  years.
Equipment purchased for the clean-up was handed over to the waste management utilities at
the end of the campaign.

26

OPERATIONS:  THE  FEDERAL  REPUBLIC  OF  YUGOSLAVIA  -  THE  REPUBLIC  OF

5.
MONTENEGRO

5.1 

Overall position

On 8th January 2001, the Agency assumed management responsibility for the 1998, 1999 and
2000  programmes  in  Montenegro  which  were  previously  being  managed  by  the  European
Commission.  The  1998  programme  amounted  to  €5  million,  the  1999  programme  to  €23
million,  and  the  2000  programme  to  €19  million.However  from  the  1998  programme  €1
million  was  de-committed  in  the  agriculture  sector  (import  of  cattle),  due  to  the  BSE  and
FMD crises in Europe.

The  break-up  of  the  former  Yugoslavia,  the  ensuing  armed  conflicts  and  economic
mismanagement  resulted  in hyperinflation and  a  ruined  economy.  Established  markets  were
lost, traditional production relations were disrupted and the international community imposed
sanctions. Montenegro suffered a further severe economic set back as a result of the Kosovo
crisis in 1999. GDP dropped by a further 10% in 1999 alone to 58% of the 1990 level. Today,
the  macro-economic  environment  remains  fragile.  In  2001  inflation  in  Montenegro  reached
21.8%,  despite  the  use  of  the  DEM.  There  has  been  some  recovery  in  output  following  the
end of the Kosovo conflict. The official rate of real growth in 2001 is estimated to be 3.5%,
but this will in  all likelihood be  exceeded. Nevertheless it  is  still  estimated  to  be  just  about
half of the 1990 level.

Faced with this difficult situation, the government adopted ambitious plans, including cutting
expenditure  on  a  range  of  budget  items,  liberalising  the  prices  of  some  key  staples,  better
targeting  of  social  benefits,  accelerating  restructuring  and  privatisation,  and  freezing  the
minimum wage. In this regard, a budget for 2002, consistent with FRY’s IMF agreement, was
proposed  by  the  Government  and  adopted  by  the  Parliament.  A  World  Bank  debt
consolidation loan has been approved for the FRY (thereby applying to Montenegro), opening
the way for agreed structural adjustment financing. A comprehensive enterprise restructuring
and labour initiative was designed and adopted by the Government. Finally, a series of legal
and  other  measures  have  been  implemented  aiming  to  improve  the  overall  business
enviroment.

In the context of the above situation, the Agency agreed with the Government a programme
for 2001 that targets the sectors of municipal development, transport, institution building and
vocational & educational training.

Municipal  development:  the  Government  is  committed  to  a  reform  programme  including
increased  decentralisation  of  revenue,  expenditure  and  management  functions  to  local
government.  The  programme  provides  funds  to  four  selected  municipalities  for  technical
assistance  to  enhance  their  management  capacity  and  in  small-scale  investments  in  local
infrastructure.

Transport:  due  to  years  of  under-investment,  only  limited  crisis  maintenance  has  been
undertaken on the road network serving southern Montenegro which has strategic importance
in  terms  of  tourism  and  access  to  the  port  of  Bar.  Journey  times  are  excessive  due  to
inadequate provision of safe overtaking sections, and basic safety provision is sub-standard.
The  programme  targets  these  deficiencies  in  order  to  improve  the  movement  of  goods  and
people both within Montenegro and the wider region, thereby encouraging economic activity,

27

facilitating  cross  border  exchanges  and  attracting  trade  and  foreign  investment.  Technical
assistance is also being provided to the relevant line Ministry.

Institution-building (statistics): in order to support the development of a system for gathering
and  analysing  statistics  which  are  an  essential  tool  in  a  market  economy  and  functioning
democracy, technical assistance and equipment will be provided to the Statistics Office of the
Republic of  Montenegro. The expected effects and results will be  to  have  aggregate  data  at
FRY level.

Institution-building (public sector capital expenditure): there is an urgent need to improve the
management  of  public  sector  capital  expenditure  within  the  Government’s  medium-term
budget  strategy.  The  programme  provides  technical  assistance,  including  training,  in  this
sector to different line Ministries.

Vocational  &  educational  training:  current  training  systems  for  youths  and  adults  are  not
adequate  to  support  economic  restructuring  and  the  development  of  a  market  economy  in
Montenegro. The programme will modernise these systems in two key sectors  that  have the
greatest  immediate  potential  to  further  economic  development  in  Montenegro  (tourism  and
wood  processing)  and  will  ensure  a  well-skilled  supply  of  labour,  enhancing  the  quality  of
services and sector competitiveness.

An assistance envelope of some €11.5 million is forecast for implementation by the Agency
in 2002. This  will  concentrate on the  sectors  of public  administration,  energy, environment,
transport and enterprise restructuring.

See two key tables in Annex A3

(cid:1)  EC funds delegated to the European Agency for Reconstruction for implementation in the

Republic of Montenegro, at 31/12/2001 – by sector

(cid:1)  EC funds delegated to the European Agency for Reconstruction for implementation in the

Republic of Montenegro, at 31/12/2001 – by amounts committed, contracted, paid

See also Evaluation, section 6.3

5.2 

Implementation of 2001 programmes

The Financing Agreement for the 2001 programme, based on a budget of €13.3 million, was
signed in October 2001. An additional allocation of €3 million was approved by the CARDS
committee  on  7  December  2001  and  will  be  available  by  end  of  January.  The  overall
Programme has been designed taking into account the need to avoid duplication of and ensure
complementarity  with  activities  from  previous  programmes  (1999-2000)  that  are  currently
under  implementation.  A  significant  element  of  these  previous  programmes  included
interventions  in  critical  areas  such  as  enterprise  development,  education,  agriculture,  public
finance, media and infrastructure. The 2001 programme is built around three basic elements:

Municipal development (€4.5 million)

Four  municipalities  have  been  selected:  Podgorica,  Mojkovac,  Kolasin,  and  Bijelo  Polje.
Identification  and  needs  assessment  is  presently  ongoing.  A  restricted  services  tender
procedure for the institution capacity building to the selected municipalities and monitoring of
works  implementation  (€1  million)  was  launched  in  mid-December,  with  contract  signature
expected  by  the  end  of  February  2002.  Priority  infrastructure  works  for  the  investment

28

component  (€3.5  million)  are  in  the  process  of  being  identified.  Tendering  and  contracting
will be ongoing during the first semester of 2002.

Transport (€9.0 million)

A  restricted  tender  procedure  for  the  institutional  capacity  building  to  the  Ministry  of
Transport  (€1  million)  was  launched  in  mid-December  with  contract  signature  expected  by
the  end  of  February  2002.  Of  the  five  works  tenders  within  the  investment  component  (€8
million),  four  were  launched  by  the  end  of  December  and  contracts  will  be  signed  by  mid
March 2002. The tender for the remaining project will be launched in January 2002.

Institution building (€1.2 million)

The tender for Technical Assistance to the Statistical Office (€0.6 million) was launched mid-
December in coordination with Eurostat. The short list for Technical Assistance for managing
public sector expenditure is completed and the tender will be launched by end January 2002.

Vocational and educational training (€1.0 million)

The  programme  was  approved  on  7  December  2001  and  the  Procurement  Notice  for  the
institutional  building  component  (€0.8  million)  has  been  published.  Tenders  for  the
investment component (€0.2 million) will be launched early 2002.

A technical and administrative assistance facility (€0.6 million)

To  provide  short-term  technical  assistance  in  project  preparation,  tender  evaluation,  audits,
etc. The facility has not yet been utilised.

5.3 

Implementation of 2000 programmes

Infrastructure (€10.8 million)

The  programme  will  contribute  to  the  maintenance  and  improvement  of  the  transport
infrastructure. Individual projects include:

Rehabilitation of Podgorica-Airport road (€1.9 million)

Completed in February 2001.

Construction of the ‘Union Bridge’, Podgorica (€2.9 million)

The works contract for an amount of €4.2 million was signed in August 2001, and works are
ongoing with completion scheduled for April 2003. The balance of funds will be provided by
the Government of Montenegro and the Municipality of Podgorica.

Road rehabilitation: coastal road & Bar-Podgorica (€5.0 million)

Contracts for the four component construction projects have been signed and works are either
ongoing or have been completed. All works are programmed to be completed by May 2002.
Due  to  competitive  tenders  received,  there  remains  a  balance  of  €1.2  million  which  will
(following discussions with the Ministry of Transport) finance the rehabilitation of a tunnel in
the north of Montenegro.

29

Institution-building in key Ministries (€0.8 million)

A contract  for technical  assistance  was  signed  in  November  2001  to  provide  supervision  of
construction activities and technical support to the Ministry of Transport in the area of road
management. The team is currently in Montenegro.

Education (€3.0 million)

The  project  comprises  the  construction  of  an  elementary  school  within  a  deprived
neighbourhood  of  Podgorica.  The  works  contract  was  signed  on  5th December  2001  and
construction activities are ongoing. Due to favourable tender prices, a balance of €750,000 is
available  and  will  be  used  to  fund  the  rehabilitation  of  additional  schools.  Tenders  to  be
launched in January 2002.

Agriculture (€2.3 million)

The  overall  project  objective  is  the  modernisation  of  the  milk  dairy  sector.  A  technical
assistance  and  procurement  team  (€0.4  million)  is  currently  supporting  the  Ministry  of
Agriculture  with  the  importation  of  milk  equipment  to  be  distributed  to  selected  dairy
enterprises and farmers. A tender has been launched for the provision of milking  equipment
(€1.7 million), and the supply contract is expected to be signed in the first quarter of 2002. In
consultation  with  the  Ministry  of  Agriculture,  technical  specifications  are  finalized  and  the
tender  is  launched.  The  equipment  will  be  delivered  as  credit  in  kind.  €0.2  million  are  set
aside to monitor the programme.

Financial & fiscal reform (€2.9 million)

The programme includes support to the Ministry of Finance (€1.3 million) during the ongoing
reorganisation of various departments. A service contract was signed in December to provide
the following long term technical assistance:

Budget  Office:  Long-term  technical  assistance  for  recurrent  and  capital  budgets,  budget
profiling, cash and non-cash budgets, programme budgets, performance targets.

Treasury:  Long-term  technical  assistance  for  the  expansion  of  the  network,  the  updating  of
the legislative framework, the introduction of international standards for reporting, cash/debt
management; asset management, training.

Internal audit: Long-term technical assistance for planning, risk assessment, systems review,
internal control monitoring, and training staff in modern audit techniques and methodology.

Information  technology:  Long-term  technical  assistance  for  information  &  technology  unit
within  the  Ministry  of  Finance  linked  to  the  computerisation  project  and  fully  function
Treasury system.

The programme also includes the supply and application of software, and the provision of IT
equipment to the Ministry of  Finance (€0.9  million). The contract was signed  in  December.
Discussions are currently taking place with the Ministry of Finance to utilise  the balance of
the funds.

5.4 

Implementation of 1998 & 1999 programmes

The 1999 budget is substantially contracted and disbursed.

30

Aid co-ordination unit (€0.8 million)

This ongoing project provides assistance to the Ministry of Finance (appointed National Aid
Co-ordinator),  in  increasing  its  aid  co-ordination  and  programming  capacity  at  central  level
while preparing a multi-annual national strategic development programme. A replacement of
the long-term expert will take effect early in 2002.

Reform of public administration (€1.2 million)

Three  institution-building  projects  are  ongoing:  the  provision  of  technical  assistance  to  the
Judicial  Training  Centre,  in  order  to  improve  the  effectiveness  of  the  judiciary  and  the
training  of  judicial  officials;  technical  assistance  support  to  the  Institute  of  Public
Administration,  in  order  to  design  an  overall  action  plan  for  preparing  a  new  Civil  Service
legislation;  and  technical  assistance  to  the  Union  of  Municipalities  (€180,000),  in  order  to
create  a  professionally  managed  and  operational  association  able  to  strengthen  the  local
government system. In addition a contract for the provision of IT equipment to the Ministry of
Justice  and  several  Montenegrin  courts  was  signed  in  October  and  the  delivery  of  the
equipment is ongoing.

SME development (€4.2 million)

The project supports and encourages private sector development, in particular that of SMEs,
by  establishing  a  sound  investment  climate.  A  Financing  Agreement  has  been  signed  to
provide credit lines to selected commercial banks (€3.0 million), with KFW. With Germany
bilateral funds technical assistance will be provided to the selected commercial banks. Further
complementary  technical  assistance  projects  (approximately  €1.2  million)  include  the
establishment  of  a  Euro  Info  Correspondence  Centre  (contract  signed  in  December)  and
institutional strengthening of the newly established Agency for SME Development (ongoing
Technical assistance to be completed April 2002).

Technical assistance facility (€0.8 million)

A macro economic advisor is currently providing assistance to the Prime Minister’s Office. A
Technical  assistance  team  have  been  appointed  to  assist  to  undertake  preliminary  needs
assessment for the Municipal Development Programme.

Budgetary support for IDPs (€13 million)

The  project  takes  the  form  of  budgetary  support  to  the  national  budget  of  Montenegro,  in
order  to  alleviate  the  extraordinary  financial  burden  related  to  provision  of  health  and
accommodation  facilities  to  the  influx  of  internally  displaced  persons  (IDPs)  from  Kosovo
during  the  1999  conflict.  The  support  programme  expired  on  the  30  June.  An  audit  of  the
project has been completed and a copy has been delivered to the beneficiary.

Energy supply (€2.5 million)

Budgetary  assistance  worth  €2.2  million  was  provided  to  support  EPIM  (Electrical  Power
Industry of Montenegro) in the payment of electricity supplies. The maintenance of the final
price charged to the households and enterprises, principally SMEs, has been completed. €0.2
million is being used to provide technical assistance to the Ministry of Economy.

31

Support to RTV Montenegro (€0.8 million)

The project will support the activities foreseen in the ‘Action Plan for Change’ adopted by the
management  of  RTV  CG.  A  direct  agreement  has  been  signed  with  BBC  World  Service
Television to assist with the transformation of the Montenegrin State TV into an independent
public service broadcaster. A BBC editorial consultant is currently in Montenegro working on
the  improvement  of  newsgathering  and  on  the  identification  and  implementation  of
appropriate training schemes for the editorial management. In collaboration with the Council
of  Europe,  the  Agency  is  currently  financing  a  joint  initiative  to  assist  the  Montenegrin
authorities with the adaptation of its media-related legal framework to the relevant European
standards.

The 1998 budget is fully contracted and substantially disbursed.

Agriculture (€1.0 million)

The  overall  project  objective  was  to  generate  new  employment  and  entrepreneurial
opportunities in rural areas for selected target groups (unemployed, families giving support to
refugees, farmers etc). Phase 1 of the project (delivery of just over 1000 pin-calf cattle) has
been completed, and the cattle have been distributed to  the beneficiaries  as  a  credit-in-kind.
However the collection of counterpart funds is not considered to be proceeding satisfactorily.
An  evaluation  mission  has  addressed  the  issue  of  the  fertility  of  the  distributed  cows  and
submitted its report. The second phase (delivery of a further 1000 cattle) has been cancelled
due to the BSE and FMD outbreaks in Europe. The funds (€1.0 million) cannot be reallocated
due to the expiry date of the commitment period.

Transport (€1 million)

The  general  objective  of  the  project  was  to  improve  local  transport  facilities  and  support
ambulance services. As a result 3 buses were delivered to the Podgorica Municipality and 12
ambulances were distributed to 11 Montenegrin municipalities. The project is completed.

Education (€0.5 million)

The  Agency  inherited  a  1998  project  from  the  European  Commission,  which  has  now  been
completed by the British Council. Curricula and teaching  methods for elementary  education
in selected core subjects were revised and a plan for the pre-service, in-service and continuing
professional  training  of  teachers  developed.  The  Ministry  of  Education  also  received
assistance  in  the  definition  of  a  strategic  plan  for  elementary  education.  The  project  is
completed.

Technical assistance facility (€1 million)

Now completed, the project comprised the provision of expertise to the Ministry of Finance to
assist with the reform process in areas of bank supervision and treasury issues. The project is
completed.

Technical assistance to the Prime Minister’s Office (€0.5 million)

An advisor was provided to the Prime Minister’s Office within the framework of the political
and economic reform programme. The project was completed in April 2001.

32

6.

PROGRAMMING

6.1 

Programming

In late 2000, the Agency’s Governing Board had already approved initial 2001 programmes.
In  the  early  part  of  2001,  and  as  additional  funding  became  available  during  the  year,  the
Agency submitted the balance of its programme proposals for the consideration and approval
of the Governing Board.

From  mid-2001  onwards,  the  Agency  engaged  itself  in  preparing  the  ground  for  its  2002
Annual  Programme  proposals,  so  as  to  present  the  Serbia  and  Kosovo  programmes  to  the
Governing  Board  by  January  2002,  and  the  Montenegro  programme  by  March  2002.  The
Agency kept in close contact with the Commission during the programming process, ensuring
that the projects proposed were in compliance with the FRY Country Strategy Paper (‘CSP’)
for the period 2002-2006, and its Multi-Annual Indicative Programme (MIP) for 2002-2004.
The CSP and MIP, finalised by the Commission during the second half of 2001, now provide
the framework within which the Agency prepares all of its Annual Programme proposals.

The  FRY  CSP  identified  a  series  of  problems  that  need  to  be  faced  by  Serbia,  Montenegro
and  UN-administered  Kosovo.  These  problems  include  the  current  lack  of  a  functioning
single  economic  space,  institutional  and  political  complexities  inside  the  federation,
inefficient public administration, weak judicial systems, and widespread poverty.

The CSP also pointed out other obstacles affecting the FRY’s ability to take full advantage of
the  Stabilisation  and  Association  Process,  to  its  sustainable  and  equitable  economic
development, and to its being able to deal with critical environmental issues and support trade
and  private  sector  development.  Meanwhile,  in  order  to  promote  a  truly  democratic  society
and  provide  adequate  social  conditions  for  the  population,  further  efforts  need  to  be
undertaken to reform the existing vocational education and training systems, health delivery
and social welfare systems, as well as to strengthen civil society and the media.

While the CSP recognises that there are many sectors that could benefit from EC assistance, it
also recognises that the EC must focus on a limited number of areas which have high priority
and in which  EC assistance  can have  significant impact  if  it is  concentrated.  In drafting the
2002 Annual Programme proposals, the Agency has continued to reflect this philosophy.

New programme proposals build on the substantial reconstruction and development assistance
that  has  already  been  committed  by  the  EC.  The  emphasis  for  2002  has  shifted  towards
support  for  institutional  and  general  capacity-building  in  order  to  prepare  the  FRY  for
transition  to  a  market  economy  and  for  approximation  with  the  EU,  in  line  with  the
Stabilisation and Association process. Kosovo continues to have  many infrastructure-related
needs, and this Annual Programme seeks to address some of these key requirements.

Design  of  new  programmes  has  taken  into  account  lessons  learned  in  the  course  of
implementing  projects  throughout  2001,  including  the  findings  of  evaluations  and  social
impact  assessments.  At  all  appropriate  stages  throughout  the  process  of  programme
formulation, consultations have taken place with the federal and republic level authorities in
the FRY, and also the UNMIK authorities in Kosovo.

33

EC  assistance  programmes  for  Serbia,  Montenegro  and  Kosovo  are  designed  to  be
complementary  to  each  other,  and  to  actions  undertaken  within  the  framework  of  the
Commission’s Regional Strategy for the period 2002-2006.

6.2 

External co-ordination

The Agency has implemented its EC funded projects in close co-ordination with the relevant
central  and  local  governmental  authorities  in  Serbia,  Kosovo  and  Montenegro.  Close
consultation and co-ordination has  also been maintained with  EU Member  States,  and other
international  donors  and  agencies  that  are  active  in  the  various  fields  covered  by  EC
programmes.  The  Agency  participates  in  the  donors’  conferences  jointly  organised  by  the
Commission and the World Bank to ensure international co-ordination of donors' activities. In
particular,  the  Agency  hosts  regular  co-ordination  meetings  with  the  EU  Member  State
representatives based in its areas of operation. Further sector meetings take place on an ad-hoc
basis with other countries (such as the USA) and on a more regular basis with the major IFIs,
especially with regard to policy issues. Such co-ordination of programmes with governmental
authorities and other donors continues to be critical if the FRY is to maximise the benefits it
receives from the combined international assistance effort.

6.3 

Evaluation

Approved  Evaluation  Guidelines,  in  line  with  general  EU  evaluation  standards,  set  the
framework  for  a  pragmatic,  systematic  and  participatory  approach  to  internal  evaluations
within  the  Agency.  Each  project  or  programme  is  assessed  according  to  its  relevance,
performance,  efficiency,  effectiveness,  impact  and  sustainability  in  relation  to  overall  aims
and  stated  objectives.  Each  of  the  subsequent  evaluations  featured  a  preparatory / inception
phase, an evaluation mission on-site, and sufficient time for reporting, briefing and debriefing.
Each  resulted  in  a  document  outlining  the  strengths  and  weaknesses  identified  during  the
mission, matched with a series of recommendations designed to remedy the latter or capitalise
on the former.

Two joint review missions in the private development sector in Kosovo examined the Interim
Credit Union project (with the World Bank) and the Micro-Enterprise Bank (with KFW). Due
to  the  social  character  of  micro-financing,  the  Agency’s  social  impact  assessor  in  Kosovo
participated  in  this  last  mission.  The  ICU  mission  examined  sub-loans  approved  and
disbursed to date. While finding that the transfer of banking and credit expertise to local staff
through  formal  training,  mentoring  and  coaching  had  been  successful,  the  mission  stressed
that  the  full  success  of  the  project  could  only  be  evaluated  when  a  sustained  repayments
history  of  sub-loans  became  apparent.  When  the  latter  subsequently  revealed  a  successful
repayment rate, further funds were allocated to the ICU later in the year. Meanwhile the MEB
mission  concluded  that  the  progress  of  the  credit  line,  set  against  initial  targets,  was  very
the  socio-economic
satisfactory.  It  also  carried  out  a  household  survey,  detailing 
characteristics  of  the  different  target  groups  reached  by  the  sub  loans.  It  recommended  the
identification of further bankable projects for Kosovo Serbs, and for women.

The  unit  also  examined  the  programme  for  cattle  importation  (and  related  employment
generation) in Montenegro. The evaluation report indicates risks at hand in the revolving fund
and makes recommendations for a speedy recovery of the project. The mission found that the
project’s  effectiveness in  achieving its main objective  -  that is,  to  increase  employment  and
entrepreneurial  activities  –  was  low.  It  concluded  that  there  are  more  effective  means  to
increase  employment  and  entrepreneurial  activities  than  distributing  in-calf  heifers.  It  also
found that the shortcomings in the implementation of the project resulted in a low impact for

34

an  estimated  50%  of  the  beneficiaries’  welfare.  The  Unit,  together  with  Agency  staff  in
Podgorica,  had  a  number  of  meetings  at  top  level  in  the  Ministry  of  Agriculture,  where
recommendations - particularly regarding the reallocation of cows to ensure the conditions in
which they are kept - were discussed.

An evaluation of the EU municipal experts programme in Kosovo also took place, in order to
answer questions regarding the continuation of the programme. It found strengths in the fact
that local municipalities had had access  to  an  important network of  motivated  and  qualified
candidates  from  the  EU  local  governments,  but  weaknesses  in  complex  contractual
arrangements and a level of disconnection between the experts themselves and the temporary
government  structure.  Recommendations  to  refocus  the  programme  and  review  the  delivery
system were taken on board in the new 2002 Programme.

The Energy for Democracy Programme in Serbia was evaluated in October. The mission felt
that the programme (evolving from a small 1999 programme to a substantial 2000 one) had
been a marked success in its timing and implementation, and felt that its overall practical and
political objectives had been achieved. A limited survey at the level of Municipalities, Central
Heating Divisions and Power plants was organised,  and findings  about the heating  situation
for next winter in rural Serbia were relayed to management.

An ex-ante evaluation on support  for  a  sustainable establishment of ‘Montenegro  Economic
Trends - MONET’ was completed in November.

For  implementation  in  2002,  evaluations  were  also  prepared  for  the  Internally  Displaced
Persons  programme  for  Montenegro,  the  Municipal  and  Local  Investment  Fund  in  Kosovo,
and the Kosovo housing programme.

35

7.

FINANCE

As at 31/12/2001, the Agency had been entrusted with the management of some €1.15 billion
of  EU  assistance  programmes.  Some  were  already  under  implementation  when  the  Agency
took over their  management  responsibility,  but the bulk of  these  programmes  were  initiated
by the Agency.

The breakdown is as follows:

(cid:1)  €391 million Serbia

(cid:1)  €695 million for Kosovo

(cid:1)  €59 million for Montenegro.

By the end of 2001, 85% of this amount, (i.e. €1 billion) had been contracted, while 66% of it
(i.e. €0.75 billion) had been disbursed.

During 2001 the Agency applied standard EU tender procedures in awarding €0.5 billion of
new contracts. Of these:

(cid:1)  87% were awarded through open tenders and grants

(cid:1)  13% were awarded through simplified procedures.

Over the  reporting  period  (2001),  (disregarding  the  €45  million  allocated  for  Kosovo  at  the
very end of the year), the Agency contracted more funds than were newly allocated to it.

€ million

Serbia

Kosovo

Montenegro

Total

newly

funds 

EU 
allocated in 2001
- during the first ¾
- during the last ¼
Total
Contracts  awarded  by
Agency in 2001

144
50
194
204

271
45
316
273

0
13
13
17

415
108
523
494

For assistance programmes, the Agency’s staff prepared and awarded 814 contracts, and made
2570 payments.

The number of staff dealing with the financial aspects of these programmes during 2001 (in
‘person/years’) was:

(cid:1)  5 international staff and 6.1 local staff for tendering and contracting

(cid:1)  2.7 international staff and 6.2 local staff for payments and accountancy.

The average number of days taken to process an invoice within the Agency in 2001 was 17.

36

The running costs of the Agency for its first two years of activity (2000 and 2001) amount to
€25.5 million, representing 2.3% of the total of the two final budgets for these years

Description

2000

2001

Total (€)

A - Gross operating costs

8,256,528.55

20,885,466.27

29,141,994.82

B - Operating revenues

679,987.09

2,914,652.28

3,594,639.37

C - Net operating costs (C = A - B)

7,576,541.46

17,970,813.99

25,547,355.45

D - Total Agency budget *

682,325,500.00 410,569,546.00 1,092,895,046.00

E - % of operating costs (E = C / D)

1.11%

4.38%

2.34%

* The total budget for 2000 includes €171 million received in December 2000 for implementation in 2001

Bearing in mind the accumulation of ongoing programmes from one year to another, and the
reduction  of  assistance  to  Kosovo,  it  is  foreseen  that  for  2002  the  percentage  of  operating
costs in the total budget is likely to increase.

In 2001, the European Commission appointed  a financial  controller  to  be  fully  dedicated  to
the Agency’s activities. The latter performed 165 working days of control of the Agency, of
which 70 days were spent in its different operational centres and its headquarters.

In  November  2001,  the  European  Court  of  Auditors  published  A  report  concerning  the
financial accounts of the European Agency for Reconstruction and the implementation of aid
for Kosovo for the year 2000. The following are extracts:

The  Court’s  examination  has  enabled  it  to  obtain  reasonable  assurance  that  the
annual accounts for the financial year ended 31st December 2000 are reliable and that
the underlying transactions are, taken as a whole, legal and regular.

The efficiency of the Agency’s administration is high, and the ratio of the number of
employees to the total value of aid managed is low. In both contracting and payments
for  operational  activities,  the  Agency  has  been  very  fast.  Moreover,  as  regards
programme  implementation  the  Agency  managed  to  achieve  most  of  its  ambitious
objectives  set  for  the  year  2000  in  the  fields  of  energy,  housing,  transport  and
agriculture.  The  Agency’s  efficiency  was  largely  due  to  the  high  level  of
commitment of its staff.

The favourable average cost of reconstruction of houses funded through the Agency,
compared  with  other  donors,  is  a  good  indicator  that  not  only  efficiency
considerations but also those of economy were taken into account.

The very flexible application of the rules in force, which involved the Agency taking
risks,  also  allowed  many  local  and  regional  companies  to  take  part  in  the
reconstruction  process. This  contributed to reducing the  reconstruction costs and  to
stimulating  the  recovery  of  the  economy  in  the  Balkan  countries,  which  have  been
severely affected by the conflicts in the region during the last decade.

The  outstanding  performance  of  the  Agency  is  also  due  to  the  fact  that  in  2000  it
focused its human and financial resources on a limited number of priority areas.

37

In  July  2001,  a  delegation  from  the  European  Parliament  Committee  on  Budgetary  Control
visited the Agency’s headquarters in Thessaloniki. The delegation subsequently issued a press
release,  commenting  on  the  Agency’s  ‘ability  to  reconcile  swift  and  effective  delivery  of
development assistance programmes with strict budgetary control’.

Contracts awarded by
Agency in 2001

(€494 million)

International & local
tenders
Grant agreements
Simplified procedures
Total

Serbia

Kosovo

Montenegro

€ million

%

€ million

%

€ million

%

112.5

55.3

169.6

62.2

52.7
38.6
203.8

25.6
19.1
100.0

75.9
27.4
272.9

27.8
10.0
100.0

12.7

3.8
0.8
17.3

73.4

22.0
4.6
100.0

38

8.

GENERAL SERVICES

8.1 

Administration

Staffing

At the year end the staff contingent stood at 241. In addition, recruitment is now beginning for
the Agency’s new operational centre in Skopje, fYROM.

Thessaloniki

Pristina

Belgrade

Podgorica

Total

International
Local
Total

14
19
33

44
*59
*103

31
53
84

8
13
21

97
144
241

* including 2 staff in Skopje back-up office

Premises

While the offices in Thessaloniki and Podgorica  are provided for  free  to  the  Agency by the
respective Governments, the Agency has to pay rent for its Operational Centre in Belgrade. In
Pristina, UNMIK has asked the Agency to vacate its offices in the Museum of Kosovo, which
will  be  put  at  the  disposal  of  the  newly  elected  President.  However,  it  has  agreed  to  let  an
alternative building to the Agency. This building, for which no rent will have to be paid, will
be renovated by  the Agency. Meanwhile the Agency has identified suitable premises  for  its
Operational Centre in Skopje. The Agency is also negotiating an Office Agreement with the
former  Yugoslav  Republic  of  Macedonia  (similar  to  those  it  has  in  the  Republics  of  Serbia
and Montenegro) to define privileges and immunities for staff and offices in Skopje.

8.2 

Information & communication

At the end of December 2001, the Agency’s Information and Communication Unit numbered
staff across all four locations. The unit determined general strategy, and instituted a number of
generic  systems  and  tools  for  use  across  all  operations.  (The  latter  include  introductory
‘calling card’ leaflets in all local languages in all operational centres, the Agency website at
http://www.ear.eu.int, a shared contact database, fact sheets, posters, exhibition panels, visual
and written identity guidelines, etc.) Effective relations were developed between the Agency
and  local  media  and  other  outlets  in  Serbia,  Kosovo  and  Montenegro,  and  in  EU  Member
States.  The  Agency  hosted  several  groups  of  EU  parliamentarians  over  the  year,  including
members of the Delegation for Relations with South-East Europe, the Committee on Foreign
Affairs,  Human  Rights,  Common  Security  and  Defence  Policy,  the  Committee  on  Budgets,
and  the  Committee  on  Budgetary  Control.  It  also  played  host  to  the  Commissioner  for
External  Relations,  Mr  Patten.  Amongst  a  number  of  successful  media  contacts  over  the
course  of  the  year,  the  Agency  was  the  subject  of  an  8-minute  piece  on  the  Euronews  TV
station, screened in 8 languages to a potential audience of 20 million.

39

ANNEX A1 - KEY STATISTICS SERBIA

EC funds delegated to the European Agency  for  Reconstruction  for  implementation in
the Republic of Serbia, at 31/12/2001 – by sector

€ million

1998

1999

2000

2001

Total

Media
Energy for Democracy
Schools for Democracy
Food
Health
Energy
Administrative & technical
assistance
Needs assessment
Municipal infrastructure
Agriculture
Enterprise development
Policy & legal advice centre
Regional development in
Southern Serbia
Integrated border management
Total

4.6

2.5
4.4

1.0
4.4
3.8
26.7
20.0
99.3
3.0

2.0
25.0

2.0

31.5
107.7
2.6

20.0
16.0
5.0
4.0

10.1
8.8
3.8
26.7
51.5
207.0
5.6

2.0
25.0
20.0
16.0
5.0
4.0

*4.6

*6.9

*185.2

5.0
193.8

5.0
390.5

*  European  Agency  for  Reconstruction  assumed  management  responsibility  for  programmes  previously  administered  by  the  European
Commission

EC funds delegated to the European Agency  for  Reconstruction  for  implementation in
the Republic of Serbia, at 31/12/2001 – by amounts committed, contracted, paid

Total (1998-2001)
2001 (Funds available in the last ¼)
2001 (Funds available in the first ¾)
2000
1999
1998

Committed
(€ million)

Contracted/
committed

391
50
144
*185
*7
*5

88%
31%
92%
99%
98%
100%

Paid/
Committed
68%
23%
51%
94%
79%
74%

*  European  Agency  for  Reconstruction  assumed  management  responsibility  for  programmes  previously  administered  by  the  European
Commission

40

ANNEX A2 - KEY STATISTICS: KOSOVO

EC funds delegated to the European Agency  for  Reconstruction  for  implementation in
Kosovo, at 31/12/2001 – by sector

€ million

1998

1999

2000

2001

Total

&

employment 

University, animal feed, timber
supply
Budget targeted assistance
Damage assessment
Village 
rehabilitation
Mitrovica  hospital  &  small-scale
operations
Housing
Public utilities
Transport
Agriculture
Water & solid waste management
Enterprise
Administrative & technical
assistance
Energy
Energy imports
District heating
De-mining
Feasibility studies
Postal & telecommunications
Health
Local government, civil society
Reserve
Total

7.0

5.0
3.5
7.5

1.5

14.0
9.0
6.3
1.0
3.0
4.6
3.7

13.0

6.0
2.0
8.0
0.5
28.1

10.0

59.9

37.6

15.0
10.0
14.6
15.0

90.5
28.0
3.5

10.0

18.0
28.0
20.0
20.0
1.0

110.0
20.3
2.5

14.0
38.9
5.2
315.5

7.0

15.0
3.5
7.5

1.5

111.5
9.0
39.3
39.0
37.6
39.6
4.7

213.5
48.3
6.0
6.0
2.0
8.0
24.0
39.4
5.2
695.2

*7.0

*116.2

256.5

*  European  Agency  for  Reconstruction  assumed  management  responsibility  for  programmes  previously  administered  by  the  European
Commission

EC funds delegated to the European Agency  for  Reconstruction  for  implementation in
Kosovo, at 31/12/2001 – by amounts committed, contracted, paid

Total (1998-2001)
2001 (Funds available in the last ¼)
2001 (Funds available in the first ¾)
2000
1999
1998

Committed
(€ million)

Contracted/
committed

Paid/
committed

695
45
271
256
*116
*7

85%
7%
85%
92%
97%
100%

66%
4%
54%
80%
88%
97%

*  European  Agency  for  Reconstruction  assumed  management  responsibility  for  programmes  previously  administered  by  the  European
Commission

41

ANNEX A3 - KEY STATISTICS: THE REPUBLIC OF MONTENEGRO

EC funds delegated to the European Agency  for  Reconstruction  for  implementation in
the Republic of Montenegro, at 31/12/2001 – by sector

€ million

1998

1999

2000

2001

Total

Transport
Agriculture
Administrative & technical assistance
Public administration
Education
Budgetary support
Energy supplies
Aid coordination & programming unit
Enterprise development
Media
Infrastructure
Finance
Municipal development
Institution building

1.0
1.0
0.5
1.0
0.5

0.8
1.2

12.7
2.5
0.8
4.2
0.8

2.3

3.0

10.8
2.9

*4.0

*23.0

*19.0

7.0

0.6

4.5
1.2
13.3

8.0
3.3
1.9
2.2
3.5
12.7
2.5
0.8
4.2
0.8
10.8
2.9
4.5
1.2
59.3

* European Agency for Reconstruction assumed management responsibility for programmes previously administered by the
European Commission

EC funds delegated to the European Agency  for  Reconstruction  for  implementation in
the Republic of Montenegro, at 31/12/2001 – by amounts committed, contracted, paid

Total (1998-2001)
2001 (Funds available in the last ¼)
2000
1999
1998

Committed
(€ million)

Contracted/
committed

59
13
*19
*23
*4

67%
0%
72%
97%
100%

Paid/
Committed
44%
0%
25%
77%
85%

*  European  Agency  for  Reconstruction  assumed  management  responsibility  for  programmes  previously  administered  by  the  European
Commission

42

ANNEX B - AGENCY GOVERNING BOARD MEETINGS 2001

Date

Main issues discussed and decisions taken

27-28/02/2001

18/05/2001

02/07/2001

21/09/2001

18/12/2001

Discussion of 2001 programme for Serbia
Adoption of Annual Report 2000
Exchange of  views  with  UNMIK  Pillar  IV  and  discussion  of
social dimension of the Agency’s Kosovo programme
Adoption  of draft  Agency  budget  for  2002  for  submission  to
the  Commission  and  acknowledgement  of  1st  revision  of
Agency budget 2001
Adoption of evaluation guidelines, of principles governing the
award  of  contracts,  and  of  decision  on  the  extension  of
contracts  for  the  Agency’s  international  staff  (Temporary
Agents)
Discussion  of  progress  report  on  the  implementation  of  the
Kosovo, Serbia and Montenegro programmes
Approval of revised staffing table for 2001, of rectification of
some budget lines, and of carry-over of 2000 credits
Selection  of  new  Member  States’  representatives  for  the
Agency’s ACPC
Discussion of additional 2001 support programme for Kosovo
and of support programme for Montenegro
Adoption of 2nd revision of Agency budget 2001
Discussion of additional 2001 support programme for Serbia,
the  Agency’s
of  evaluation  programme  2001,  and  of 
information activities
Exchange  of  views  with  UNMIK  Pillar  IV  on  Kosovo
activities  and  with  Swedish  NGO  on  the  role  of  women  in
reconstruction
Information  on  additional  2001  support  programme  for
Montenegro (finalisation by written procedure)
Approval  of  Agency’s  promotion  policy  and  adoption  of  2nd
revised  staffing  table  2001  and  of  3rd  revision  of  Agency
budget 2001 (the latter by written procedure)
Cancelled  due  to  bad  weather  (decisions  on  establishment  of
new operational centre in Skopje and on 2002 Agency budget
by written procedure)

43

ANNEX C - AGENCY ORGANISATIONAL STRUCTURE CHART

EU Member
States x15

Governing Board European

Commission

The Director

Operations
division
Podgorica,
Montenegro

Operations
division
Belgrade, Serbia

Operations
division  Pristina,
Kosovo

Programming
division

Finance
division

Secretary General

Infrastructure

Monitoring

Monitoring

Programming

Contract units

Secretariat 
Board

to 

the

Enterprise

Energy

Energy

External
coordination

Budget units

Administration

Institution-
building

Infrastructure

Transport 
infrastructure

&

Evaluation

IT unit

Information 
communication

&

Civil society
& media

Civil society
& media

Enterprise
development

Enterprise
development

Agriculture

Agriculture

Health

Health

Institution-
building

Institution-
building

Economic 
social sector

&

Economic 
social sector

&

Housing

Water 
environment

&

Note: as at January 2002, a new operational centre opened in Skopje, fYROM

44

ANNEX D - AGENCY BUDGET 2001

Revenues (€)

Title 1
1100

European Commission subsidy
EC budget 2001 for Kosovo assistance projects
EC budget 2000 for Serbia assistance projects
EC budget 2001 for Serbia assistance projects
EC budget 2000 for Montenegro assistance projects
EC budget 2001 for Montenegro assistance projects
EC budget 2000 for Agency running costs in Kosovo
EC budget 2001 for Agency running costs in Kosovo
EC budget 2000 for Agency running costs in Serbia
EC budget 2001 for Agency running costs in Serbia
EC budget 2001 for Agency running costs in Montenegro
Total 1100

Title 2 Other subsidies
Title 3 Miscellaneous
Bank interest
Counterpart funds
Earmarked revenues
Total

Title 4

Expenditure (€)

Title 1 Staff
Title 2 Buildings, equipment & other costs
Title 3 Projects

Kosovo 2001
Kosovo Counterpart fund
Serbia 2001
Serbia hand-over
Montenegro 2001
Montenegro hand-over
Total projects
Total

144,500,000
2,608,801
193,800,000
24,360,000
16,300,000
4,000,000
8,000,000
3,000,000
7,300,000
1,700,000
405,569,546
p.m.

0
5,000,000
p.m.
410,569,546

15,118,000
8,882,000

144,500,000
5,000,000
193,800,000
2,608,801
16,300,000
24,360,745
386,569,546
410,569,546

45

ANNEX E - AGENCY CONTACTS

Headquarters

Thessaloniki - Egnatia 4, Thessaloniki 54626, Greece
Tel. +30 310 505 100, Fax +30 310 505 172

Operational centres

Belgrade – Vasina 2-4, 11000 Belgrade, the Republic of Serbia
Tel. +381 11 30 234 00, Fax +381 11 30 234 55

Pristina - The Museum, Miladin Popovic, Pristina, Kosovo
Tel. +381 38 513 1 200, Fax +381 38 549 963

Podgorica - Urb. Parcel 137, Gorica C, 81000 Podgorica, the Republic of Montenegro
Tel. +381 81 231 740, Fax +381 81 231 741

Skopje - Makedonija  11  (1st floor),  1000 Skopje,  former  Yugoslav  Republic  of  Macedonia
(fYROM)
Tel. +389 2 109 895, Fax +389 2 124 760

info@ear.eu.int

www.ear.eu.int

46