COMMISSION STAFF WORKING PAPER KOSOVO*  2011 PROGRESS REPORT
Date: 2011-10-12
Institutions: European Commission
Subjects: Community acquis, Kosovo, accession criteria, accession negotiations, pre-accession aid

EUROPEAN COMMISSION 

Brussels, 12.10.2011 
SEC(2011) 1207 final 

COMMISSION STAFF WORKING PAPER 

KOSOVO*  2011 PROGRESS REPORT 

Accompanying the document 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL  

Enlargement Strategy and Main Challenges 2011-2012 

{COM(2011) 666 final} 
{SEC(2011) 1200 final} 
{SEC(2011) 1201 final} 
{SEC(2011) 1202 final} 
{SEC(2011) 1203 final} 
{SEC(2011) 1204 final} 
{SEC(2011) 1205 final} 
{SEC(2011) 1206 final} 

*Under UNSCR 1244/1999 

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TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

1.3. 

2. 

2.1. 

2.2. 

2.3. 

3. 

3.1. 

3.2. 

Introduction .................................................................................................................. 3 

Preface.......................................................................................................................... 3 

Context ......................................................................................................................... 3 

Relations between the EU and Kosovo........................................................................ 5 

Political criteria ............................................................................................................ 5 

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

Human rights and the protection of minorities .......................................................... 14 

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

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

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

The capacity to cope with competitive pressure and market forces within the Union
.................................................................................................................................... 30 

4. 

European standards .................................................................................................... 32 

4.1. 

Internal market ........................................................................................................... 32 

4.1.1.  Free movement of goods............................................................................................ 32 

4.1.2.  Movement of persons, services and right of establishment ....................................... 33 

4.1.3.  Free movement of capital........................................................................................... 34 

4.1.4.  Customs and taxation ................................................................................................. 35 

4.1.5.  Competition................................................................................................................ 36 

4.1.6.  Public procurement .................................................................................................... 37 

4.1.7. 

Intellectual property law ............................................................................................ 38 

4.1.8.  Employment and social policies, public health policy............................................... 39 

4.1.9.  Education and research .............................................................................................. 41 

4.1.10.  WTO issues ................................................................................................................ 42 

4.2. 

Sectoral policies ......................................................................................................... 42 

4.2.1. 

Industry and SMEs..................................................................................................... 42 

4.2.2.  Agriculture and fisheries ............................................................................................ 43 

4.2.3.  Environment............................................................................................................... 44 

4.2.4.  Transport policy ......................................................................................................... 46 

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4.2.5.  Energy ........................................................................................................................ 47 

4.2.6. 

Information society and media................................................................................... 49 

4.2.7.  Financial control......................................................................................................... 50 

4.2.8.  Statistics ..................................................................................................................... 51 

4.3. 

Justice, freedom and security ..................................................................................... 52 

4.3.1.  Visa, border management, asylum and migration...................................................... 52 

4.3.2.  Money laundering ...................................................................................................... 54 

4.3.3.  Drugs .......................................................................................................................... 56 

4.3.4.  Police.......................................................................................................................... 56 

4.3.5.  Fighting organised crime and terrorism ..................................................................... 57 

4.3.6.  Protection of personal data......................................................................................... 59 

Statistical Annex ...................................................................................................................... 60 

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1. 

INTRODUCTION 

1.1. 

Preface 

Since March 2002, the Commission has reported regularly to the Council and Parliament on 
progress made by the countries of the Western Balkans region. 

This report largely follows the same structure as in previous years. The report: 

–  briefly describes the relations between Kosovo1 and the Union; 

–  analyses the political situation in Kosovo in  terms of democracy, the rule of law, human 

rights, protection of minorities and regional issues; 

–  analyses the economic situation in Kosovo; 

–  reviews  Kosovo's  capacity  to  implement  European  standards,  that  is  gradually  to 
approximate its legislation and policies with the acquis, in line with the Stabilisation and 
Association Process, and European Partnership priorities. 

This report covers the period from October 2010 to September 2011. Progress is measured on 
the  basis  of  decisions  taken,  legislation  adopted  and  measures  implemented.  As  a  rule, 
legislation or measures which are being prepared or awaiting parliamentary approval have not 
been taken into account. This approach ensures equal treatment across all reports and permits 
an objective assessment. 

The  report  is  based  on  information  gathered  and  analysed  by  the  Commission.  Many  other 
sources have been used, including contributions from the Kosovo authorities, the EU Member 
States,  the  EU  Special  Representative  in  Kosovo,  the  EU  rule  of  law  mission  (EULEX), 
European  Parliament  reports2  and  information  from  various  international  and  non-
governmental organisations. 

The Commission draws detailed conclusions regarding Kosovo in its separate communication 
on enlargement3, based on the technical analysis contained in this report. 

1.2. 

Context 

Following  the  ruling  of  the  Constitutional  Court  in  autumn  2010,  the  President  of  Kosovo 
stepped down and new elections were called for December. The new assembly convened in 
February and elected a President. The election process was challenged from the constitutional 
perspective and the Constitutional Court played an important role through the way it exercised 
its responsibilities. As a result, a new President was elected in line with Kosovo's constitution. 
This period was marked by limited results on the reform agenda. 

During  the  reporting  period,  Serb  communities  south  of  the  River  Ibër/Ibar  have  increased 
cooperation  with  Kosovo  authorities  and  participation  in  their  representative  institutions. 

1 
2 
3 

Under UNSCR 1244/1999 
The rapporteur for Kosovo is Ms Ulrike Lunacek. 
Enlargement Strategy and Main Challenges 2011-2012 - COM(2011) 666.  

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Their  turnout  in  elections  was  higher  and  they  also  participated  in  the  census.  In  northern 
Kosovo, integration has not progressed. Serbia-supported municipalities in the north did not 
cooperate sufficiently with UNOPS and the Commission to allow a census to proceed in this 
part  of  Kosovo.  Serbs  in  the  north  supported  by  local  political  leaders  also  challenged  the 
authority of EULEX.  

At  the  end  of  July,  the  situation  escalated  in  northern  Kosovo  when  Kosovo  decided  to 
impose an embargo on Serbian goods in retaliation to a Serb blocking of goods since 2008 on 
the  grounds  of  the  non  recognition  of  the  "Customs  of  Kosovo"  stamp.  The  decision  on  an 
embargo  followed  a  failure  to  reach  an  agreement  on  Kosovo  customs  stamps  within  the 
framework of the EU facilitated dialogue between Belgrade and Pristina, which was launched 
following last year's UN General Assembly resolution. The unilateral deployment of Kosovo 
police at gates 1 and 31 in northern Kosovo led to violence, resulting in the death of a Kosovo 
police officer. Calm was restored with the help of KFOR, the NATO-led military presence. In 
September, the issue of customs stamps was resolved in the context of the Belgrade/Pristina 
dialogue. The implementation of the agreement resulted in widespread blockades in the north, 
including  at  the  gates  1  and  31.  Violent  incidents  also  occurred.  The  tensions  in  northern 
Kosovo need to be defused, and free movement of people and goods re-established. All actors 
need to play their part in this process. In the light of the situation in northern Kosovo, Serbia 
interrupted its participation in the dialogue at the end of September. 

The dialogue has proven to be the main way to address differences between the two parties. 
Agreements  were  also  reached  on  civil  registries,  free  movement  of  persons  and  cadastre 
records.  The  agreements  reached  need  to  be  implemented  in  good  faith.  Kosovo's  generally 
constructive approach in the dialogue marks progress in its commitment to the EU.  

To  date,  Kosovo  has  been  recognised  by  81  UN  Member  States,  including  22  EU  Member 
States.  

During  the  reporting  period,  the  UN  Secretary-General  issued  four  reports  on  Kosovo  –  in 
October 2010  and in  January,  May  and August 2011. He noted that Kosovo authorities  had 
increased their efforts to establish a close engagement with the European Union and enjoyed 
visibility  at  the  international  level.  He  also  pointed  out  that  the  dialogue  between  Belgrade 
and  Pristina  had  the  potential  to  bridge  the  differences  between  the  sides  and  to  resolve  a 
series of long-standing issues that affect the lives of the people on the ground. 

KFOR  has  also  continued  to  help  maintain  security  in  other  parts  of  Kosovo.  During  the 
reporting  period,  its  presence  was  reduced  to  just  over  6,000.  In  this  context,  the  Kosovo 
police have taken over responsibility for protecting several cultural and religious sites. They 
have also taken over the task of security along the border with the former Yugoslav Republic 
of Macedonia and Montenegro. 

Kosovo  did  not  meet  the  conditions  for  a  Stand-By  Arrangement  with  the  International 
Monetary  Fund  and  consequently  the  Fund  did  not  disburse  its  macro-financial  assistance. 
Therefore,  the  Commission  could  not  disburse  another  tranche  of  its  macro-financial 
assistance  to  Kosovo.  The  Kosovo  government  needs  to  take  urgent  steps  to  address  the 
budgetary deficit.  

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1.3. 

Relations between the EU and Kosovo 

Kosovo is participating in the Stabilisation and Association Process (SAP). The 2011 cycle of 
meetings under the SAP dialogue (SAPD) was completed in July. During the reporting period, 
seven  sectoral  meetings  were  held  on  the  following  sectors:  justice,  freedom  and  security; 
agriculture; economy, statistics and financial control; internal market, competition, health and 
consumer  protection;  transport,  environment,  energy  and  regional  development;  innovation, 
human  capital,  social  policies  and  information  society;  and  trade,  industry,  customs  and 
taxation.  On  30  June,  Kosovo  hosted  the  second  SAPD  civil  society  dialogue  meeting, 
followed by the plenary meeting on 1 July. Kosovo also hosted a high-level conference on the 
inclusion  of  the  Roma,  Ashkali  and  Egyptian  communities  in  May.  To  promote  economic 
dialogue, the fiscal surveillance mechanism with the European Commission continued,  with 
meetings being held twice a year. 

In  December  2010,  in  the  context  of  the  early  general  election,  the  European  Parliament 
deployed  an  official  seven-member  election  observation  delegation  to  Kosovo.  In  January 
2011,  a  two-member  European  Parliament  delegation  observed  the  repeat  elections  in  five 
municipalities.  The  Commission  deployed  a  three-member  election  expert  mission.  The  EU 
Special  Representative's  (EUSR)  office  organised  a  diplomatic  election  watch.  In  May,  the 
fourth European Parliament–Kosovo inter-parliamentary meeting took place in Pristina. 

EULEX  has  continued  to  operate  across  Kosovo  and  fulfil  its  mandate.  The  cooperation  of 
Kosovo authorities with EULEX has been mixed. The mission has strengthened its presence 
and  activities  in  northern  Kosovo  especially  following  the  events  of  summer  when  Kosovo 
Police special units tried to deploy to gates 1 and 31. The Mitrovicë/Mitrovica court is staffed 
solely by EULEX judges. The situation in northern Kosovo has posed specific challenges to 
the mission. 

The EU re-confirmed its commitment to Kosovo, including the northern part, by opening an 
information point in northern Mitrovicë/Mitrovica. The EU House has extended its presence 
and  has  permanent  staff  from  EULEX,  EUSR  and  the  Commission.  Mr  Feith's  term  as  EU 
Special Representative (EUSR) came to an end; he continues to act as International Civilian 
Representative.  In  May,  a  temporary  EUSR  was  appointed.  The  Italian  Ambassador  to 
Kosovo  is  continuing  to  carry  out  his  mandate  as  facilitator  for  the  north.  The  Head  of  the 
Greek  liaison  office  in  Pristina  is  continuing  his  mandate  as  facilitator  for  the  protection  of 
religious  and  cultural  heritage  in  Kosovo.  Both  have  made  major  contributions  in  their 
respective areas.  

Kosovo  continues  to  benefit  from  the  Instrument  for  Pre-accession  Assistance  (IPA),  the 
Instrument for Stability (IfS) and other sources of funding. Kosovo is participating in the IPA 
multi-beneficiary programmes. The multiannual indicative planning document for 2011-2013 
was  adopted  on  27  June.  During  2011,  a  total  of  € 68.7  million  granted  in  the  IPA  annual 
programme  for  2011  was  allocated  in  close  coordination  with  the  Ministry  for  European 
Integration  and  government  institutions.  The  EU  pre-accession  assistance  is  focusing  on 
support  for  the  rule  of  law,  the  economy,  trade  and  industry,  and  for  public  administration 
reform. 

2. 

POLITICAL CRITERIA 

This  section  examines  the  progress  made  by  Kosovo  towards  meeting  the  Copenhagen 
political  criteria,  which  require  stability  of  institutions  guaranteeing  democracy,  the  rule  of 

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law,  human  rights  and  respect  for  and  protection  of  minorities.  It  also  monitors  regional 
cooperation,  good neighbourly  relations with enlargement countries and Member States and 
compliance with international obligations, such as cooperation with the International Criminal 
Tribunal for the former Yugoslavia (ICTY). 

2.1. 

Democracy and the rule of law 

Parliament 

In  October  2010,  one  of  the  parties  withdrew  from  the  coalition  government  and  the  acting 
President  of  Kosovo  called  early  general  elections  for  12  December.  Following  a  no-
confidence  vote, the assembly dissolved  on 2 November. The  Central Election  Commission 
organised early general elections in less than 40 days.  

Based  on  the  rulings  by  the  competent  bodies,  the  Central  Election  Commission  organised 
repeat  elections:  on  9  January  in  the  municipalities  of  Skenderaj/Srbica,  Gllogoc/Glogovac 
and  Deçan/Dečane  and  at  two  additional  polling  centres,  one  in  the  municipality  of 
Malishevë/Mališevo,  the  other  in  Lipjan/Lipljan,  and  on  23  January  in  the  municipality  of 
Mitrovicë/Mitrovica.  Over  40%  of  the  votes  cast  had  to  be  recounted.  The  repeat  elections, 
recounts  and  delayed  publication  of  results  damaged  the  credibility  of  the  process  and  the 
legitimacy of the results.  

On  7  February,  the  Central  Election  Commission  announced  the  certified  Kosovo-wide 
election  results.  The  turnout  was  just  above  45%.  Participation  in  the  six  Serb  majority 
municipalities increased. In the three northern municipalities, the turnout was negligible. 

There  were  serious  shortcomings  in  the  electoral  process.  Challenges  remain  in  terms  of 
compliance  with  international  standards  and  simplicity  of  the  current  system  and  past 
impunity with regard to electoral fraud. A total of 502 persons have been indicted for fraud 
related  to  the  general  elections  at  municipal  prosecution  offices  in  Kosovo.  By  the  end  of 
June,  only  18  verdicts  had  been  rendered.  With  the  exception  of  one  case,  the  Kosovo 
prosecutors  filed  appeals  against  all  verdicts,  due  to  the  mild  rulings.  Kosovo  needs  to  deal 
more decisively with cases of electoral fraud. Kosovo needs to address the shortcomings and 
to ensure political will at all levels to conduct fair elections at every stage of the process. 

The  assembly  convened  again  on  21  February.  On  21  and  22  February,  the  Speaker  of  the 
assembly,  the  President  of  Kosovo  and  the  government  were  elected.  Subsequently,  the 
election of the President was challenged by a group of members of the assembly before the 
Constitutional  Court.  On  28  March,  the  Constitutional  Court  ruled  that  the  presidential 
election  of  22  February  had  been  "unconstitutional".  Following  an  agreement  between  the 
coalition  parties  (the  Democratic  Party  of  Kosovo  –  PDK  and  the  New  Kosovo  Alliance  – 
AKR)  and  the  main  opposition  party  (the  Democratic  League  of  Kosovo  –  LDK),  a  new 
President – Ms Atifete Jahjaga – was elected on 7 April in accordance with the constitution. 
The tri-partite agreement also established that constitutional and electoral reforms, including 
direct election of the President of Kosovo, needed to occur within specified timeframes.  

In  its  fourth  mandate,  the  assembly  re-elected  the  former  speaker  again  for  the  new 
legislature.  The  Presidency  was  reduced  from  nine  to  six  members.  Five  members  of  the 
assembly were elected as Deputy Presidents, three from the largest groups and two from the 
non-Albanian communities. In an attempt to streamline their work, the assembly reduced the 
number  of  assembly  committees  from  16  to  13.  Cooperation  between  the  European 

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Integration  Committee  and  the  Ministry  of  European  Integration  has  improved.  The 
Committee  needs  to  be  strengthened,  in  particular  its  administrative  capacity,  and  to  ensure 
overall  coordination  and  monitoring  of  the  European  integration  action  plan,  and  to 
effectively scrutinise legislation for compliance with European standards. 

After the dissolution of the assembly on 2 November 2010, all pending draft laws were sent 
back  to  the  office  of  the  Prime  Minister.  Since  the  beginning  of  its  fourth  mandate,  the 
Assembly adopted a budget and a number of reform laws. It also adopted two resolutions, the 
first  in  March  on  the  Belgrade/Pristina  dialogue  and  the  second  in  April  on  European 
integration. The European integration action plan was adopted in April. 

The assembly's strategic programme for 2012-2014 is under revision. The assembly has not 
yet  adopted  its  new  rules  of  procedure  in  line  with  the  new  mandate.  Oversight  of  the 
executive  branch  by  the  assembly  needs  to  be  strengthened.  Government  representatives  do 
not  attend  plenary  sessions  on  a  regular  basis.  Requests  by  the  assembly  for  written  reports 
from  the  government  are  not  sufficiently  met.  Public  hearings  remain  sporadic  and  civil 
society  is  not  effectively  involved  in  any  assembly  debate.  There  is  no  institutionalised 
platform  that  would  allow  a  regular  dialogue  between  the  assembly  and  civil  society 
organisations.  There  are  concerns  as  regards  the  adherence  to  the  assembly's  rules  of 
procedure.  The  adoption  of  the  law  on  the  Special  Chamber  of  Supreme  Court  without  a 
review  by  the  Committee  on  legislation  and  judicial  matters,  as  required  by  the  rules,  is  an 
example. 

The  assembly's  monitoring  and  research  capacity  still  remains  weak.  The  legislative 
procedure needs to be strengthened in order to ensure cross-sectoral expertise. The office for 
legal  affairs,  standardisation  and  harmonisation  is  understaffed,  thus  undermining  effective, 
in-depth  scrutiny  of  legislation.  The  assembly's  capability  to  scrutinise  compliance  with  EU 
norms effectively needs to be enhanced.  

The  assembly  still  lacks  a  legal  department  that  would  provide  legal  advice  to  the 
administration  leadership,  the  president  and  the  presidency  only  and  would  represent  the 
assembly in courts. The capability of the assembly administration to provide legal advice and 
formal opinions to the assembly on constitutional issues also remains very weak. 

Concerns remain about management of human resources by the assembly secretariat. A new 
regulation outlining the organisation and responsibilities of the assembly administration was 
adopted in October 2010 and is being implemented. The regulation is not fully aligned with 
the  legislation  in  force,  such  as  the  law  on  civil  servants  and  the  law  on  salaries  of  civil 
servants. A merit-based recruitment procedure needs to be applied in order to avoid political 
interference.  The  assembly  needs  to  introduce  stronger  mechanisms  to  oversee  budget 
expenditure during the course of the financial year. The staff training budget remains largely 
unspent.  In  February  2011,  the  Constitutional  Court  ruled  that  the  law  on  rights  and 
responsibilities  of  members  of  the  assembly  was  not  in  line  with  the  law  on  pensions. 
Therefore, the pension age for members needs to be raised from 55 to 65. 

Overall, the assembly followed the decisions of the Constitutional Court on the re-election of 
the  President.  There  were  serious  shortcomings  in  the  process  of  general  elections.  Kosovo 
needs  to  take  urgent  steps  to  address  these  by  simplifying  the  system,  making  it  more 
transparent, and investigating and prosecuting cases of electoral fraud. Limited progress has 
been achieved on strengthening oversight of the government by the assembly, on improving 
scrutiny  of  proposed  legislation  in  line  with  European  integration  priorities  or  on  the 

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government  and  assembly  working  together  on  a  shared  reform  programme.  There  are 
concerns as regards adherence of the assembly to its rules of procedure. 

Government 

On 22 February, the assembly voted on a new coalition government formed by members of 
the PDK, AKR and minority parties. The current Government has six Deputy Prime Ministers 
and  19  ministers,  of  whom  three  are  also  Deputy  Prime  Ministers.  The  Deputy  Ministers 
include three Serbs and eight from other communities.  

The new government  adopted  its  legislative strategy  in March, followed by its annual work 
plan  in  April.  The  government  rules  of  procedure  were  revised.  In  March,  the  government 
adopted  a  regulation  establishing  and  strengthening  the  role  of  the  European  integration 
departments  within  the  ministries.  Now,  they  also  perform  strategic  policy  and  external 
assistance coordination functions. The Ministry of European Integration holds regular weekly 
meetings with these departments, thus ensuring a better flow of information and coordination 
between these key stakeholders. The inter-ministerial council on European integration matters 
met  twice  during  the  reporting  period.  The  overall  inter-institutional  architecture  governing 
the European integration process needs to be further strengthened and to be synchronised and 
managed more effectively. The European integration working groups do not meet regularly.  

The Ministry of European Integration, and in particular civil servants dealing with European 
integration  matters,  significantly  enhanced  the  management  of  the  second  cycle  of  the 
Stabilisation and Association Process dialogue. This ensured continuity of the overall process 
even under difficult institutional circumstances. In March, the Ministry adopted an action plan 
outlining  ten  key  European  integration  priorities  of  general  nature  for  the  Kosovo 
government. More focused identification of specific goals and measurable results would guide 
the  government's  efforts  better.  Furthermore,  the  Ministry  mobilised  the  government  and 
assembly  to  deliver  on  key  priorities.  The  government  also  adopted  a  revised  European 
Partnership Action Plan in March. The structure of the document was improved and the list of 
activities  streamlined.  Further  efforts  are  needed  in  order  for  the  document  to  become  a 
monitoring tool and strategic guidance for the government, by identifying more clearly what 
can realistically be achieved during the 12 months covered by the plan.  

In  October  2010,  the  law  on  local  self-government  was  amended.  The  strategic  plan  on 
capacity-building  in  municipalities  was  completed  in  March  2011  and  training  has  been 
provided.  The  Ministry  of  Local  Government  adopted  a  regulation  on  assessment  of  the 
legality  of  municipal  acts.  An  instruction  on  the  responsibilities  of  municipalities  in  the 
process of European integration was also issued. An indicator-based system for assessing the 
performance  of  municipalities  was  developed  which  is  now  operating  in  every  municipality 
except  three  in  the  north.  The  Ministry  has  made  some  progress  on  supervising  local 
authorities. Budgetary constraints and the lack of access to land remain major obstacles to the 
economic development of municipalities. Contradictory interpretations of legislation on local 
self-government continue to create obstacles in cooperation between central and local levels 
of administration. The situation needs to be resolved, including by forwarding the matters to 
the competent courts. 

The  efforts  on  decentralisation  have  continued.  The  government  needs  to  find  solutions  for 
the  long-term  sustainability  of  the  newly  created  Serb-majority  municipalities.  Their 
administrative capacity also needs to be further strengthened. As a result of opposition from 

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the Serbia-supported structures in northern Kosovo, decentralisation could not progress in this 
region. 

Overall,  mixed  progress  can  be  reported  in  this  area.  The  government  strengthened  the 
European  integration  departments  in  individual  ministries  and  the  Ministry  of  European 
Integration  has  continued  to  build  up  its  coordinating  role.  Further  efforts  are  needed  to 
improve  implementation,  in  the  line  ministries,  of  the  reform  agenda,  based  on  actions 
identified in the Stabilisation and Association Process dialogue. Significant progress has been 
achieved on decentralisation. Municipalities continue to face challenges in terms of capacity 
and resources. The integration of municipalities and Serb communities in northern Kosovo is 
a particular challenge.  

Public administration 

There  has  been  limited  progress  with  public  administration  reform.  The  revised  public 
administration  strategy  for  the  period  2010-2013  which  was  adopted  by  the  government  in 
September  2010  has  not  yet  been  implemented.  An  inter-ministerial  working  group 
responsible for drafting an action plan implementing the public administration reform strategy 
was  established  in  November  2010.  The  action  plan  has  not  yet  been  finalised,  thus 
significantly  delaying  implementation  of  the  reforms  envisaged.  The  overall  process  is 
hampered by lack of financial resources and insufficient political support. In its first meeting 
since  September  2010,  the  inter-ministerial  committee  on  public  administration  reform 
adopted four strategic development plans in July.  

In the field of civil service reform, some important regulations and administrative instructions 
were  adopted,  such  as  the  regulation  on  working  hours  and  on  job  descriptions,  and  in 
particular the regulations on the appointment of senior civil servants and on the civil register 
of  civil  servants.  A  regulation  delimiting  the  administrative  responsibilities  of  the  Office  of 
the Prime Minister and ministries was adopted as part of the measures to implement the law 
on state administration. Some additional staff were recruited to the civil service department, 
but  the  institutional  framework  in  the  public  administration  continues  to  suffer  from  the 
reported lack of adequate resources. The legal framework necessary for the implementation of 
the civil service primary legislation is still not complete. Implementation of the laws on state 
administration and on administrative procedures has been limited. 

The Kosovo  Institute of Public Administration has  provided a  series of training sessions, in 
particular for public procurement officers. The administrative and financial capacity and the 
coordinating  function  of  the  Institute  remain  weak.  This  affects  its  capability  to  provide  a 
more rational strategic approach to capacity-building for civil servants.  

The  law  on  access  to  public  documents  was  adopted  in  October  2010  and  is  in  the  initial 
stages of implementation. Most requests come from the media, but no statistics are being kept. 
The  Independent  Oversight  Board  is  directly  accountable  to  the  assembly.  It  deals  with 
complaints  from  civil  servants  and  monitors  implementation  of  the  civil  service  legislation. 
The Board has organised outreach activities in municipalities on the civil service laws adopted 
in 2010. Its effectiveness is limited since most of its decisions are not executed by the relevant 
public institutions. Furthermore, some of its responsibilities overlap with those of the Ministry 
of Public Administration. 

The Ombudsperson of Kosovo remains a weak institution, due to the lack of political support 
to ensure its proper functioning and financial independence. The recommendations made by 

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the Ombudsperson require the support of the Office of the Prime Minister in order to ensure 
that  they  are  implemented.  Recruitment  of  the  deputies  of  the  Ombudsperson  has  still  not 
been  completed.  In  June  2011,  the  Ombudsperson  presented  a  special  report  to  the  Kosovo 
Assembly. The report identifies insufficient human and financial resources as well as the lack 
of  adequate  work  premises  in  Pristina  and  other  municipalities  as  key  challenges.  The 
assembly and government need to address this situation urgently.  

During  2010,  the  Ombudsperson  received  a  total  of  1,233  visits  from  individuals  who  were 
seeking advice and help. By 1 September 2011, the Ombudsperson institution received about 
1,000  complaints.  The  Ombudsperson  needs  to  improve  communication  with  the  public  on 
the results of his work.  

External audit also needs to be further developed, since it serves as a driver for improving the 
public administration and ensuring accountability. In addition to the internal audit offices in 
the  ministries,  there  is  the  Office  of  the  Auditor  General,  which  responds  directly  to  the 
Assembly  and  whose  mandate  and  duties  are  defined  by  the  Constitution  and  by  a  law.  By 
September  2011,  the  Office  had  124  positions,  which  all  were  filled.  With  regard  to  e-
government,  lack  of  coordination  has  led  to  the  situation  that  different  branches  of  the 
administration are not connected and that only limited e-government services are provided to 
citizens.  

Overall,  there  has  been  limited  progress  on  public  administration  reform.  Some  laws  and 
regulations  have  been  adopted.  Efforts  to  implement  the  strategies  and  legislation  adopted 
need  to  be  stepped  up.  Furthermore,  the  skills  of  the  civil  service  need  to  be  significantly 
improved.  Kosovo  needs  to  build  a  professional  public  administration  free  of  political 
interference.  This  is  a  key  European  Partnership  priority  and  needs  to  be  a  high  political 
priority.  Strengthening  the  capacity  of  institutions  in  charge  of  public  administration  on  the 
one  hand  and  of  independent  institutions  on  the  other,  notably  the  Ombudsperson,  is  of  the 
utmost importance. 

Civilian oversight of the security forces 

There has been limited progress in civilian oversight of the security forces. Kosovo still needs 
to implement the legislation on classification of information and security clearance. Scrutiny 
of  the  security  service  and  of  the  Kosovo  Security  Force  by  the  relevant  committees  in  the 
assembly needs to be improved. Furthermore, the main political parties in Kosovo continue to 
operate their own security networks.  

Judicial system 

Kosovo  has  made  progress  in  the  judicial  sector.  The  Constitutional  Court  has  issued  a 
number  of  key  decisions,  which  made  a  significant  impact.  Institutions  ensured  that  these 
judgments  were  followed.  In  September,  the  Constitutional  Court  ruled  on  the  issue  of 
functional  immunity  of  the  deputies  of  the  assembly,  the  president  and  the  members  of 
government. Besides confirming that none are immune for actions taken and decisions made 
outside  the  scope  of  their  responsibility,  the  decision  also  sets  out  in  which  cases  and 
circumstances arrests or detention may or may not occur.  

Kosovo  authorities  have  continued  implementing  the  adopted  judicial  reform  legislation, 
notably the laws on the Judicial and Prosecutorial Councils, on courts and on prosecution. The 
annual  budget  for  the  judiciary  is  about  € 17  million  for  2011.  In  2010  it  was  about  € 14 

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million, which is estimated at 0.34% of 2010 GDP. Kosovo adopted a law on civil aspects of 
international child abductions in October 2010 and the law on witness protection in July. The 
law on criminal liability of legal persons for criminal offences, the law on international legal 
cooperation in criminal matters, extradition and transfer of sentenced persons, and the law on 
the  Special  Chamber  of  the  Supreme  Court  were  all  adopted  at  the  end  of  August. 
Implementation  of  the  law  on  the  Special  Chamber  of  the  Supreme  Court  presents 
considerable challenges in view of the shortage of qualified local judges. The law also limits 
the  role  of  EULEX  in  the  Chamber,  which  is  an  issue  of  concern,  given  the  fact  that  the 
mission's strong involvement decreases potential for controversies over Chamber's decisions. 

With  the  aim  of  implementing  the  law  on  mediation,  the  mediation  committee  certified  74 
mediators, out of which 50 have been submitted to the Ministry of Justice in order to obtain 
the license. They received training and pilot mediation centres were opened in Gjilan/Gnjilane 
and Pejë/Peć with donor support. Implementation of the notary law has started. Further efforts 
are needed to establish fully functional notary system. 

The department responsible for international legal cooperation within the Ministry of Justice 
has  continued  to  exercise  its  duties  in  a  professional  and  efficient  manner.  Its  capacity  has 
been  strengthened.  In  2011,  bilateral  agreements  on  legal  cooperation  in  criminal  matters, 
extradition and transfer of sentenced persons were signed with the former Yugoslav Republic 
of Macedonia and Turkey. Other bilateral agreements are being negotiated. Beyond this legal 
framework,  international  legal  cooperation  based  on  reciprocity  is  taking  place  with  many 
other countries. The Kosovo Ministry of Justice acts on requests for mutual legal assistance 
received from non-recognising countries, either directly or via UNMIK or EULEX. UNMIK 
remains the formal point of contact with Interpol and the ICTY. Direct mutual legal assistance 
between  Serbia  and  Kosovo  is  non-functional.  On  12  August,  a  technical  arrangement  on 
mutual legal assistance was signed between the Ministry of Justice and EULEX, under which 
EULEX assumes the role of an intermediate between the Ministry of Justice and states, which 
did  not  recognise  Kosovo,  and  will  facilitate  the  processing  of  requests  for  mutual  legal 
assistance from those countries.  

Salaries for judges and prosecutors have been increased, as provided for in the relevant laws, 
further strengthening the independence of judges. The Kosovo Judicial Council has started to 
address  shortcomings  within  the  judiciary.  The  Council  adopted  an  action  plan  for  the 
implementation of the law on courts. It adopted a strategy to reduce the backlog of cases in 
October 2010 and started implementing it on 1 January 2011. By the end of July, the backlog 
(which was set by the strategy at 161,273 on reference date 31 December 2008) was reduced 
by  around  26%  to  a  total  of  around  119,000  cases.  The  total  number  of  pending  cases  was 
211,588  cases  (of  which  111,704  backlog  cases  in  the  regular  courts  -  76,030  of  those  are 
execution cases for non-payment of utilities), whereas the minor offences courts have 99,031 
pending cases (7,284 of which are backlog cases). A specialised enforcement unit was set up 
for  civil  enforcement  cases,  with  offices  in five  courts.  Around  30  enforcement  clerks  were 
hired.  

The Director of the Council's secretariat was appointed and has taken major steps to improve 
the  functioning  of  the  secretariat.  The  Council  assumed  full  responsibility  for  recruiting, 
vetting and selecting candidates for judicial positions and established an office for judicial and 
prosecutorial assessment and vetting for supporting the selection process. The office needs to 
play  an  important  role  in  ensuring  accountability  of  judiciary.  Of  a  total  of  399  judges 
foreseen  for  Kosovo  courts,  244  positions  were  filled  and  the  Council  published  vacancy 
notices  for  another  112  posts  open.  The  distribution  of  the  remaining  43  positions  will  be 

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done  based  on  the  new  law  on  courts,  which  restructures  the  court  system  in  Kosovo.  The 
number  of  applications  for  reappointment  from  members  of  minorities  has  continued  to  be 
lower than needed to fill all the posts. As part of the reappointment process, three judges (out 
of  a  total  of  seven)  were  appointed  to  the  Special  Chamber  of  the  Supreme  Court  and  one 
judge was appointed to the appeal panel of the Special Chamber. On 11 August, four Kosovo 
Albanians and one Kosovo Serb were appointed by the Kosovo President as Supreme Court 
judges. This brings the total number of judges at the Supreme Court to 16. 

The Council has also organised training for court officials on implementation of the manual 
on  court  management  and  on  case  management  information  system.  It  also  appointed  the 
disciplinary panel in February, but still needs to appoint the other committees indicated in the 
law  on  the  Judicial  Council.  Some  disciplinary  proceedings  against  judges  or  prosecutors 
were  reported,  but  none  of  them  resulted  in  dismissal.  The  Judicial  Council  has  not  yet 
reached its full composition. The Council adopted rules for the election of members by their 
peers  to  fill  the  positions  vacated  by  the  prosecutors  who  are  now  members  of  the  Kosovo 
Prosecutorial Council and organised the election process. Two judges from the first instance 
level  were  elected.  The  Assembly  still  needs  to  appoint  three  members  of  the  Council, 
including two judges from minority communities.  

The  law  on  the  Kosovo  Prosecutorial  Council  entered  into  force  on  1  January.  All  nine 
members of the Prosecutorial Council were appointed and the Council has started working. It 
took over certain responsibilities from the Ministry of Justice and the Kosovo Judicial Council 
and  its  two  key  bodies  are  now  in  operation:  the  disciplinary  committee  and  the  panel  for 
recruiting  new  prosecutors  to  fill  the  45  vacancies.  Some  administrative  and  organisational 
regulations  were  approved  by  the  Council  and  the  recruitment  process  is  ongoing.  The 
Council  assigned  special  prosecutors  to  deal  with  organised  crime,  economic  crime, 
corruption  and  trafficking  of  human  beings  in  all  district  courts  and  municipal  courts.  It  is 
important that cooperation between prosecutors and the police continues to improve, notably 
in the fight against organised crime, for which the Council needs to develop its prosecutorial 
policy and strategy in line with the law.  

Progress  has  been  made  on  adjudicating  cases  pending  after  the  March  2004  riots.  The 
criminal  procedures  were  finalised  at  first  instance;  the  majority  of  the  civil  cases  are 
considered inadmissible. 

The judicial system remains weak and efficiency needs to be enhanced. Implementation of the 
manual  on  court  management  is  at  an  early  stage.  Data  and  case  management  is  still  weak. 
There are still reports of threats and intimidation against judges, especially in sensitive cases 
such  as  on  property  rights.  This  is  a  serious  concern  as  regards  impartiality  of  judiciary. 
Appropriate security and protection measures therefore need to be taken to provide judges and 
court  staff  with  a  secure  working  environment  and  effective  safeguards  against  threats  or 
intimidation. Political interference in the work of the judiciary is still a concern. 

Rule of law continues to be a cause for concern in northern Kosovo. The Mitrovicë/Mitrovica 
court  still  consists  solely  of  EULEX  judges  and  prosecutors  and  is  operating  with  limited 
capacity.  This  limits  access  to  justice  and  undermines  rule  of  law.  Forty-two  criminal  cases 
have been adjudicated, but civil cases are not being processed. Civil cases have been pending 
for more than three years since the normal activities of the court were halted in March 2008, 
raising concerns about the right to a trial within reasonable time. Currently, no municipal or 
minor offence courts are functioning in northern Kosovo, apart from the Mitrovicë/Mitrovica 
court staffed by EULEX. 

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There  are  serious  concerns  about  transparency  when  it  comes  to  implementing  the  law  on 
pardons. The acting President (partially) pardoned 103 prisoners in February 2011 (compared 
to 62 in February 2010). Many of them were serving sentences for serious crimes.  

Overall, Kosovo has made progress in this area. The Constitutional Court has made a number 
of  key  judgments.  The  Judicial  Council  has  started  addressing  key  priorities  and  the 
Prosecutorial Council has started operating. The successful completion of the reappointment 
process  has  increased  self-confidence  among  the  local  judiciary.  The  judicial  system  is  still 
weak.  Interference  in  the  workings  of  justice  persists,  endangering  its  independence  and 
impartiality. Improvements are needed in the efficiency of court proceedings and enforcement 
of decisions. 

Anti-corruption policy 

Kosovo  has  made  some  progress  on  tackling  corruption.  The  implementation  of  the  anti-
corruption  strategy  is  monitored  by  an  Anti-Corruption  Agency.  The  Agency  is  also  the 
responsible  authority  to  monitor  the  implementation  of  the  law  on  preventing  conflicts  of 
interest in exercising public functions, which was amended in August. The law on declaration, 
origin and control of property of senior public officials and on declaration, origin and control 
of  gifts  of  all  public  officials,  the  law  on  protection  of  informants  (whistleblowers)  and  the 
law  on  public  procurement  were  also  adopted  at  the  end  of  August.  An  anti-corruption 
coordinator  was  appointed  within  the  Office  of  the  State  Prosecutor  and  one  prosecutor  per 
district  prosecution  office  was  assigned  to  corruption  cases.  Steps  have  been  taken  to 
strengthen the Kosovo anti-corruption task force and to ensure that seconded police officers 
and appointed experts will be able to contribute effectively. Similar steps have been taken to 
improve  cooperation  between  prosecutors.  A  mixed  panel  of  local  and  EULEX  judges  has 
convicted  senior  officials  and  politicians.  The  indictment  against  officials  of  the  customs 
department was dismissed on legal grounds by a pre-trial EULEX judge of the Pristina court. 
The prosecution has appealed against this decision. 

The increase in the salaries of judges and the completion of the reappointment process were 
positive  steps  to  prevent  corruption  in  judiciary.  The  2011  campaign  on  the  declaration  of 
assets  led  to  an  increase  in  the  number  of  declarations  by  officials.  96%  (1830)  of  officials 
made declarations, which were published online. Cases have been initiated against 84 persons 
who did not disclose their assets. The Anti-corruption Agency has stepped up its awareness-
raising  activities,  by  means  of  campaigns  and  targeted  training.  The  Agency  has  sufficient 
capacity to perform its tasks. Law enforcement agencies have strengthened their disciplinary 
structures. 

There have been some convictions on corruption-related cases. Since January 2009, a total of 
thirty verdicts have been issued by mixed panels of EULEX judges and Kosovo judges, thirty 
defendants were found guilty, nine were acquitted. On other corruption cases, 216 cases are 
inherited from previous years and 92 were reported in the period October 2010 – July 2011. 
75  cases  have  been  resolved  at  first  level  instance  (40  of  which  with  a  condemnatory 
judgement) in this period. 

Kosovo  continues  to  face  significant  challenges  in  fighting  corruption.  The  adopted 
legislation now needs to be fully implemented. The capacity to investigate this type of crime, 
and the level of expertise, remains limited. Law enforcement and judicial authorities need to 
be more pro-active in this area. Cooperation between the Anti-Corruption Agency, the police 
and  the  prosecution  needs  to  be  further  improved.  Declarations  of  assets  by  public  officials 

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continue to show discrepancies between the assets declared and actual revenue. Most political 
parties  did  not  fully  comply  with  their  reporting  obligations  to  the  office  for  political  party 
registration. Furthermore, necessary amendments to the law on financing of political parties 
have not yet been adopted. Breaches of procurement rules continue to be an issue of concern 
in  the  context  of  corruption.  Citizens  regularly  encounter  corruption  in  police,  customs  and 
court services. Major efforts are needed to fight the widespread corruption in education and 
health care. 

Overall, some progress has been achieved in the fight against corruption, notably by starting 
to tackle some of the corruption cases and improving the legislative framework. Structures in 
place  to  deal  with  corruption  have  also  improved.  The  legislative  framework  is  still  not 
complete.  There  is  a  need  to  tackle  this  challenge  more  proactively,  in  particular  by  law 
enforcement  and  judiciary.  This  needs  to  done  within  their  own  ranks  as  well.  Corruption 
remains  prevalent  in  many  areas  and  continues  to  be  a  very  serious  concern.  It  also  affects 
access by citizens to public services.  

2.2. 

Human rights and the protection of minorities  

Observance of international human rights law 

Kosovo is a member of neither the UN nor the Council of Europe. Consequently, it is not in a 
position  to  ratify  the  relevant  international  human  rights  instruments.  Kosovo  is  not 
subject  to  the  frameworks  set  up  by  these  international  bodies  for  regular  reporting  and 
cooperation on human rights (including the  European Court  of  Human Rights). Kosovo's 
Constitution  contains  strong  provisions  to  secure  international  standards  on  human  rights. 
Alongside a catalogue of rights, the Constitution makes the operative provisions of numerous 
international human rights instruments binding within  the  legal  order  of  Kosovo.  Kosovo  is 
aiming  to  engage  with  European  and  international  monitoring  bodies  beyond  the  ongoing 
informal communication.  

During  the  reporting  period,  the  government  submitted  a  report  to  the  Committee  on  the 
Rights  of  the  Child.  This  cooperation  with  ad  hoc  arrangements  for  reporting  to  the  UN 
Treaty  bodies  is  a  positive  step.  It  made  it  possible  for  Kosovo  to  provide  a  report  on 
implementation of the Convention for the Elimination of all Forms of Discrimination against 
Women. 

Promotion and enforcement of human rights remain a major challenge. Training has been 
organised to build up the capacity of the human rights units. The enforceability of legal and 
administrative  remedies  for  human  rights  infringements  needs  to  be  improved  at  all  levels. 
The range of institutions and bodies dealing with human rights at central and municipal levels 
is  too  dispersed  and  at  times  overlapping.  Communication  and  coordination  between  the 
different institutions and bodies dealing with human rights at central and local levels and with 
the Ombudsperson are weak. These bodies need to be streamlined and their mandate clarified 
in order to make better use of their limited expertise and resources. 

Overall, this area remains a major challenge. The institutional set-up promoting and enforcing 
human  rights  needs  to  be  simplified.  Appropriate  resources  need  to  be  allocated.  Efforts  to 
enhance  monitoring  and  reporting  mechanisms  need  to  be  stepped  up  and  to  focus  on 
improving  the  enforcement  of  existing  legislation  and  policies.  Ensuring  full  respect  for 
human rights is a key European Partnership priority. 

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Civil and political rights 

The government needs to continue its efforts to address torture and ill-treatment, including 
the fight against impunity. The number of reported cases involving police and prison staff has 
decreased.  EULEX  is  monitoring  and  following  allegations  of  possible  ill-treatment  at 
Dubravë/Dubrava  prison  and  working  closely  with  the  Kosovo  Correctional  Service 
intervention team.  

Overall, further efforts are needed to prevent torture, ill-treatment and impunity. 

Kosovo  has  achieved  some  progress  as  regards  the  prison  system.  Living  conditions  in 
Kosovo's  detention  facilities  have  improved.  The  first  steps  have  been  taken  to  establish  a 
sustainable mechanism for monitoring local detention in order to coordinate the efforts of the 
various  local  organisations  and  institutions  monitoring  detention.  A  cooperation  agreement 
between  the  Ombudsperson,  the  Kosovo  Rehabilitation  Centre  for  Torture  Victims  and  the 
Council  of  Defence  of  Human  Rights  and  Freedoms  aimed  at  setting  up  such  a  mechanism 
entered  into  force  in  May.  The  Kosovo  Correctional  Service  has  introduced  a  methadone 
treatment  programme,  which  has  improved  the  situation  of  drug  addicts  among  the  prison 
population. 

Some  outstanding  issues  need  to  be  addressed.  Only  a  small  number  of  the  approximately 
thirty  sublegal  acts  to  implement  the  law  on  execution  of  penal  sanctions  have  entered  into 
force. Due to the lack of space in pre-trial detention centres and the increase in the number of 
detainees (from 369 in August 2010 to 545 in June 2011), the Kosovo Correctional Service 
transferred  some  detainees  to  Dubravë/Dubrava  prison,  where  they  are  housed  in  a  separate 
block  from  sentenced  prisoners.  The  Correctional  Service  continues  to  face  difficulties 
securing  funds  for  refurbishment.  Construction  of  the  high-security  prison  needs  to  be 
finalised as soon as possible. Cooperation with the Mitrovicë/Mitrovica detention centre and 
the headquarters has improved and is now satisfactory. This facility is not suitable for long-
term prisoners.  

Currently, the Correctional Service has no electronic information system that can record and 
provide  reliable  date  on  the  prison  population.  This  makes  it  impossible  to  plan  effective 
social reintegration programmes. Corruption within the prison system needs to be addressed. 

Overall,  some  progress  can  be  reported  in  relation  to  correctional  services.  Kosovo  is 
continuing to address its objectives in this area. 

In  the  case  of  access  to  justice,  there  has  been  limited  progress.  Mechanisms  for  assisting 
victims of trafficking and domestic violence exist. Legal aid offices have also been opened. 
Court liaison offices are in operation across the regions, but their funding and resources need 
to  be  fully  ensured.  Major  challenges  such  as  the  backlog  of  cases  persist.  The 
Mitrovicë/Mitrovica court continues to function with limited capacity under EULEX. Access 
to justice for victims of trafficking, both children and women, needs to be improved. Further 
efforts are needed to ensure legal aid in Kosovo, including adopting the appropriate law. 

Overall,  Kosovo  has  made  limited  progress  in  this  area.  A  number  of  obstacles  still  limit 
access to justice. Kosovo is at an early stage of ensuring such an access. 

As  regards  freedom  of  expression,  limited  progress  can  be  reported.  The  transparency  of 
media ownership is guaranteed by a law and the law is properly enforced. The Independent 

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Media  Commission  delivered  the  media  monitoring  of  the  election  campaign  for  the  first 
time. The ministerial human rights units have received training on the law on access to public 
documents.  Enforcement  of  this  law  requires  that  the  roles  and  responsibilities  of  the 
ministries involved be clarified. 

Five  media  professionals  and  one  mayor  were  indicted  for  alleged  threats  and  defamatory 
comments  towards  an  independent  investigative  journalist.  Journalists  continue  to  face 
political  pressure  and  intimidation,  which  is  threatening  the  still  fragile  investigative 
journalism. The amendment to the Criminal Code putting an end to defamation as a criminal 
offence  still  needs  to  be  adopted.  The  professional  standards  in  journalism  need  to  be 
enhanced. 

Efforts to draft new laws on the Independent Media Commission and the public broadcaster 
RTK  have  contributed  to  increased  awareness  on  European  standards.  The  editorial 
independence  of  the  public  broadcaster  RTK  is  not  guaranteed.  RTK  also  lacks  sustainable 
the  RTK's 
financing.  The  current  budget-only  funding  has  severely  undermined 
independence. Other media depend heavily on financing from the public sector and publicly-
owned companies. The assembly still needs to appoint its members to the Independent Media 
Commission. Legislation guarantees sufficient time for minority programmes on the RTK, but 
this is not observed in practice.  

Overall,  Kosovo  continues  to  face  considerable  challenges  in  this  area,  including  political 
interference. 

Freedom  of  assembly  and  association  continues  to  be  exercised  in  Kosovo.  Various 
demonstrations took place in Kosovo. The newly-amended law on freedom of association in 
NGOs ensures that their right to association is not hindered. With regard to the development 
of  civil  society  organisations,  little  progress  can  be  reported.  The  President  of  Kosovo  has 
invited several representatives of civil society to advise her. The institutions need to find ways 
to ensure more structured cooperation with civil society. Public understanding of the role of 
civil  society  remains  low.  It  is  a  concern  that  civil  society  is  subject  to  undue  political 
pressure and intimidation if its activities do not correspond to the views of authorities. 

Overall, there has been a mixed progress on efforts to fully guarantee freedom of assembly 
and  association.  The  environment  in  which  NGOs  operate  needs  to  be  improved.  The 
government,  the  assembly  and  municipalities  need  to  cooperate  more  effectively  with  civil 
society. 

In relation to  freedom of thought, conscience and religion,  there  has  been  some  progress. 
Kosovo  police  has  continued  taking  over  responsibility  from  KFOR  for  guarding  historical 
and  religious  sites,  including  Serbian  Orthodox  ones.  Only  three  sites  remain  under  KFOR 
protection. Kosovo furthered its renovation activities of Serbian Orthodox sites in cooperation 
with relevant participants from the Serbian Orthodox Church and from the Serbian authorities. 
The Orthodox seminary restarted its activities in its historical premises in Prizren. Kosovo has 
launched consultations on the amendments to the law on freedom of religion notably to put an 
end  to  the  current  requirement  for  all  religious  communities  to  register  as  NGOs. 
Demonstrations on religious ground took place peacefully in Pristina. Religious leaders have 
participated jointly in some religious events. The construction of the catholic cathedral in the 
centre  of  Pristina  is  ongoing.  Students  took  action  to  clean  the  Jewish  cemetery  in  Pristina. 
However,  a  number  of  religious  heritage  sites  have  been  vandalised,  including  Serbian 

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Orthodox churches and Orthodox and Muslim cemeteries. The mechanisms for reporting and 
following up such activities need to be improved.  

Overall, there has been a mixed progress on freedom of thought, conscience and religion, the 
transfer of responsibility for protecting religious and cultural sites to the police has continued 
smoothly. Tolerance towards religions remains fragile. Lack of respect towards symbolic sites 
and believers, irrespective of religion, persists. 

Economic and social rights (see also Chapter 4.1.8 – Social policies, employment and public 
health) 

In  the  areas  of  women's  rights  and  gender  equality,  some  progress  can  be  reported.  The 
position  of  women  in  politics  has  improved  with  the  election  of  Ms  Atifete  Jahjaga  as  the 
Kosovo President and the appointment of three women as Deputy Prime Ministers, including 
the  negotiator  in  the  Belgrade/Pristina  dialogue  and  the  Minister  for  European  Integration. 
The  labour  law  extended  the  right  to  maternity  leave.  In  implementing  this  law,  attention 
needs to be paid to the vulnerability of women in the labour market. Implementation  of the 
law for the protection against domestic violence has continued. To this end, the Agency for 
Gender Equality and the Kosovo Judicial Institute have provided training to legal staff on the 
protection from domestic violence. A public debate on this issue was held in Gjilan/Gnjilane. 
Leaflets  were  also  published.  The  Ministry  for  the  Kosovo  Security  Force  established  a 
human  rights  unit,  which  also  deals  with  gender  equality  and  hired  three  officers.  At 
municipal level, trainings have been provided and capacity enhanced.  

Domestic  and  gender-based  violence  continues  to  be  a  challenge  in  Kosovo.  The  relevant 
legislation needs to be implemented and monitored. Services for victims of domestic violence 
and trafficking are partially funded by the government but remain heavily dependent on donor 
funding. The long-term reintegration of victims, including their economic stability and access 
to justice, needs to be provided. Positive measures need to be enforced to empower women as 
victims of trafficking and domestic violence. High drop-out rates amongst girls and the under-
representation of women on the labour market, including in the public sector, require concrete 
action by authorities. The Agency for Gender Equality has continued facilitating, promoting 
and monitoring implementation of the Gender Equality Programme (2008-2013).  

Overall, some progress can be reported in women's rights. The relevant institutions need to be 
strengthened and the budget increased in order for the legislation to be implemented fully. 

Protection of children's rights has improved with the implementation of the juvenile justice 
code  and  its  monitoring  process.  In  March,  the  annual  report  on  children's  rights  was 
published. The Council for Child Protection and Justice for Children was established. It needs 
to  focus  on  implementing  the  strategy  and  action  plan  for  children's  rights  for  2009-2013. 
Kosovo opened learning centres in a handful of municipalities to fight against drop-out among 
the Roma, Ashkali and Egyptians. These efforts need to continue. 

The  social  assistance  scheme  is  being  revised  based  on  necessary  consultations  and  taking 
account of budgetary constraints. Child protection remains weak and the child poverty rate is 
over  48%.  Children  are  at  greater  risk  of  poverty  than  the  general  population,  in  particular 
among the Roma, Ashkali and Egyptian communities. Poor maternal care and child nutrition 
and healthcare are additional challenges reflected in the high level of child mortality. Forced 
begging  by  children  continues  to  be  widespread.  Kosovo  needs  to  strengthen  its  child 
protection system.  

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Overall, child protection remains weak. Mechanisms and processes need to be developed to 
enforce  children's  rights.  Child  protection  needs  to  benefit  from  a  functional  multi-sectoral 
approach. 

Limited  progress  has  been  achieved  on  socially  vulnerable  persons  and/or  persons  with 
disabilities.  Training  sessions  in  this  area  enhanced  the  administrative  capacity  and  need  to 
continue. The Council for Persons with Disabilities was established to coordinate enforcement 
of  legislation.  The  first  report  on  the  implementation  of  the  action  plan  for  people  with 
disabilities  (2009-2011)  was  published.  This  plan  and  the  law  on  vocational  training  and 
employment for people with disabilities need to be better enforced, and their implementation 
monitored. Adequate actions at municipal level are also required.  

Overall, more efforts are needed to improve the daily life of socially vulnerable groups and 
persons with disabilities. 

The government has continued to carry out a few awareness-raising campaigns on the anti-
discrimination law. The low level of confidence in the courts is discouraging for the victims 
of discrimination. More efforts are needed to combat all forms of discrimination, which is a 
major issue of concern. Enforcing the relevant legislation, in particular the anti-discrimination 
law,  remains  imperative.  Monitoring  the  implementation  of  legislation  in  this  area  is  still 
insufficient.  

The  Constitution  prohibits  discrimination  on  the  basis  of  sexual  orientation.  The  anti-
discrimination law also provides a high degree of protection for the lesbian, gay, bisexual and 
transgender (LGBT) community. Practical enforcement of the legislation remains a challenge. 
There is still a lack of awareness on LGBT issues, which are not discussed openly. There is 
limited knowledge and understanding on the part of law enforcement officers about the rights 
of  this  community.  Socially-accepted  lack  of  tolerance  towards  individuals  identifying 
themselves as having a different sexual orientation requires more political commitment. The 
members of the LGBT community face threats or the risk of violence.  

Overall,  more  efforts  are  needed  to  raise  general  awareness  about  anti-discrimination 
measures and to implement the existing legislation. 

In the area of labour and trade union rights, some progress has been achieved. The law on 
labour was adopted in November 2010. This improves working conditions notably in terms of 
work-contracts. It also introduces paid maternity-leave up to 9 months. The Socio-Economic 
Council  became  operational  and  the  law  on  the  Socio-Economic  Council  was  adopted 
regulating its organisation, mandate, and actions. Labour inspectorates were reorganised, but 
they lack the necessary capacity to monitor labour conditions throughout Kosovo. The law on 
trade-unions was adopted clarifying the employees' rights to establish and participate in trade 
unions. There are concerns as to the alignment of the law on strikes with the European Charter 
for Fundamental Rights and international standards.  

Overall,  labour  and  trade  union  rights  are  largely  guaranteed.  The  implementation  of  the 
existing legislation will be crucial to make changes tangible.  

As regards property rights, there has been a mixed progress. A range of laws were adopted 
improving the legal framework (law on cadastre, amendments to the law on the establishment 
of the immovable property rights register, the law on taxes on immovable property, the law on 
allocation  for  use  and  exchange  of  immovable  property  of  municipalities,  and  the  law 

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amending  the  law  on  expropriation).  The  municipality  of  Pristina  adopted  a  regulation  to 
initiate  the  process  for  legalisation  of  illegal  constructions.  The  local  judge  of  the  Supreme 
Court panel for appeals against contested Property Agency decisions was appointed, making 
the  panel  operational.  The  government  appointed  its  property  rights'  coordinator  to  improve 
enforcement  of  law  in  this  area.  The  Kosovo  Cadastral  Agency  has  launched  a  project  to 
register apartments in the major cities of Kosovo. All municipal land registry offices are now 
connected  to  the  central  Kosovo  Cadastral  Agency  and  records  are  available  both  centrally 
and  in  the  municipal  offices.  Out  of  the  41,222  claims  recorded  by  the  Kosovo  Property 
Agency, 30,649 have been adjudicated by the Kosovo Property Claims Commission. 18,365 
adjudicated  claims  which  were  overturned  due  to  incorrect  physical  notification  during  the 
period  2006  to  2009  have  been  re-notified.  UNHCR  offices  in  Serbia  operate  as  the  liaison 
office for the Kosovo Property Agency.  

The  number  of  valid  Property  Claims  Commission  decisions  stands  at  17,076,  of  which 
11,712  were  delivered  to  successful  claimants.  Of  4,526  requests  received,  3,133  were 
implemented,  1,069  by  repossession,  and  1,268  were  placed  under  the  administration  of  the 
Property  Agency.  Implementation  of  eviction  orders  and  property  administration  in  the 
northern  part  of  Mitrovicë/Mitrovica  remains  a  challenge.  The  funding  of  the  Property 
Agency remains unsustainable. Approximately 21,000 property compensation claims remain 
unresolved  before  the  courts.  Second-instance  courts  often  send  property  cases  back  to  the 
first-instance court for a re-trial. This is due to irregularities either in the judgment or in the 
proceedings,  and  leads  to  a  repeat  of  trials.  Inter-ethnic  property  disputes  are  unduly 
prolonged  before  the  local  courts.  There  is  no  compensation  scheme  for  socially-owned 
apartments.  The  law  on  sales  of  apartments  where  occupancy  rights  exist  has  still  not  been 
adopted.  The  lack  of  a strategy  to  regularise  informal  settlements  remains  a  concern.  While 
the  expropriation  procedures  are  applied  satisfactorily  and  property  owners  compensated, 
proper  consultation  and  notification  of  the  displaced  owners  by  the  authorities  are  not 
adequately carried out. This leads to additional backlog of cases in the courts. 

Overall, the weak implementation of the property-related legislation is the major obstacle to 
protecting and enforcing property rights. 

Respect for and protection of minorities, cultural rights 

There has been some progress in the respect for and protection of minorities. Decentralisation 
and  support  for  the  newly-founded  Serb-majority  municipalities  are  positive  developments. 
This process needs greater attention and political will to solve outstanding issues, such as land 
management. The work of the Communities Consultative Council has continued. Its members 
have  contributed  to  the  review  of  government  activities  and  policies  affecting  communities, 
especially via its working groups on education and on issues concerning the Roma, Ashkali 
and Egyptian communities. During the reporting period, a Kosovo Croat was appointed to the 
Council, thus making the forum more representative. The Council is increasingly consulted by 
executive bodies. The number of incidents affecting the minority population has increased as 
a consequence of events that triggered tensions between Kosovo and Serbia. 

Limited progress can be reported on access to education for minority communities. The newly 
adopted  laws  on  pre-university  education  and  higher  education  contain  provisions  as  to  the 
representation  of  non-Albanian  communities  in  educational  councils  and  authorities 
regulating  and  supervising  the  education  system.  The  new  law  on  higher  education 
incorporates  all  higher  education  providers  including  the  Serbian-speaking  university. 
Finalising  the  new  framework  curricula  was  the  pre-condition  for  drafting  the  curricula  in 

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Serbian and other languages of communities. It is now in place and the drafting of the subject 
curricula  needs  to  begin.  Registration  of  Roma  pupils  has  slightly  increased.  The  Roma 
language curriculum was published as an elective course in three languages (Albanian, Roma 
and Serbian).  

Many  school  textbooks  are  still  not  available  in  the  mother-tongue  of  the  Turkish,  Bosniak 
and  Roma  communities.  Moreover,  there  is  still  no  Serbian  curriculum  made  available  by 
Kosovo, nor is Serbian available as the second official language in any of the public schools 
outside  of  the  areas  predominantly  inhabited  by  Serbs.  In  many  cases,  access  to  secondary 
mother-tongue education for the Turkish and Bosniak communities is hindered by the lack of 
curricula  translated  into  their  own  language  or  the  low  quality  of  textbook  translations. 
Training  for  teachers  teaching  in  the  languages  of  communities  needs  to  be  enhanced,  in 
particular regarding new curricula.  

The  teaching  staff  of  Serbia-supported  schools  has  started  to  sign  contracts  with  Kosovo 
municipal  education  directorates.  Gorani  teachers  have  not  signed  any  contracts  with  the 
municipality  of  Dragash/Dragaš  and  have  therefore  been  prevented  from  using  the  Kosovo-
administered school premises. 

There has been little progress on the use of languages. The legal framework generally meets 
international standards on linguistic rights. The Language Commission has started receiving 
complaints. Newly-established municipalities have adopted regulations on the use of official 
languages.  The  implementation  of  the  law  on  the  use  of  official  languages  remains 
inadequate.  The  lack  of  sufficient  human  and  financial  resources  jeopardises  access  to 
multilingual public services and also effective participation in public life. The impact of the 
Language Commission is very limited due to the lack of human resources and the complicated 
institutional structures dealing with fundamental rights. 

International support has improved the position of minority media, especially in Serbian. The 
Serbian  television  producers  have  launched  the  "TV  Mreža"  network  linking  four  Serbian-
language television stations around Kosovo and covering 80% of the Kosovo Serb population. 
The Kosovo Media Association radio network in Serbian broadcasts throughout Kosovo.  

The public broadcaster (RTK) has allotted times below the legal provisions for programmes in 
the  Serbian,  Roma,  Bosnian,  Gorani  and  Turkish  languages.  The  plan  to  establish  a  second 
public channel to broadcast in Serbian or any non-Albanian languages has not been finalised. 
The Fund for the Support of Media of Minority, Multi-ethnic and Other Special Groups has 
not  been  operational  since  collection  of  the  public  broadcasting  fee  for  the  RTK  was 
suspended by a court decision in October 2009. As a result, the 5% of the total fee collected 
earmarked for the fund is not available.  

Overall,  limited  progress  has  been  achieved  regarding  access  to  education  for  minority 
communities.  The  main  challenge  remains  the  lack  of  curricula  and  textbooks  in  minority 
languages.  Teachers  also  need  more  training  where  such  new  curricula  exist.  Kosovo 
authorities need to step up their efforts in this area, notably to allocate adequate resources to 
educate  minority  communities.  Little  progress  can  be  reported  on  the  use  of  languages. 
Implementation of the legal framework is inadequate. Multilingual public services are not in 
place. The position of minority media, especially in Serbian, has improved. 

Regarding the Roma, Ashkali and Egyptian (RAE) communities, mixed progress has been 
achieved.  In  October  2010,  the  lead-contaminated  camp  at  Çesmin  Lug/Česmin  Lug  was 

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closed  and  all  the  accommodation  was  demolished.  Its  residents  along  with  other  families 
from Osterode were resettled in Roma Mahalla in south Mitrovicë/Mitrovica where municipal 
authorities  allocated  land  for  their  housing.  The  government  has  promoted  the  civil 
registration  of  these  communities,  including  by  offering  such  registration  free  of  charge.  A 
report  on  the  implementation  of  the  Strategy  for  the  Integration  of  Roma,  Ashkali  and 
Egyptian  communities  was  published.  Kosovo  participated  in  the  Roma  Decade  steering 
committee as an observer, allowing it to engage with key players on regional Roma issues.  

Osterode camp has not yet been closed because public land for its remaining residents (nine 
families) has not been allocated. Kosovo still lacks a comprehensive plan to regulate informal 
RAE settlements. The lack of civil status registration is a further serious obstacle to access to 
services.  Reintegration  of  repatriated  Roma,  Ashkali  and  Egyptians  is  a  concern.  The 
authorities need to increase their commitment to address urgent issues affecting the lives of 
the  Roma,  Ashkali  and  Egyptian  communities  notably  their  access  to  education,  healthcare, 
housing and social protection. 

Overall,  there  has  been  some  progress  on  integrating  minority  communities.  Kosovo  has 
achieved good results by closing the lead-contaminated camp of Çesmin Lug/Česmin Lug and 
increasing  civil  registration  of  the  Roma,  Ashkali  and  Egyptian  communities.  These  efforts 
need to continue to foster their socio-economic integration. 

In  the  area  of  refugees  and  internally  displaced  persons  (IDPs),  little  progress  can  be 
reported.  From  January  to  December  2010,  a  total  of  2,261  members  of  minorities  returned 
voluntarily to Kosovo, which marks the highest return rate in the last six years. The voluntary 
return process was affected by the difficult political and economical environment in the first 
semester of 2011. The budget dedicated to voluntary return was considerably reduced by the 
government.  Municipalities  face  difficulties  to  provide  social  housing  for  returnees  without 
property.  

The government needs to step up its efforts to take the lead in addressing the issue of IDPs. 
The municipalities alone are still not able to respond to the immediate and long-term needs of 
IDPs  and  returnees,  due  to  a  lack  of  funds  allocated  for  that  purpose.  There  is  an 
inconsistency  between  municipal  return  strategies  and  the  action  plan  prepared  by  the 
Ministry for Communities and Returns. 

IDPs  continue  to  face  a  number  of  risks,  particularly  lack  of  personal  identity  and  property 
documentation,  deplorable  living  conditions  and  lack  of  access  to  basic  socio-economic 
rights.  Moreover,  the  non-recognition  of  administrative  documents  between  Kosovo  and 
Serbian institutions further affects access to services and property restitution for IDPs. Attacks 
on returnees are rare. If they happen, they are not always subject to proper follow-up by the 
police and the judiciary. 

A clear strategy to tackle the caseload of IDPs is needed. In terms of the return process, the 
main  challenges  are  the  continued  and  heightened  socio-economic  problems,  education  and 
property ownership issues, lack of funding, inter-ethnic tensions in some of the areas and lack 
of commitment on the part of the institutions.  

Overall,  the  return  process  remains  a  challenge  for  Kosovo.  Limited  access  to  property, 
delayed property restitution proceedings and the scarcity of economic opportunities continue 
to  be  the  main  obstacles  to  sustainable  returns.  Many  displaced  persons  are  still  living  in 
difficult conditions. Pristina and Belgrade need to cooperate to tackle this issue. 

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Regarding the enforcement of cultural rights, limited progress can be noted. The Director of 
the Department of Cultural Heritage in the Ministry of Culture was appointed. The secretariat 
of  the  Council  for  Cultural  Heritage  became  operational.  Cooperation  between  the  relevant 
ministries  and  between  central  and  local  levels  is  slowly  improving,  but  needs  to  be 
intensified and managed in a more structured way to secure sustainable progress. The Kosovo 
Police instructed all regional police stations to tighten patrols at cultural and religious heritage 
sites. The laws on Prizren and on Hoçë e Madhe/Velika Hoča have not been adopted. 

Implementation of the legislative framework governing protection of cultural heritage remains 
weak. The comprehensive list of cultural heritage sites qualifying for protection, as provided 
for by the law on cultural heritage, has still not been adopted. As a result, many historically 
protected  items  remain  vulnerable.  This  results  in  breaches  of  the  law.  A  stronger 
commitment for cultural heritage spatial planning is needed. 

Overall, there has been limited progress on cultural rights. Kosovo has improved coordination 
and  brought  new  structures  into  operation.  Implementation  of  the  legislative  framework 
remains weak.  

2.3. 

Regional issues and international obligations 

Cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY) 
has continued. 

As  regards  missing  persons,  as  of  September  2011,  there  were  still  approximately  14,000 
people  missing  from  the  conflicts  in  the  region.  Of  these,  some  10,000  were  related  to  the 
conflict  in  Bosnia  and  Herzegovina,  2,000  to  the  conflict  in  Croatia  and  over  1,800  to  the 
conflict in Kosovo. 

Kosovo  adopted  a  law  on  missing  persons.  It  is  the  first  legal  framework  that  guarantees 
recognition of the right-to-know and right-to-reparation to the families of the missing, as well 
as the legal status of the missing persons. The Working Group on Missing Persons, a bilateral 
forum that brings together the Belgrade and Pristina delegations for dialogue and exchanges 
of information on missing persons in Kosovo, has remained the framework within which the 
Pristina  authorities  have  pursued  their  commitments.  Excavation  and  de-mining  work  has 
continued at the Zhilivoda/Žilivode and Kosharë/Košare sites, where human remains of ethnic 
Serbs  are  allegedly  buried.  Most  of  the  work  is  being  carried  out  by  the  Kosovo  Security 
Force  with  the  involvement  of  the  Government  Commission  on  Missing  Persons,  an  inter-
ministerial body. Experts from the EULEX Department on Forensic Medicine, in cooperation 
with the Kosovo Security Force, conducted site assessments at Lake Livoq/Livoc and near the 
village  of  Zhilivoda/Žilivode.  The  operation  at  Lake  Livoq/Livoc  found  no  remains  of 
missing persons. Kosovo authorities need to provide new information from their own sources 
on the alleged gravesites. 

The  unidentified  human  remains  stored  at  the  Pristina  morgue  continue  to  be  a  cause  for 
concern. The lack of a formal agreement between Kosovo and the former Yugoslav Republic 
of Macedonia is an obstacle to clarifying allegations related to unidentified human remains in 
the former Yugoslav Republic of Macedonia.  

EULEX  has  continued  investigating  war  crimes  cases.  It  has  conducted  a  number  of 
operations,  including  arrests  and  convictions  in  war  crimes  cases  involving  senior  political 
figures. In the 'Geci trial', a mixed panel of the Mitrovicë/Mitrovica district court sentenced 

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four  former  KLA  commanders  and  members  to  imprisonment  for  terms  between  seven  and 
fifteen  years  for  (amongst  others)  war  crimes  against  the  civilian  population.  In  the 
Kleçkë/Klečka case, the indictment was confirmed, charging the ten defendants with various 
counts of war crimes against the civilian population and prisoners of war in 1999. In this case, 
a  former  minister  who  is  also  a  senior  political  figure  of  the  ruling  party  was  arrested  by 
EULEX.  A  resolution  adopted  by  the  Parliamentary  Assembly  of  the  Council  of  Europe  on 
inhuman treatment of people and illicit trafficking in human organs in Kosovo raised serious 
allegations  related  to  the  conflict  of  1999.  EULEX  has  established  a  special  Brussels-based 
task force with a liaison office in Pristina to investigate these allegations. The authorities are 
cooperating  with  EULEX  in  this  investigation.  Kosovo  still  lacks  its  own  capacities  and 
political  commitment  to  investigate  war  crimes  cases  with  its  own  judicial  and  law 
enforcement authorities.  

Overall, there has been mixed progress in this area. The missing persons file requires greater 
political  commitment,  supported  by  financial  and  technical  resources  provided  by  the 
government  to  ensure  adequate  engagement.  Unless  adequately  addressed,  the  issue  will 
continue  to  fuel  resentment,  hinder  reconciliation  and  adversely  affect  the  overall  political 
climate  in  Kosovo.  The  authorities  are  cooperating  with  EULEX  in  the  investigation  of 
allegations raised in the resolution adopted by the Parliamentary Assembly of the Council of 
Europe. 

Kosovo's Constitution stipulates Kosovo's external representation. But some parties insist on 
Kosovo's participation with UNMIK presence for regional initiatives signed by UNMIK. This 
causes  challenges  to  regional  participation.  Kosovo  did  not  participate  in  the  Regional 
Cooperation  Council  (RCC)  Board  meetings  between  June  2010  and  May  2011.  It  did, 
however, participate, as part of the UNMIK/Kosovo delegation, at the RCC Annual Meeting 
in Montenegro in June 2011 and at the Board meeting of September 2011. A new coordinator 
of the RCC office was  appointed  in  May. Even though there is a streamlined  procedure for 
holders  of  Kosovo  passports  to  obtain  visas  to  attend  RCC  activities  in  Bosnia  and 
Herzegovina, the visa procedure remains cumbersome and time-consuming for other regional 
events held there.  

On 1 January, Kosovo, with UNMIK, took over as chair of the Central European Free Trade 
Agreement  (CEFTA).  During  the  reporting  period,  it  organised  four  meetings  under  its 
Presidency,  including  a  meeting  on  deputy  ministerial  level.  Within  the  Belgrade/Pristina 
dialogue an agreement has been found on the customs stamps. Goods have started flowing in 
both directions in September.  

Kosovo has continued to participate in the Energy Community Treaty, the European Common 
Aviation  Area  Agreement  and  the  South-East  Europe  Transport  Observatory.  It  is  formally 
represented  in  these  three  regional  cooperation  fora  by  UNMIK.  The  Kosovo  institutions 
attend  most  regional  and  international  meetings  for  which  UNMIK  facilitation  is  required, 
thereby enabling Kosovo to remain included in regional/international fora. 

Kosovo has continued to participate as an observer in the Investment Compact for South-East 
Europe,  which  is  designed  to  improve  the  investment  climate  and  encourage  private-sector 
development  in  the  region  through  the  implementation  of  reforms  enhancing  domestic  and 
foreign  investment.  Kosovo  has  also  continued  to  be  fully  involved  in  implementation 
projects,  such  as  the  EU-funded  Regional  Competitiveness  Initiative.  Kosovo  supports  the 
RECOM initiative on reconciliation. 

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The demarcation process with Montenegro has not progressed, notwithstanding the existence 
of a commission specifically responsible for this process. 

Overall, an agreement remains to be found on a sustainable solution for participation by both 
Kosovo  and  Serbia  in  regional  fora.  This  is  essential  for  inclusive  and  functioning  regional 
cooperation. Demarcation of the border with Montenegro needs to be finalised. 

3. 

ECONOMIC CRITERIA 

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

3.1. 

The existence of a functioning market economy 

Economic policy essentials 

As  a  consequence  of  the  political  instability  and  early  elections,  the  2011  budget  was  not 
passed by the Assembly until the end of March. In April the government adopted its medium-
term expenditure framework  (MTEF),  covering the years 2012-2014. The SDR 92.7 million 
(€ 109 million) Stand-By Arrangement (SBA), negotiated with the IMF in mid-2010, went off 
track, notably due to a significant wage increase in the government sector. A non-disbursing 
IMF Staff Monitored Programme (SMP), running until the end of 2011, was agreed upon in 
June.  The  SMP,  which  entails  conditionality,  is  an  important  test  and  attempt  to 
regain credibility in economic and fiscal policy. Overall, the determination to pursue market-
oriented economic policies has been maintained, but measures were adopted that introduced 
severe  distorsions  in  the  economy.  Designing  and  implementing  a  coherent  and  credible 
economic strategy, linking policy priorities, structural reforms and public expenditure, remain 
a major challenge. 

Macroeconomic stability 

The economic situation is challenging. The large increases in the budget deficit over the last 
two  years  have  not  managed  to  spur  economic  growth  significantly.  The  2010  national 
accounts  data  are  still  not  available,  but  external  and  fiscal  imbalances  increased,  driven  by 
another  year  of  public-sector  expansion.  Private  consumption  growth  is  likely  to  have 
remained subdued due to the almost unchanged remittances, low job creation and accelerating 
inflation. The contribution of government's final consumption to real GDP growth, although 
supported by nominally increasing public expenditure, has been constrained by a continuous 
winding-down  of  the  donors  consumption.  Government  investment  remained  buoyant,  but 
there  are  uncertainties  surrounding  private  investment  developments,  as  bank  lending  and 
foreign  capital  inflows  have  been  channelled  mainly  into  non-investment  activities  in  the 
services  sector.  Exports  of  goods  and  services  performed  impressively,  increasing  by  36%. 
Starting from a very low base, they increased their share in GDP to about a fifth. Imports of 
goods  and  services  also  increased  in  double-digits,  althought  at  a  lower  rate,  widening  the 
negative  contribution  of  net  exports  to  growth  by  about  1  percentage  point.  Economic 
statistics remained weak, hampering a comprehensive assessment of the economic situation. 

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GDP  per  capita4  is  estimated  to  have  risen  at  € 2,385  in  2010,  equal  to  9.7%  of  the  EU-27 
average (9.6% in 2009). Overall, Kosovo's economic growth remained weak and fragile. 

In 2010, led by a doubling of base metals exports, total exports of goods increased nominally 
by more than 70%. In 2011 they continued performing strongly, although their growth went 
down significantly to 19% by the end of July. Exports' share of GDP rose to 7.4%, up from 
the very low 4.5% in 2009, driven by strong foreign demand and high commodity prices. This 
positive  trend  masks  an  underlying  weakness,  as  base  metals  increased  their  share  in  total 
exports to almost two-thirds, revealing a lack of diversification and the predominance of low 
value  added  goods  in  the  exports'  structure.  Imports  of  goods  rose  by  11%  in  2010  and 
accelerated their growth to 14% by the end of July 2011. Their share in GDP climbed to 49%, 
up from 47.3% in 2009. The imports structure shifted towards intermediate and consumption 
goods at the expense of capital goods. 

The  coverage  ratio,  i.e.  exports  of  goods  as  a  percentage  of  imports  (12-month  moving 
average), has increased and stood at 14.1% in July 2011. The net exports of goods displayed a 
better performance than in 2009, but the deficit in goods and services worsened from 39.2% 
of  GDP  in  2009  to  40.5%  in  2010.  The  surplus  in  services  dropped  substantially  due  to  a 
significant increase in imports of construction services starting in the second quarter of 2010. 
In the first seven months of 2011, the trade deficit widened to € 1,122 million compared with 
€ 992 million in the corresponding period of the previous year, as gains on the exports side 
were more than offset by increased imports of goods. 

In 2010, the current account deficit (including official transfers) widened to 16.0% of GDP, 
up  from  15.4%  in  2009.  This  increase  was  driven  mainly  by  the  deteriorating  services 
account. At the same time, the surplus on the income account improved to 3.1% of GDP as 
investment income outflows declined by about 40% over the previous year. Current transfers 
remained significant at 21.6% of GDP. Net workers' remittances, a major source of financing 
domestic demand, increased by about 6% but their share of GDP remained almost unchanged 
at 10.2%. The surplus on the capital and financial account (12.3% of GDP) fell short of the 
size of the current account deficit. Net foreign direct investments increased to 7.5% of GDP, 
about a third of which went into real estate and construction and another 22% into financial 
services. There was a spike of about  50% in FDI inflows in manufacturing, associated with 
the  completion  of  privatisation  deals  rather  than  new  green-field  investments.  Over  2010, 
currency and deposits held abroad were converted into portfolio  investments abroad  (equity 
and debt securities). This was accompanied by an increase in the central bank reserve assets. 
Net errors and omissions of 3.7% of GDP are high in comparison with the 1.5% in 2009 and 
pose a problem when it comes to proper analysis of economic developments. Overall, external 
imbalances  are  high,  especially  in  trade  in  goods,  and  production-enhancing  foreign 
investment inflows have remained limited. 

Unemployment was very high at 45.4%, according to the latest official data from the Labour 
Force  Survey  2009.  No  data  are  available  on  the  unemployment  rate  in  2010  because  the 
Labour  Force  Survey  was  cancelled  due  to  financial  constraints.  In  2010,  the  number  of 
registered  unemployed  went  down  by  about  1%,  mostly  in  the  unskilled  segment. 
Nevertheless, by the end of June 2011 unskilled unemployed still accounted for 60% of total 
registered  job-seekers.  Unemployed  with  university  education,  although  a  relatively  small 

4 

A measure using PPP is not available for Kosovo. The calculation is based on the population estimates 
of the 2011 census. 

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number, have steadily increased and approached 4,000, signalling problems in the functioning 
of and the links between the labour market and the education system. Data from the Kosovo 
Pension and Savings Trust Fund indicate that in 2010 the number of contributors increased by 
2.3% or 5,213 people, almost equally divided between the government and non-government 
sectors. The statistics available do not provide a true picture of the labour market, particularly 
given  the  significant  informal  employment.  Overall,  information  about  the  labour  market  is 
scarce  and  doubts  about  its  accuracy  persist.  Unemployment  remained  very  high  and  the 
economy did not create enough jobs to reduce pressures on the labour market and offer job 
opportunities, especially to young new entrants. 

The  annual  average  inflation  was  3.5%  in  2010.  Monthly  inflation  rates  accelerated  sharply 
from mid-2010 on and in the first quarter of 2011. By March 2011 inflation peaked at double-
digit levels of 10.8% (year-on-year), before it slowly decelerated to the still high 5.3% by the 
end of August. Food prices were the main contributor to inflation with 3.5 percentage points, 
followed by energy-related items with 0.9. Core inflation (non-food and non-energy) reached 
a  high  of  1.6%  in  May,  after  it  had  usually  remained  below  1%,  spurred,  inter  alia,  by  the 
government  promise  to  increase  government-sector  wages  substantially.  About  90%  of  all 
goods in the consumer basket exhibited increasing prices, indicating broad-based inflationary 
pressures. The inflation level and structure have hit the poor disproportionally and put under 
strain consumption patterns dependent on remittances. Overall, inflation has been volatile and 
risen to high levels. 

Kosovo is using the euro as legal tender. Consequently, the Central Bank of Kosovo (CBK) 
has  only  limited  policy  instruments.  The  growth  in  broad  money  (IMF  definition5)  stood  at 
18.7%  by  the  end  of  July  2011.  Its  dynamics  throughout  the  period  was  influenced  by  the 
reduction  in  public  non-financial  corporations'  deposits  due  to  the  withdrawal  by  the 
government  of  dividends  from  the  publicly-owned  telecommunications  company.  The 
monetisation  of  the  economy,  measured  by  the  ratio  of  average  broad  money  to  GDP, 
increased  slightly,  from  39.8%  in  2009  to  40.4%  in  2010.  Stricter  bank  supervision  led  to 
reclassification of some loans and an increase in non-performing loans, which reached 5.9% 
of  total  loans  by  mid-2011.  The  central  bank  has  put  the  biggest  micro-finance  institution 
under  direct  administration.  This  case  has  highlighted  weaknesses  in  the  legislation,  in 
particular  on  the  licensing  of  micro-finance  institutions.  Overall,  the  monetary  framework 
continued to function relatively well, although there is room for improvement, in particular in 
regulation and supervision of the financial sector. 

The budget deficit increased from 0.7% of GDP in 2009 to 2.7% in 2010, driven by surging 
expenditures and lower dividend receipts. The underlying deficit was much higher – 5.5% of 
GDP  –  if  one-off  receipts,  particularly  a  € 85  million  dividend  and  a  € 30  million  budget 
grant,  are  taken  into  account.  In  addition,  there  has  been  a  significant  increase  in  unpaid 
invoices, which stood at 0.7% of GDP at the end of 2010. Total revenue (excluding dividends 
and  grants)  increased  by  about  1  percentage  point  to  25.3%  of  GDP.  Total  primary 
expenditure  increased  by  about  0.7  percentage  points  to  30.7%  of  GDP.  Two  thirds  of  the 
underlying revenue continued to be collected as border taxes on consumption, while direct tax 
revenue  decreased  in  not  only  relative  but  also  absolute  terms.  Current  expenditure  reached 
18.1%  of  GDP,  up  from  17.7%  in  2009,  underpinned  by  a  strong  increase  in  spending  on 
wages and salaries. Social transfers went up by 0.3 percentage points to 4.8% of GDP. Total 
subsidies,  capital  transfers  and  net  lending  to publicly  owned  enterprises  went  down  by  1.3 

5 

Including deposits excluded from broad money. 

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percentage  points  to  3.2%  of  GDP,  due  to  a  reduction  in  spending  on  the  Kosovo  Energy 
Corporation.  Capital  expenditure  increased  from  9.9%  to  10.7%  of  GDP,  although  all 
categories  of  capital  expenditure,  other  than  those  related  to  construction  of  the  highway 
linking  Pristina  and  Tirana,  had  been  cut  significantly  by  2.2%  of  GDP.  The  government 
deposits available at the central bank dropped from € 342 million (8.7% of GDP) in 2009 to 
€ 244 million  (5.9%)  at the end  of 2010.  Government  debt  to the  World Bank  and  the  IMF 
stood at 6.2% of GDP. 

Due to the early dissolution of parliament, the 2011 budget was delayed and was not adopted 
by  the  new  Assembly  until  March.  It  envisages  a  17%  increase  in  revenue  (excluding 
dividends and grants) over 2010, 17.2% higher total primary expenditure, and a budget deficit 
of  € 227  million  (4.7%  of  GDP). The budget foresees that the deficit would be financed by 
direct grants, privatisation receipts from the sale of Post and Telecommunications of Kosovo 
(PTK) and borrowing from international financial institutions, most of which are unlikely to 
materialise in 2011. In the first eight months of 2011, budgetary execution has been marked 
by  strong  tax  revenue  performance  (17%  annual  growth)  driven  mostly  by  equally  strong 
imports of goods. In the first quarter, expenditure lagged behind, especially at municipal level, 
but  by  end  of  August  total  expenditure  accelerated  and  increased  by  more  than  24%.  The 
budget turned into a deficit of € 16.6 million mainly because of particularly strong increases 
in spending on wages and salaries (25%) and capital outlays (61%). The Ministry of Finance 
took steps to improve the transparency of budget execution and started uploading preliminary 
monthly  information  about  budget  revenue  and  expenditure  onto  its  website.  However, 
budgetary transparency could be further improved. Overall, the financing of the 2011 budget 
is facing significant risks. 

In  2010,  in  an  attempt  to  rationalise  and  bring  predictability  to  economic  policy,  Kosovo 
entered a Stand-By Arrangement with the IMF. The agreement allowed sufficient room and 
time for adjustment of the significant fiscal imbalances. Nevertheless, after a series of ad hoc 
measures, the programme derailed. In addition to the Labour Law adopted in the last session 
of  the  previous  Assembly,  a  number  of  initiatives  with  a  potentially  significant  negative 
impact on the level and quality of government expenditure were taken without prior analysis 
of their economic and budgetary impact. 

The  government  decision  to  increase  government  employees'  wages  substantially  (by  30  to 
50%),  later  incorporated  in  the  2011  budget  despite  the  objections  raised  by  the  European 
Commission  and  the  IMF,  was  highly  detrimental  to  fiscal  sustainability  and  the  quality  of 
spending. In mid-July 2011, the government entered into a new agreement with the IMF – a 
non-disbursing  Staff  Monitored  Programme  (SMP)  due  to  run  until  the  end  of  2011.  Under 
the  programme,  the  government  committed  to  consolidation  measures  totalling  € 35  million 
and to set aside a reserve of € 60 million as unallocated expenditure for 2011, the release of 
which is linked to announcement of the winner of the PTK privatisation bid. This reserve is 
crucial  for  preserving  a  minimum  level  of  government  bank  balances  by  the  end  of  2011. 
However, keeping it is likely to imply cuts in non-highway capital spending, which is one of 
the most growth-enhancing categories of expenditure. The implementation of the SMP is an 
important  test  and  an  attempt  to  restore  credibility  to  economic  and  fiscal  policy.  Overall, 
fiscal planning and the quality of public finances deteriorated further and policy predictability, 
consistency and transparency remain serious challenges. 

Economic  development  continued  to  be  marked  by  fragile  growth  and  significant  domestic 
and external imbalances, aggravated by poor fiscal policy. In particular, the high inflation and 
dysfunctional labour market pose major challenges for economic and social cohesion and the 

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significant  economic  uncertainty  remained  an  obstacle  to  job  creation  and  private-sector 
development.  In  2011,  in  an  attempt  to  remedy  some  of  the  major  policy  weaknesses,  the 
government  presented  an  economic  vision  and  action  plan  for  economic  reform.  This  is 
commendable  for  the  leading  role  given  to  the  private  sector  in  sustainable  economic 
development. However, the plan lacks prioritisation and sequencing of proposed measures. It 
relies on an optimistic macroeconomic scenario. Careful assessments and proper fiscal impact 
analyses  of  most  of  its  measures  are  still  due.  In  addition,  the  plan's  medium-term  budget 
deficit  target  of  2%  of  GDP  is  inconsistent  with  the  0.5%  deficit  envisaged  in  the  MTEF. 
Overall, the proper functioning of the macroeconomic policy mix is increasingly threatened 
by the unpredictable fiscal policy and unsustainable growth in government expenditure. 

Interplay of market forces 

About 90% of the publicly-owned enterprises (POEs) had operating profits in 2010, but a few 
big energy and mining companies continued to suffer large losses and have been a significant 
drain  on  the  budget.  The  Privatisation  Agency  of  Kosovo  continued  the  privatisation  of 
socially  owned  enterprises  (SOEs).  Mainly  small  businesses  were  privatised,  with  the 
exception  of  a  big  cement  factory  (which  will  secure  employment  for  the  500  workers  for 
three  years).  Limited  progress  was  made  with  liquidating  SOEs:  only  one  in  2010.  The 
privatisation  of  publicly  owned  enterprises  had  temporarily  stalled  because  of  the  early 
dissolution of parliament. The process of privatising PTK resumed in the spring. In June 2011 
two  companies,  out  of  the  five  which  had  declared  interest,  qualified  for  the  next  stage.  In 
September,  the  government  gave  two  additional  weeks  for  expression  of  interest  to  the 
companies  which  had  not  qualified  in  June.  This  extension  potentially  undermines  the 
credibility  of  the  privatisation  process.  The  privatisation  of  KEK  Distribution  and  Supply 
(KEDS)  also  proceeded,  with  four  companies  pre-qualifying  to  participate  in  it.  The 
transaction  for  development  of  the  New  Kosovo  Power  Plant  (NKPP)  continued  to  suffer 
delays,  partly  related  to  the  future  energy  market  model  and  the  long-term  power  purchase 
agreement between the NKPP and KEDS, which still needs to be finalised in detail. Overall, 
there  has  been  some  progress  with  the  privatisation  process,  especially  concerning  publicly 
owned enterprises. 

Market entry and exit 

The business register now includes 105,000 companies. Data from the Tax Administration of 
Kosovo (TAK) show that around half of them are actually inactive. In order to be deregistered 
after  becoming  inactive,  companies  have  to  present  the  business  register  with  a  statement 
from TAK that all outstanding tax obligations have been fulfilled. So far, online registration 
of companies is possible only at the 'one stop shops' or municipal business centres that have 
been  established  in  22  municipalities.  Businesses  continued  to  suffer  from  power  cuts  and 
most firms identified corruption and red tape as major impediments to doing business. As part 
of its economic development action plan, the government announced its goal of improving the 
business  environment  substantially.  To  this  end,  it  plans  a  number  of  measures,  including a 
comprehensive  reform  to  remove  50%  of  licence  and  permit  requirements  in  the  medium 
term.  Overall,  weak  administration,  unreliable  electricity  supply  and  deficient  rule  of  law 
continued to hinder market entry and exit. 

Legal system 

The  legal  system  continued  to  suffer  from  poor  accessibility  and  efficiency.  Weak 
enforceability of contracts remained one of the main concerns of companies and investors in 

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Kosovo.  It  is  also  one  of  the  factors  explaining the  relatively  high  interest  rates  charged  by 
commercial  banks  to  the  private  sector.  The  Kosovo  court  system,  in  cooperation  with 
EULEX, is investigating several high-profile corruption cases. Senior officials and politicians 
have been convicted. 

There  has  been  some  progress  regarding  property  rights  infrastructure.  All  Municipal 
Cadastre Offices are now connected to the central Kosovo Cadastral Agency and records are 
available in both places. Over the last few years, both registered transactions and mortgages 
have  increased,  indicating  use  of  property  as  collateral.  A  total  of  5,364  mortgages  were 
registered in 2010 and 2,712 in the first eight months of 2011. It takes about 15 days for the 
Municipal  Cadastre  Offices  to  register  a  transaction.  Some  land  registry  books  remain  in 
Serbia.  An  agreement  on  cadastre  was  reached  within  the  framework  of  Belgrade/Pristina 
dialogue. The agreement needs to be implemented. Expropriation procedures are not always 
applied  and  property  owners  are  not  always  consulted  or  adequately  compensated.  Overall, 
the  existing  legal  framework  is  underdeveloped  and  its  implementation  remained  poor.  The 
difficult, lengthy and costly legal enforcement of contracts and prevalent corruption continued 
to hamper the business environment. 

Financial sector development 

The  financial  sector  expanded  by  13.7%  in  2010,  taking  the  total  value  of  assets  to  € 3.2 
billion or about 78% of GDP. The banking sector is predominant and accounted for 77% of all 
assets,  followed  by  pension  funds  (15.4%),  microfinance  institutions  (4.3%),  insurance 
companies  (3.1%)  and  financial  intermediaries  (0.2%).  The  number  of  commercial  banks 
(eight),  pension  funds  (two)  and  insurance  companies  (eleven)  remained  the  same,  whereas 
two  microfinance  institutions  had  their  licences  revoked  in  2010  (reducing  their  number  to 
17).  The  degree  of  concentration  of  the  banking  system  remains  high,  with  77.4%  of  the 
assets managed by three banks. About 90% of the assets in the sector are held by banks under 
foreign  ownership.  In  2010,  boosted  by  growing  interest  income,  the  retained  profit  of  the 
banking sector increased by 30%. The return on average assets remained unchanged at 1.4% , 
whereas  the  return  average  equity  increased  to  14.9%  compared  with  13.9%  in  2009.  Non-
performing  loans  increased  from  4.3%  of  total  loans  in  2009  to  5.9%  in  mid-2011  but  the 
banking  system's  capital  adequacy  ratio  remained  solid  above  17%.  While  interest  income 
continued  to  rise  moderately  in  the  first  half  of  2011,  provisions  for  loans  and  other  assets 
losses  have  doubled  in  comparison  to  the  same  period  in  2010  and  suppressed  profitability. 
Overall, financial intermediation continued to deepen and, despite increasing non-performing 
loans, the banking sector remained stable and profitable. 

Credit  gained  some  speed,  increasing  by  13.2%  (year-on-year)  in  2010  to  35%  of  GDP.  Its 
growth accelerated to 15.3% by the end of July 2011, with both households and non-financial 
corporations rates of annual credit growth in the double-digits – 17.2% and 13.2%. Almost all 
of the increased corporate lending went to the services sector, in particular to wholesale and 
retail  trade,  and,  partly,  to  the  construction  sector.  The  share  of  lending  exposure  to 
manufacturing and agriculture decreased over the period, reflecting the low level of domestic 
production and the high dependence of the economy on imports. The maturity of loans was 
extended  slightly  and  loans  with  a  maturity  longer  than  two  years  increased  to  73%  of  the 
total loan portfolio in 2010, up from 70% in 2009. This trend was reversed sharply in May, 
following  a  spike  in  borrowing  of  up  to  two  years,  whereas  the  long-term  loan  segments 
stagnated. 

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In 2010, total deposits increased to 47.1% of GDP, up from 44.6% in 2009. Deposits structure 
and growth rates have been skewed because of significant withdrawals of deposits of public 
non-financial  corporations  related  to  payments  of  PTK  dividends.  Total  deposits  grew  by 
15.7% by the end of July. Household deposits, which made up about 70% of the total, have 
had  a  remarkably  robust  growth,  increasing  by  about  18%.  The  loans-to-deposits  ratio 
increased over 2010 to 75.3%, and then further to 81.2% in July 2011, close to the informal 
benchmark  of  80%  loans-to-deposits  ratio.  The  12-month  moving  average  effective  interest 
rate on deposits was on a clear downward path over the period and stood at 3.5% in July. The 
average  effective  interest  rate  on  loans  has  also  gone  down  a  bit  to  14.5%,  but  the  average 
spread  remained  above  11  percentage  points.  Overall,  the  deposit  base  and  credit  activity 
continued to increase but lending conditions remained tight. 

3.2. 

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

Existence of a functioning market economy 

Macroeconomic  stability  is  increasingly  threatened  by  unpredictable  fiscal  policy  in  an 
environment  of  persistent  and 
imbalances.  The 
vulnerabilities of the policy mix increased due to the significant budgetary deficit and limited 
financing  options.  Unemployment  is  very  high,  revealing  deep  structural  problems  in  the 
economy. Overall, the weak rule of law, corruption, high level of informal activities, and ad 
hoc policies have increased economic uncertainty and deep structural problems continued to 
hamper the economy. 

increasing  domestic  and  external 

Human and physical capital 

Some  progress  was  made  with  access  to  education,  given  the  considerable  investment  in 
school  infrastructure,  specifically  for  basic  education  (grades  1-9)  .  Education  is  one  of  the 
largest government programmes, accounting for about 13% of total spending (3.9% of GDP), 
although  resources  allocated  to  it  still  remain  relatively  low.  Due  to  the  high  proportion  of 
school-age children in Kosovo's population, spending per pupil is lagging even further behind. 
More  than  half  of  all  the  teachers  in  elementary  and  secondary  schools  are  only  with 
secondary  or  higher  education.  Educational  results  are  generally  poor.  About  42%  of  all 
secondary school students managed to pass the 2011 final exam ('Matura') at the first trial in 
June  and  the  pass  rate  of  vocational  school  pupils  was  only  25%.  In  2010,  the  Ministry  of 
Education,  Science  and  Technology  (MEST)  produced  a  comprehensive  sector  strategy 
(2011-2016)  which  recognises  the  importance  of  an  inclusive  system  of  education  by 
expanding access to basic and upper secondary education and renewing plans for expanding 
pre-school  education.  In  August  2011  the  government  has  officially  adopted  the  strategy. 
Kosovo  still  lacks  accurate  data  on  the  number  of  students  and  the  employment  rate  of 
graduates.  Schools  continue  to  operate  on  multiple  shifts.  The  research  capacity  of 
universities and research institutes in Kosovo remains very weak. The Investment Promotion 
and the Small and Medium-sized Enterprise (SME) Agencies have set up an online catalogue 
of education institutions in Kosovo in order to enhance cooperation and transfers of expertise 
and technology to SMEs. Overall, the education sector is still affected by the lack of adequate 
facilities and characterised by poor outcomes. 

Total investment stood at around 30% of GDP in 2010, almost unchanged over the previous 
year.  Public  investments  (predominantly  in  road  infrastructure)  expanded  but  the  growth  in 
private investments appears to have been curtailed, judging from the 13% annual reduction in 

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imports  of  capital  goods.  Construction  of  a  highway  towards  Tirana  continued  and  the  first 
34 km are scheduled to be opened to traffic by the end of October 2011. However, the scale of 
the project is not proportionate either to the forecast traffic or to the available resources and is 
crowding  out  other  expenditure.  Not  much  has  been  done  to  improve  energy  infrastructure 
and efficiency. Overall, there were marginal improvements in physical capital. The efficiency 
of government capital spending is questionable and information about the level and structure 
of private investments remained scarce. 

Sectoral and enterprise structure 

Kosovo's enterprise sector remains dominated by small and micro-enterprises. About 99.7% 
of the enterprises employ less than 50 people, contributing about 60% of the overall turnover 
in the economy.  Access to and  the cost of finance remained problematic, mainly due  to the 
high risks in the economy. Measures to improve access to finance for SMEs are envisaged in 
the SME strategy adopted in July 2011. 

In  order  to  attract  investors,  the  government  is  considering  long-term  power  purchase 
agreements of up to 20 years between the new generation company and the distribution and 
supply company. In a similar vein, it is contemplating recommending a possible multi-annual 
ban on new entrants to the market for mobile telephone service-providers. Measures such as 
these  would  hinder  competition.  In  2010,  KEDS's  billing  and  collection  rates  improved 
slightly, supported by the lack of electricity price increases, but they still remain low. 

The  informal  sector  is  fuelled  by  weaknesses  in  tax  and  expenditure  policies  and,  in  law 
enforcement,  including  the  fight  against  corruption  and  organised  crime.  It  reduces  the  tax 
base and the efficiency of economic policies. As a measure to combat the informal economy, 
the  Kosovo  tax  administration  continued  to  issue  fiscal  numbers  and  to  install  fiscal  cash 
registers.  However,  these  registers  are  still  not  systematically  used.  Overall,  the  enterprise 
structure remained unchanged. The large informal sector poses a big challenge. 

State influence on competitiveness 

A Law on State aid was adopted in July 2011.Under this law, State aid will be granted mainly 
for  social  purposes.  The  Law  provides  for  the  State  Aid  Commission  to  approve  State  aid, 
which  will  be  monitored  by  the  Competition  Commission.  Budget  subsidies  and  capital 
transfers to publicly owned enterprises totalled 1.7% of GDP in 2010, down from a high of 
2.4% in 2009. Another 1.5% of GDP were channelled to support the investment programme 
of  the  Kosovo  Electricity  Company.  Electricity  prices  remained  unchanged,  below  cost-
recovery  levels.  The  government  has  set  up  a  limited  grant  scheme  consisting  of  coupled 
payments  to  cereal  and  livestock  farmers  and  matching  grants  for  the  dairy,  fruit  and 
vegetables  sectors  at  farm  level.  It  has  also  announced  plans  to  substantially  increase  direct 
agricultural  subsidies  which,  in  view  of  the  level  of  development  of  the  sector,  may  be 
inefficient  in  comparison  with  other  more  structural  support  measures.  Overall,  state 
interference in the economy remained high but broadly unchanged. 

Economic integration with the EU 

The  openness  of  the  economy,  measured  by  the  value  of  imports  and  exports  of  goods  and 
services  in  relation  to  GDP,  increased  to  81.2%  from  70.5%  in  2009.  Exports  to  the  EU 
Member  States  recovered  from  a  slump  in  2009  and  grew  by  84%,  accounting  for  45%  of 
total  exports  of  goods.  Exports  to  CEFTA  countries  increased  by  33%,  although  their  share 

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declined  from  32%  to  24%.  Since  the  beginning  of  2011,  after  the  expiration  of  the 
autonomous  trade  measures  and  due  to  a  delay  in  their  renewal,  Kosovo  no  longer  benefits 
from preferential access to the EU market. The EU and CEFTA countries remained the main 
origin for Kosovo's imports, with shares of 38.3% (39% in 2009) and 37.2% (35.8% in 2009) 
respectively.  With  about  two  thirds  of  the  new  foreign  investment  inflows  in  2010,  the  EU 
countries  were  the  biggest  investors  in  Kosovo.  Overall,  economic  integration  with  the  EU 
remains significant.  

4. 

EUROPEAN STANDARDS 

This section examines Kosovo's capacity to gradually approximate its legislation and policies 
with those of the acquis related to the internal market, sectoral policies and justice, freedom 
and  security,  in  line  with  the  Stabilisation  and  Association  Process  and  the  European 
Partnership  priorities.  It  also  analyses  Kosovo's  administrative  capacity.  In  each  sector,  the 
Commission's  assessment  covers  progress  achieved  during  the  reporting  period,  and 
summarises Kosovo's overall level of preparation.  

4.1. 

Internal market 

4.1.1.  Free movement of goods 

There  has  been  limited  progress  in  the  area  of  standardisation.  Four  new  technical 
committees  on  agri-food,  leather,  toys  and  recreation,  and  information  technology  were 
established bringing the total number of such committees up to 18. An administrative instruction 
on  the  organisation  and  functioning  of  these  technical  committees  was  adopted.  To  date, 
around  3,400  European  standards  (ENs)  were  adopted  as  Kosovo  standards,  including  a 
number of harmonised standards related to New Approach directives. The Agency is still not 
a member of any European or international standardisation organisation. Kosovo also needs to 
develop a medium-term strategy for standardisation. 

There has been some progress on conformity assessment. The law on technical requirements 
for  products  and  conformity  assessment  was  amended  in  August.  Two  administrative 
instructions were adopted in 2010 aiming to transpose the harmonised acquis on lifts and on 
electromagnetic compatibility. 17 testing laboratories and 1 inspection body were accredited 
in  accordance  with  EN/ISO  standards,  covering  food  analysis  for  water  and  fuel  chemical 
testing, as well as physical-chemical and mechanical testing of construction materials.  

There  has  been  some  progress  on  accreditation.  The  law  on  accreditation  and  the 
administrative instruction on the composition and functioning of the Council for Accreditation 
were amended. The Accreditation Directorate, which continues to operate under the Ministry 
of  Trade  and  Industry,  revised  its  quality  management  systems  documentation.  The 
Directorate has a cooperation contract with the European corporation for accreditation (EA) 
and applied in November 2010 to sign a bilateral agreement with the EA under the conditions 
applicable to signatories of the EA multilateral agreement in the field of testing laboratories. 
The  pre-peer  evaluation  assessment  took  place  in  May.  The  Directorate  also  became  a 
member of the International Laboratory Accreditation Cooperation (ILAC) in July, and of the 
International Accreditation Forum (IAF) in 2010. 

There has been some progress on metrology. The law on metrology was adopted in October 
2010 which enables transposition of the New Approach directives. Implementing provisions 

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for pre-packages and measuring units were adopted, as were administrative instructions in the 
fields of thermometry, electronic power meters, electronic meters of reactive energy, flow of 
fluids  except  water  and  non-automatic  weighing  instruments.  Compatibility  of  the  existing 
metrology legislation with the acquis has not yet been assessed. The Metrology Department 
currently employs a staff of 12. The two laboratories of the Metrology Department, based in 
Pristina and in Prizren, started their operations in 2010. These laboratories do not yet meet all 
relevant  international  standards  as  there  are  no  documented  quality  management  systems, 
calibration  procedures  or  verification  procedures  for  measuring  instruments.  The  Metrology 
Department became a liaison organisation of the European Association of National Metrology 
Institutes in October 2010.  

There  has  been  some  progress  in  the  area  of  market  surveillance.  A  new  law  on  market 
inspectorate  and  surveillance  which  takes  account  of  Regulation  (EC)  765/2008  on 
accreditation and market surveillance entered into force in September 2010. Its compatibility 
with  the  horizontal  acquis  has  not  yet  been  assessed.  Two  administrative  instructions  were 
adopted in 2011 for the organisation and functioning of the Market Inspectorate and for the 
legal documents of the Inspectorate. There is still no detailed strategy for market surveillance 
in Kosovo. The division of responsibilities between the market inspectorate and the metrology 
department  is  still  not  clearly  defined.  Over  3000  inspections  were  conducted  between 
September  2010  and  March  2011.  Lack  of  laboratories  to  test  products  hinders  effective 
market  surveillance  activities.  The  procedure  for  destroying  confiscated  dangerous  products 
remains  a  challenge  because  of  an  incomplete  legal  framework,  and  the  absence  of 
appropriate premises. 

No legislative progress has been made concerning consumer protection. The implementation 
of  the  consumer  protection  action  plan  2010-2014  has  continued,  and  awareness-raising 
campaigns  have  been  intensified.  One  citizens  advisory  centre  was  opened  and  a  website 
listing dangerous products is online. The administrative capacity has not improved. 

Overall, some progress has taken place in the legal framework. Approximation with the EU 
acquis in the area of free movement of goods is limited. Better coordination of, and a strategy 
for the alignment process for the whole of the European acquis for Free Movement of Goods 
is needed. Further progress in the approximation of product specific legislation is necessary. 
The  administrative  capacity  for 
implementation  and 
enforcement  are  inadequate.  Adequate  human  resources  need  to  be  dedicated  to  completing 
the legal framework and to implementing the existing provisions. Considerable efforts are still 
needed in this area. 

legislative  approximation, 

the 

4.1.2.  Movement of persons, services and right of establishment 

Limited  progress  has  been  achieved  in  the  area  of  free  movement  of  persons.  Kosovo  has 
started  preparations  for  developing  and  negotiating  bilateral  social  security  agreements  with 
EU member states and countries in the region at the beginning of 2011. Following the entry 
into force of the law on work permits and employment of foreign citizens in March 2010, a 
total of 1682 work permits for foreigners have been issued. Institutional capacities in the area 
of free movement of persons remain limited. 

Limited progress has been achieved regarding the freedom to provide services. A database 
on  services-related  legislation  was  completed  in  June.  Statistics  on  services  continues  to  be 
insufficiently available.  

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There  has  been  limited  progress  on  postal  services.  The  telecommunications  regulatory 
authority  adopted  implementing  legislation  on  licensing  fees  for  postal  operators  providing 
postal  services  on  the  territory  of  Kosovo.  A  separate  department  for  postal  services  was 
established within the telecommunications regulatory authority, as called for by last year's law 
on  postal  services,  and  recruited  the  senior  postal  services  officer.  Administrative  capacity 
still needs to be further strengthened. 

Some progress can be reported in the area of financial services. The law on deposit insurance 
created the legal base for establishing the Deposit Insurance Fund of Kosovo. Its Board was 
appointed in July, including the Governor of the Central Bank, a representative of the ministry 
of Finance, representative of SCAAK (association of certified accountants) and one expert in 
banking  recruited  through  a  public  selection.  The  assessment  of  the  regulatory  and 
supervisory regime led to a roadmap for the migration from a rule-based CAMEL approach 
(capital  adequacy,  asset  quality,  management,  earnings,  and  liquidity)  to  a  more  forward-
looking risk-based supervision approach. Capital adequacy criteria are only partially aligned 
with  those  of  Basel  II.  The  Central  Bank  has  the  capacity  to  implement  an  effective 
supervision of the financial sector.  

There  has  been  some  progress  in  the  area  of  insurance.  The  assembly  adopted  a  law  on 
compulsory  third  party  insurance,  which  establishes  a  national  bureau  for  insurance  and  a 
fund to which insurance companies have to contribute. This fund will ensure that green card 
holders in Kosovo get paid in case of damage. This is a precondition for Kosovo applying to 
the  Council  of  Bureaux  for  Green  Cards  for  temporary  membership  (in  the  absence  of  UN 
membership), foreseen for the beginning of 2012. 

There  has  been  some  progress  in  the  area  of  securities.  Further  steps  have  been  taken  to 
develop a capital market. For this purpose, in the framework of the 2009 law on public debt, 
an  open  market  operations  unit  was  set  up  anticipating  future  auctions  of  government 
securities. The unit is part of the asset management directorate of the Central Bank. 

There  has  been  little  progress  regarding  the  right  of  establishment.  Alignment  with  EU 
standards on the recognition of professional qualifications is limited.  

Some progress has been made in the area of company law. The law on business organisations 
adopted in June brings the legal framework closer to EU standards and strengthens provisions 
on avoiding conflicts of interest and requirements with regard to external audits of companies. 
The number of municipal business centres or 'one-stop-shops' to set up companies has been 
increased  from  8  to  22  (see  also  chapter  4.2.1  on  SME  policy).  The  law  on  accounting  and 
audit has been implemented. 

Overall, alignment with European standards in the area of movement of persons, services and 
right  of  establishment  as  well  as  company  law  is  at  an  early  stage.  Administrative  capacity 
needs  significant  reinforcement,  in  particular  in  the  area  of  postal  services.  Alignment  and 
administrative capacity concerning financial services are more advanced.  

4.1.3.  Free movement of capital 

There has been limited progress concerning free movement  of capital, in the context of an 
already liberal regime. There are no restrictions regarding foreign ownership or investment in 
the financial sector or in other assets. As an illustration, foreign banks control around 80% of 
Kosovo's banking sector. In 2011, overall foreign direct investment increased compared to its 

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level in 2010, reaching 7.6% of GDP. Kosovo does not have a stock exchange or a financial 
market. 

Limited progress has been made on payment systems. The Central Bank developed software 
for  the  introduction  of  a  real-time  gross  settlement  system  which  is  part  of  the  National 
Payment  Strategy.  Actual  implementation  of  this  strategy  awaits  adoption  of  the  law  on 
payments. As regards international payments, efforts to negotiate an interim SWIFT code (an 
ISO 3166-1 user assigned code) in the absence of UN membership have not been successful. 

Overall,  the  system  for  capital  movements  is  very  liberal.  Further  reform  is  needed  to 
introduce  Basel  II  risk  requirements,  and  to  establish  a  legal  framework  in  line  with  EU 
standards on the free movement of capital and payment systems. The capacity of the Central 
Bank to supervise the sector is adequate. 

4.1.4.  Customs and taxation 

There  has  been  some  progress  in  the  area  of  customs.  The  Customs  Service  adopted 
amendments to the administrative instruction on disciplinary procedures to counter allegations 
of unprofessional conduct of customs staff. Overall revenue collected by the Customs Service 
until  the  end  of  July  2011  amounted  to  € 426.8  million,  compared  to  € 359.5  million  in  the 
same  period  of  2010.  The  internal  anti-corruption  unit  deals  with  a  backlog  of  cases  from 
2010.  The  Independent  Review  Board  for  appeals  by  businesses  and  taxpayers  of  the  Tax 
Administration and Customs Service still has over 2500 cases to handle and its decisions are 
often  of  poor  quality.  The  independence  and  impartiality  of  this  board  needs  to  be 
strengthened. 

Before  the  incidents  at  the  gates  1  and  31  in  northern  Kosovo  at  the  end  of  July,  EULEX 
Customs  registered  goods  declared  to  them  and  instructed  drivers  to  report  to  the  Kosovo 
Customs  Terminal  at  south  Mitrovicë/Mitrovica.  Kosovo  Customs  operated  one  static 
checkpoint  on  each  of  the  main  roads  from  gates  1  and  31,  several  kilometres  south  of  the 
gates,  where  they  made  a  limited  check  on  some  of  the  vehicles.  The  Customs  service 
estimated that roughly 25% of the commercial vehicles did not comply with the instructions 
and diverted to other locations in the north before reaching the Kosovo Customs checkpoints.  

In  the  scope  of  the  Belgrade/Pristina  dialogue,  an  agreement  has  been  reached  on  customs 
stamps. Kosovo lifted its embargo on Serbian goods and Serbia and Bosnia and Herzegovina 
recognised  Kosovan  stamps.  Free  movement  of  goods  has  been  re-established.  The  gates  1 
and  31  are  staffed  by  a  mixed  team  of  EULEX  and  Kosovo  Police  and  Customs  from  both 
ethnicities.  

Cooperation agreements have been signed with the former Yugoslav Republic of Macedonia 
and with Slovenia aimed at harmonising trade statistics. A protocol on electronic exchange of 
data  on  prior  arrival  has  been  signed  with  Montenegro.  Preparatory  work  to  replace  the 
present  Customs  Data  Processing  System  with  Asycuda  World  (Automated  System  for 
Customs Data), provided by UNCTAD, has continued. 

Overall,  Kosovo's  customs  legislation  is  largely  in  line  with  the  EU  Customs  Code.  The 
Independent  Review  Board  needs  to  function  more  effectively  and  reduce  the  backlog  of 
cases. 

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There  has  been  some  progress  in  the  area  of  taxation.  The  Tax  Administration  of  Kosovo 
adopted an administrative instruction in November which clarified the powers of units such as 
the tax investigation unit and the unit dealing with appeals. The Tax Administration started to 
implement the 2010 tax compliance strategy and the strategy plan 2010-15. The Strategy led 
to shorter procedures for dealing with non-filing tax payers, refund claims and appeals. At the 
same  time,  the  implementation  of  the  strategy  would  be  further  enhanced  by  upgrading  the 
Administration's IT system - SIGTAS.  

As  of  April  2011,  companies  applying  for  a  fiscal  number  receive  it  within  one  day  and 
checks are performed afterwards. During 2011, 8,800 fiscal numbers were issued, taking the 
total  to  48,800,  which  is  still  less  than  the  total  number  of  firms  registered  by  the  business 
registration agency (around 105,000). The fiscal numbers can be used as a good indicator of 
active businesses, showing that a significant number of activities remain unregistered. Total 
tax revenue until end July 2011 was € 138 million, compared to € 117 million over the same 
period of the previous year.  

Overall,  there  has  been  some  progress  in  the  area  of  taxation,  mostly  related  to  the 
implementation of reforms to support the tax compliance strategy. 

Some  progress  has  been  made  as  regards  administrative  and  operational  capacity  of  the 
Kosovo  customs.  The  Customs  Service's  anti-smuggling  units  have  conducted  a  number  of 
operations to tackle smuggling and tax evasion. Large intelligence-led operations have led to 
seizure of significant quantities of alcohol, much of it counterfeit. There have been increased 
efforts  to  tackle  illicit  and  counterfeit  pharmaceuticals.  An  organisational  review  was 
conducted and it confirmed the significant modernisation efforts of the Customs Service, even 
if some gaps remain and further effective reforms and modernisation need to be implemented. 

In  terms  of  the  tax  administration's  administrative  and  operational  capacity,  its  regional 
offices  introduced  performance  indicators  to  measure  the  quality  of  their  services  to  tax 
payers.  A  risk  management  unit  was  established  to  increase  the  capacity  to  identify  risk  to 
revenues  originating  from  economic  activities.  More  than  9,000  businesses  have  been 
equipped  with  electronic  fiscal  devices.  Tax  payer  awareness  activities  have  also  increased 
and internal training of officers has continued. The Tax Administration has carried out more 
compliance visits at firms and – together with the police – checks of trucks related to goods of 
unclear origin. In the fourth quarter of 2010, an interface was established with the commercial 
banks in Kosovo in order for all tax payments made through these banks to be automatically 
registered  by  the  Tax  Administration.  An  organisational  review  concluded  that  creditable 
efforts in the modernisation process have already been undertaken by TAK. A range of gaps 
still  remain,  and  therefore  further  effective  reforms  and  modernisation  need  to  be 
implemented. 

Overall,  enforcement  of  customs  has  improved,  notably  in  the  areas  of  the  fight  against 
smuggling  and  counterfeiting,  but  efforts  need  to  be  further  enhanced.  Administrative 
capacity to enforce tax payments and to reduce the large informal sector remains low. In this 
regard, the efficiency of the work and cooperation between the Tax Administration, the courts 
and the police needs to be enhanced.  

4.1.5.  Competition 

There has been some progress in the area of competition. The legislative framework for anti-
trust and mergers has improved through implementing legislation complementing the 2010 

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law on protection of competition. This legislation includes statutes and working methods of 
the  Kosovo  Competition  Authority  and  the  implementation  of  the  merger  rules.  The 
competition law is  to a large extent  now  compliant with EU standards, but  still  needs to be 
aligned  further,  e.g.  as  regards  the  definition  of  a  dominant  market  position.  The  turnover 
thresholds  for  the  obligation  to  notify  planned  mergers  ought  to  be  adjusted  to  a  level 
appropriate to the size of the Kosovo economy. 

Some progress may equally be noted in enforcing competition rules. The Kosovo Competition 
Authority adopted decisions concerning breaches of competition rules by companies active in 
the markets for retail motor fuel, fiscal cashiers and insurance. Fines were imposed on certain 
companies in these sectors. Actual payment of fines is subject to the outcome of any appeals 
by the companies. The Authority has not adopted any merger decision and it has continued to 
build up experience. The Authority suffers from a lack of experienced staff and still does not 
have its own premises. It is housed in the Kosovo Parliament building. More resources need 
to be devoted to advocacy on competition rules, especially among SMEs. 

The law on State aid was adopted in July and will enter into force on 1 January 2012. This 
law foresees a State Aids Commission consisting of representatives of various ministries, civil 
society  and  the  private  sector.  Monitoring  of  approved  State  aid  will  be  carried  out  by  the 
Kosovo Competition Authority.  

Overall,  some  progress  has  been  made  in  the  field  of  competition.  Implementation  of  anti-
trust and merger policy is still at an early stage. The competition law needs to be amended to 
be  aligned  more  closely  with  the  EU  acquis.  The  administrative  capacity  of  the  Kosovo 
Competition Authority is insufficient for the tasks assigned to it and existing staff need further 
training. Alignment of State aid policy is at a very early stage and there is no track record of 
implementation. 

4.1.6.  Public procurement 

Progress  can  be  reported  in  the  area  of  public  procurement.  A  first  version  of  the  law  on 
public procurement was adopted in November 2010. It contained a number of provisions that 
significantly  diverged  from  the  public  procurement  directives  and  exposed  procurement 
officers  to  political  interference  and  pressure,  and  thus  undermining  the  transparency  and 
accountability  of  the  overall  process  and  opening  up  opportunities  for  corruption.  A  new 
version of the law was adopted in August 2011, which addresses most of the deficiencies of 
the  previous  law  and  significantly  increases  the  compatibility  with  EU  standards.  It  also 
reinforces the independence of procurement officers. 

The  Public  Procurement  Regulatory  Commission  issued  several  administrative  instructions, 
which  regulate,  inter  alia,  the  use  of  languages  in  public  procurement  documents,  public 
opening  of  proposals  and  examination,  evaluation  and  comparison  of  proposals,  the  use  of 
selection  criteria,  etc.  The  Commission  submitted  its  2010  Report  to  the  Parliament  for 
approval. Around 13,500 contracts were signed in 2010, of which open procedures accounted 
for 85% of the total number of contracts whereas the restricted procedure was not used. Direct 
single source procedures decreased in 2010 thus accounting for 7% of contracts in 2010. 430 
complaints  have  been  received  and  reviewed  by  the  Procurement  Review  Body  in  2010. 
Framework contracts are still not used. This would reduce the number of tenders and would 
allow for better price conditions.  

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Measures  against  cases  of  misconduct  in  the  tendering  procedures  have  been  undertaken  in 
several cases by issuing directives to the contracting authorities concerned. The Procurement 
Review Board had to issue only one fine to a contracting authority who did not comply with 
the directive. The minimum amount of fines is relatively modest (€ 5,000) and does not have 
a sufficiently dissuasive effect. 

161  contracting  authorities  currently  operate  in  Kosovo.  The  current  law  provides  that  the 
procurement officers have to undertake up to 15 days training within one year, compared to 
10  under  the  previous  rules.  Training  is  provided  by  the  Kosovo  Institute  of  Public 
Administration and in cooperation with the Public Procurement Regulatory Commission. 489 
procurement officers were certified after attending the training. 

There  are  overlaps  between  the  three  public  procurement  bodies  (Procurement  Agency, 
Procurement  Review  Board  and  Procurement  Regulatory  Commission),  and  the  division 
between  regulatory  and  executive  powers  is  not  entirely  defined.  Efficient  cooperation  and 
inter-institutional co-ordination mechanisms need to be improved. 

Overall, the procurement legislation is not yet in line with European standards. Kosovo still 
needs to complete and improve the legal framework in the public procurement area. Notably, 
the  law  on  public  private  partnerships  and  concessions  needs  to  be  amended  to  meet  the 
requirements  of  the  acquis.  The  three  public  procurement  bodies  need  to  cooperate  more 
efficiently.  Awareness  of  public  procurement  procedures  by  contracting  authorities  and 
economic operators needs to be raised and independence of public procurement officers needs 
to be further strengthened.  

4.1.7. 

Intellectual property law 

There has been some progress concerning legislative aspects of intellectual property rights.  

There  has  been  little  progress  in  the  area  of  copyright  and  related  rights.  An  anti-
counterfeiting strategy is yet to be developed. No collecting societies exist in Kosovo. 

There  has  been  good  progress  concerning the  legislation  in  the  area  of  industrial property 
rights.  The  2010  laws  on  patents,  trademarks  and  industrial  designs  were  amended  in  July 
with  the  aim  to  make  them  compliant  with  the  EU  legislation.  A  Trademark  Database  was 
established,  but  is  not  yet  functional.  At  the  same  time,  the  digitalisation  of  data  for  over 
10,000 applications was finalised in May. In 2010, 1,480 decisions on trademarks and 147 on 
patents  were  taken.  In  2010,  the  Industrial  Property  Office  received  550  applications  on 
trademarks,  85  on  patents  and  4  on  industrial  designs.  The  backlog  of  applications  remains 
very  high,  with  17,000  trademarks  4,000  designs  and  500  patents  outstanding.  Proceedings 
remain  lengthy.  The  Industrial  Property  Office  is  still  understaffed  and  its  premises  are  not 
adequate.  

Some  progress  has  taken  place  in  enforcing  intellectual  property  rights.  An  Intellectual 
Property  Rights  Unit  was  established  within  the  Kosovo  Customs  and  became  fully 
operational in January. Risk profiles on goods that may infringe property rights were drafted 
and awareness activities on intellectual property rights have increased. 

A  memorandum  of  understanding  between  the  Customs  Service  and  the  Industrial  Property 
Office  was  signed.  The  division  of  competences  between  Customs  and  the  Ministry  of 
Environment and Spatial Planning still needs to be clarified. The Customs Service has made 

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efforts to enforce IPRs, goods have been seized (and in some cases destroyed) and significant 
fines  were  imposed.  In  general,  counterfeit  products  and  piracy  remain  issues  of  concern  in 
Kosovo.  Punitive  measures  against  industrial  property  rights  infringements  still  need  to  be 
clarified.  Destruction  procedures  for  goods  harmful  to  public  health  are  not  fully  defined. 
They  cannot  be  put  into  practice  because  of  gaps  in  the  legislative  framework  as  well  as 
inadequate administrative capacity, including adequate facilities to destroy dangerous goods. 

Piracy  is  widespread  and  commerce  of  pirated  material  takes  place  in  public  view  without 
sanction.  Kosovo  needs  to  carry  out  a  rigorous  assessment  of  the  scale  of  the  challenge  in 
order  to  design  the  most  appropriate  tools  and  put  in  place  the  necessary  institutional 
framework to fight piracy. 

Overall, Kosovo has started efforts to align its legislative framework with European standards 
in  the  area  of  intellectual  property  rights.  Some  steps  have  been  taken  to  increase 
administrative capacity in this area. The overall capacity remains insufficient and enforcement 
continues  to  be  a  challenge.  Counterfeiting  and  piracy  remain  issues  of  serious  concern  in 
Kosovo.  

4.1.8.  Employment and social policies, public health policy 

Kosovo  has  made  some  progress  in  the  field  of  employment  policy.  By  implementing  the 
Employment  Strategy  2010-2012,  it  has  further  contributed  to  create  new  employment 
opportunities,  notably  through  public  work  schemes.  The  Ministry  of  Labour  and  Social 
Welfare  endorsed  a  sectorial  strategy  and  its  related  action  plan  2011-13  focusing  on  job 
creation policies and the development of active employment measures. Implementation of the 
employment strategy has started, focussing on young people, persons with disabilities, social 
assistance  beneficiaries  and  people  suffering  from  poverty.  The  public  employment  service 
has  pursued  its  proactive  registration  of  job  seekers.  Resources  and  capacities  are  not 
sufficient to cope with all disadvantaged people who are mostly outside of the labour market. 
Some  efforts  have  been  made  to  modernise  employment  bureaus.  At  the  same  time,  their 
capacity  needs  to  be  strengthened.  Social  partners  have  little  influence  in  drafting  the 
employment strategies. 

Employment  rates  remain  very  low  and  youth  unemployment  and  long-term  unemployment 
are alarmingly high. Additional commitments from the government to address the challenge 
and decisive action by the government are needed.  

Some progress can be reported as regards social policies.  

The  adoption  of  the  labour  law  has  strengthened  the  legal  framework.  The  cost  of  its 
implementation may not be sustainable. Its implementation requires close monitoring, notably 
to pay attention to a possible increased vulnerability of women on the labour market, due to 
the newly-provided extended maternity leave. 

also 

operating 

In the area of health and safety at work, limited progress has been made. Labour inspectors 
and 
are 
Graçanicë/Gračanica.  The  labour  inspectorate  still  needs  to  improve  its  efficiency  in 
exercising  its  duties.  The  number  of  labour  inspectors  remains  insufficient.  Accidents  that 
happen at the work place need to be registered. 

of  Obiliq/Obilić,  Shtërpcë/Štrpce 

in  municipalities 

Some  progress  has  been  made  in  the  field  of  social  dialogue.  The  law  on  trade  unions  was 

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39 

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adopted,  regulating  their  establishment  and  mandate.  The  new  law  on  the  socio-economic 
council was adopted. The socio-economic council became operational. Discussions took place 
between social partners on setting the minimal wage. The dialogue between the government, 
employers' organisations and trade-unions needs to be improved. The bipartite social dialogue 
at  branch-  and  company-levels  requires  additional  promotion.  The  lack  of  reliable  data  on 
trade union membership prevents representative unions from being designated. 

There has been limited progress in the area of social inclusion including anti-discrimination 
(see  also  Political  criteria).  The  minimum  standards  for  five  different  social  services  were 
determined.  They  represent  a  template  for  the  standards  of  other  social  services,  which  are 
currently  being  drafted.  The  procedures  to  license  providers  of  social  services  were 
developed. The Roma, Ashkali and Egyptian minority communities continue to face the most 
serious challenges in terms of social inclusion. In the area of gender equality, some progress 
can  be  reported.  Kosovo  adopted  its  programme  and  action  plan  against  domestic  violence. 
Actions  to  protect  the  victims  of  domestic  violence  have  continued  with  the  active 
involvement of civil society organisations. They are monitored by the government, which is 
partially  financing  these  activities,  notably  the  enforcement  of  the  law.  Research  on  gender 
equality has improved. The implementation and enforcement of the legislation require further 
efforts  to  affect  positively  the  situation  of  women.  In  order  to  address  high  female 
unemployment, more job opportunities are needed. The low representation of women in key 
sectors  of  society  remains  a  concern.  Lack  of  employment  opportunities  is  an  overall 
challenge to achieving a higher level of social inclusion. In order to implement and monitor 
policy  effectively,  official  statistics  on  social  exclusion  and  poverty  are  required,  as  well  as 
adapted resources. 

Limited progress can be reported on social protection. Decentralisation of social services has 
continued. At the same time, adequate resources for this process have not been secured. The 
law on social assistance scheme and the law on social and family services were not adopted. 
There were cases of undue political interference in the appointment of certain directors of the 
centres for social work in municipalities. 

There  has  been  some  progress  in  the  area  of  public  health  policy.  The  health  information 
system  strategy  and  action  plan  2010-2020  were  adopted  and  Kosovo  has  started  its 
implementation.  The  implementation  of  the  2009  health  strategy  continues.  The  legislative 
framework  was  strengthened  by  the  adoption  of  twelve  administrative  instructions.  The 
tobacco  law  continues  to  be  implemented.  Awareness-raising  campaigns  as  well  as  site 
inspections have been intensified. The provisions concerning smoking in public areas need to 
be enforced. Laws on health and health insurance still need to be adopted. Statistical data at 
municipal  level  remains  limited.  Very  little  progress  has  been  made  in  implementing  the 
blood, tissues and cells legislation. Kosovo's child mortality rate continues to be high.  

The  fight  against  drug  abuse  has  not  yet  been  addressed  and  neither  has  the  policy  on 
prevention  of  non-communicable  diseases.  There  has  been  very 
in 
implementation of breast, cervical and colorectal cancer screening programmes in accordance 
with the EU Council Recommendation.  

little  progress 

The  provision  of  health  services  does  not  adequately  reach  minority  communities.  The 
availability  of  data  on  the  health  status  of  the  Roma,  Ashkali  and  Egyptian  (RAE) 
communities is limited. In the framework of the resettlement of lead-affected Roma, Ashkali 
and Egyptian) communities, the Ministry of Health endorsed a lead screening and treatment 
protocol.  A  family  medicine  centre  in  Mitrovicë/Mitrovica  is  responsible  for  carrying  out 

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40 

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specific  treatments  to  children  diagnosed  with  high  blood  lead  level.  Levels  of  lead 
contamination in the Mitrovicë/Mitrovica area remain high. Full vaccination coverage in the 
RAE  communities  is  lower  than  in  other  communities.  From  January  2011  the  institute  for 
public health carried out a vaccination campaign, inoculating more than 800 children from the 
RAE communities against various diseases. 

In the area of mental health, provisions on mentally disabled persons need to be included in 
the  health  strategy  action  plan.  Adequate  funding  for  proper  restructuring  of  the  sector  is 
needed.  Further  actions  are  needed  to  promote  inclusion  of  people  with  mental  health 
problems, notably in the education system, and their empowerment.  

In  general,  the  Ministry  of  Health  continues  to  be  affected  by  a  lack  of  adequate  funds  and 
capacity. The health sector's low budget still hampers the fulfilment of basic needs for mother 
and child healthcare.  

Overall, some progress can be reported in the employment, social policies and public health 
sectors. The legislative framework was improved notably by the adoption of the labour law, 
the  law  on  trade-unions  and  the  health  information  system  strategy.  At  the  same  time,  the 
administrative capacity remains limited and enforcement of legislation requires rapid action. 

4.1.9.  Education and research 

There  has  been  some  progress  in  the  field  of  education,  notably  as  regards  the  legislation. 
The  Education  Strategy  Paper  2011-2016  was  finalised  and  a  budget  was  allocated  for  its 
implementation.  The  revised  legislation  for  preschool,  primary,  secondary  and  higher-
education was adopted as well as policies for tackling the high drop-out rates of students, and 
violence at school. The Curriculum Framework was finalised. The participation in Tempus is 
increasing and the awareness about its benefits for public and private education institutions is 
improving.  The  administrative  capacity  to  manage  Tempus  projects  was  strengthened.  The 
European Association for Quality Assurance in Higher Education granted associate status to 
the Kosovo Accreditation Agency. 

The revised legislation foresees a number of new bodies, funding of which is not yet secured. 
Greater  attention  is  needed  on  quality  management  and  quality  assurance  in  education, 
particularly in the field of teacher training and the system of student and teacher assessment. 
There  was  an  undue  political  interference  in  the  appointment  of  certain  school  directors. 
Various programmes run by the Faculty of Education of Pristina University have not met the 
accreditation  standards  of  the  Accreditation  Authority.  The  law  on  adult  education  and  the 
law  on  vocational  education  training  need  to  be  reviewed  to  bring  them  in  line  with  other 
legislation  such  as  the  law  on  national  qualifications.  The  institutional  capacity  of  the 
Qualifications Authority needs to be improved to implement further the law on the National 
Qualifications  Framework.  The  draft  procedures  on  the  validation  of  qualifications  and 
accreditation  of  the  Vocational  Education  and  Training  providers  require  field  testing  and 
effective  implementation.  The  Council  for  Vocational  Education  and  Training  needs  to 
become  fully  operational.  Women's  access  to  vocational  training  needs  to  be  strengthened. 
Kosovo  needs  to  develop  statistics  and  data  on  education,  including  the  number  of  students 
and the employment rate of graduates.  

Inclusive  education  requires  increased  awareness,  attention  and  actions,  notably  to  enhance 
the  situation  of  marginalised  groups  such  as  children  from  minorities  and  children  with 
disabilities.  Schools  and  local  authorities  need  to  ensure  equal  opportunity  to  education  for 

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41 

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children from vulnerable groups. The strategy for integration of RAE in education provides a 
good  framework.  Learning  centres  for  Roma  pupils  were  opened.  Simplified  school 
registration  of  Roma  pupils,  which  was  guaranteed  through  an  administrative  instruction, 
remains  to  be  enforced  by  the  directors  of  schools.  Pro-active  measures  to  encourage 
enrolment and retention of Roma, Ashkali and Egyptian children need to be implemented. 

The  high  proportion  of  school-age  children  in  the  population  and  characteristics  of  the 
education  system  require  enhanced  commitments  and  resources  from  the  government  to 
develop capacities at central and municipal levels to implement the legislation. 

On  research  and  innovation,  limited  progress  can  be  reported  on  the  alignment  with 
European standards. At the same time, it was declared a priority policy in 2010. The national 
science programme was implemented, funding research projects in the six priority areas for a 
total amount of € 1 million. Some support was granted to facilitate access to publications in 
Albanian  language,  one  of  the  official  languages.  To  stimulate  the  scientists,  a  prize  was 
organised  for  the  best  Kosovan  researcher  of  the  year  and  the  new  researcher  of  the  year. 
Participation  in  the  Seventh  European  Research  Framework  Programme  (FP7)  has  slightly 
increased in terms of submissions, but was very limited in successful and funded projects.  

There has been no progress with respect to investment in research. Substantial efforts are thus 
necessary  to  contribute  to  the  objectives  and  targets  of  the  European  Research  Area  and 
Innovation Union.  

Overall, Kosovo is gradually progressing towards its priorities on education and research. The 
implementation  of  the  legislative  framework  needs  to  be  enhanced  through  improved 
coordination  between  central  and  local  levels  and  by  allocating  more  resources.  Achieving 
progress in research requires additional and sustained efforts. 

4.1.10.  WTO issues 

Kosovo is not a member of the WTO and has not taken any formal steps to join it. 

4.2. 

Sectoral policies 

4.2.1. 

Industry and SMEs 

There  has  been  some  progress  in  the  area  of  industry  and  SMEs.  In  July,  the  Government 
adopted  the  Strategy  on  SME  Development  for  the  period  2012-2016  with  the  vision  2020. 
The goals of the strategy are built around the principles of the Small Business Act for Europe. 
The  SME  Support  Agency,  in  the  Ministry  of  Trade  and  Industry,  is  the  main  institution 
responsible  for  implementing  this  strategy.  The  Agency,  together  with  the  Chamber  of 
commerce  and  the  regional  development  agencies  have  increased  efforts  for  better 
coordination and communication between educational institutions and SME's in Kosovo. 

The business register includes 105,000 companies. Data from the Tax Administration, based 
on the fiscal numbers issued, suggests that only less than half of them are actually active. To 
deregister  after  becoming  inactive,  companies  have  to  present  to  the  business  register  a 
statement  from  the  Tax  Authority  that  all  outstanding  tax  obligations  were  fulfilled.  Online 
company  registration  has  only  been  possible  at  the  'one-stop-shops'  or  municipal  business 
centres that were established in 22 municipalities. Full online business registration is still not 
possible.  

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The Ministry of Trade and Industry adopted an industrial strategy in 2009. The government 
still needs to endorse it. Industry and SME development in general continues to suffer from 
difficulties  with  the  legal  enforcement  of  contracts,  unreliable  electricity  supply  and  limited 
and expensive access to finance.  

Overall, coordination and cooperation need to be increased between relevant actors in the area 
of enterprise and industrial policy (agencies for SME development and investment promotion, 
chambers  of  commerce,  banking  association,  courts,  regional  development  agencies,  etc.). 
The implementation plan for the SME and industrial strategies needs to be adopted, adequate 
budget allocated and the responsible authorities need to be strengthened.  

4.2.2.  Agriculture and fisheries 

In the area of agriculture and rural development policy, there has been limited legislative 
activity.  Changes  to  the  law  on  wine  were  adopted  in  July,  entailing  further  specifications 
regarding classification, assessment and determination of the geographical protected origin. 

The Ministry and the Kosovo Food and Veterinary Agency need to assume new tasks related 
to direct payments and the transfer of inspection powers from municipalities to the Agency. 
The  overall  2011  budget  for  both  institutions  is  some  7%  lower  than  in  2010.  The  farm 
register is being upgraded to include data from other registers, such as the animal registry and 
the  vineyard  register.  The  small  average  size  of  farms  in  Kosovo,  the  many  subsistence 
farmers and the large informal part of the agricultural sector complicate data-gathering for the 
farm accountancy data network. This in turn affects policy-making. Discrepancies continue to 
exist  between  EUROSTAT  and  the  Statistical  Office  of  Kosovo  figures  on  EU-Kosovo 
agricultural trade. 

The  Ministry  has  continued  its  scheme  of  coupled  payments  to  farmers,  in  the  sectors  of 
cereals  and  livestock,  and  aid  for  processing  and  marketing  for  the  dairy,  meat,  fruit  and 
vegetables  sectors  at  farm  level,  through  the  Payment  Unit  established  last  year  in  the 
Ministry.  Advisory  services  do  not  yet  inform  farmers  how  to  apply  for  the  grants. 
Commercial funding from Kosovo's banks remains costly (often prohibitively so) for farmers 
both in terms of interest rates and collateral requested. 

Following last year's changes to the law  on  forest  management,  many  forestry  competences 
were  transferred  to  municipalities,  several  of  which  drafted  long-term  forest  management 
plans. This allows long-term licences for wood logging to be issued, in turn leading to a more 
sustainable forest management. In January, the forest management annual operation plan was 
finalised by the Kosovo Forests Agency.  

As  regards  food  safety,  veterinary  and  phytosanitary,  the  Monitoring  and  Scientific 
Boards of the Kosovo Food and Veterinary Agency were appointed at the beginning of 2011. 
The transfer of inspection competences from municipalities to the agency, as provided for by 
last year's food law, has still not been completed. This transfer needs to be finalised to control 
the continuing illegal animal trade and slaughtering and to strengthen the controls at livestock 
markets. Other challenges in this respect include the limited number of veterinary inspectors. 

In December, the process of identifying and registering small ruminants and pigs started with 
the  aim  to  complete  it  in  a  year's  time.  The  IT  infrastructure  for  the  animal  identification, 
registration  and  movement  control  system  is  still  not  fully  operational.  Animal  registration 

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43 

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continues  to  be  hindered  by  non-reporting  of  animal  births  and  movement,  as  well  as 
smuggling and illegal slaughtering.  

Tender  processes  are  underway  for  equipment  at  the  laboratory  of  the  Food  and  Veterinary 
Agency.  This  laboratory  does  not  have  sufficient  staff  and  the  infrastructure  of  the 
phytosanitary  and  veterinary  border  inspection  points  remains  poor.  No  facilities  for 
processing animal by-products exist. A feasibility study for establishing a rendering plant was 
completed.  Discussions  on  urgently-needed  landfill  disposal  as  an  interim  solution  have  not 
yet led to any concrete results. 

Four  food  hygiene  regulations  (deriving  from  new  EU  hygiene  package)  were  adopted.  In 
October  2010,  the  Food  and  Veterinary  Agency  completed  an  assessment  of  dairy 
establishments,  slaughterhouses  and  meat  processing  plants,  as  a  first  step  to  drafting  a 
strategy for upgrading these establishments. A working group was established in the area of 
plant protection to compile a list of all plant diseases currently present in Kosovo. 

Most  of  the  European  standards  on  fisheries  do  not  apply  to  Kosovo,  which  has  no  marine 
fishing. 

Overall,  Kosovo  has  made  limited  progress  in  the  area  of  agriculture  and  food  safety. 
Implementation  of  the  legislative  framework  remains  the  main  challenge,  linked  to 
administrative  capacity  building  in  the  various  institutions  involved  and  the  low  budgets 
allocated to these sectors. Animal registration, disposal of animal by-products and evaluating 
agrifood establishment as a first step to their upgrade deserve particular attention. 

4.2.3.  Environment 

As regards environment, there has been limited progress in the area of horizontal legislation. 
An  administrative  instruction  on  participation  and  information  of  public  stakeholders  in  the 
Environmental Impact Assessment procedures was adopted in July. Other implementing rules 
on Environmental Impact assessment and on Strategic Environmental Assessment were also 
adopted. The implementation of the law on environmental impact assessment has begun, but 
the quality of reports requires improvement. The Environmental Crime Directive was partially 
transposed.  Cooperation  between  NGOs  and  the  Ministry  needs  to  be  strengthened.  Civil 
Society  organisations  are  not  sufficiently  involved  and  consulted  in  policy-making.  Public 
debate  on  environmental  matters  has  to  be  further  developed.  10  capital  projects  were 
implemented  from  the  Environmental  Action  Plan;  another  11  are  in  the  process  of  being 
carried out. 

There  has  been  some  progress  in  the  area  of  air  quality.  Administrative  instructions 
determining (inter alia) norms of air quality, monitoring points and number and frequency of 
measurements  were  adopted  in  2010,  another  administrative  instruction  on  norms  of  air 
quality was adopted in July. Three first stations of the air quality monitoring network came 
online,  others  are  expected  during  2011.  The  agglomerations  and  zones  have  not  yet  been 
identified  and  the  air  polluters'  inventory  also  remains  to  be  compiled.  Inter-institutional 
cooperation between the Ministry of Environment and the Ministry of Energy has improved. 
The energy sector continues to be the main source of emissions of dust, SO2 and NOX, which 
are substantially above the EU limits.  

There has been little progress in the area of waste management. The Law on waste has not yet 
been  adopted.  Waste  recycling  and  separation  are  still  not  tackled.  The  rate  of  waste  bill 

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collection slightly increased in  2010,  but it  remains  low. Local Environmental  Action  Plans 
drafted by Municipalities include also a waste management component. 

With regard to water quality, there has been very little progress. The law on water has not yet 
been  adopted.  Kosovo  currently  has  two  waste  water  treatment  plants;  one  more  is  in  the 
process  of  being  completed.  Vulnerable  zones  and  protected  areas  have  not  yet  been 
designated  and  there  is  still  no  water  quality  monitoring  programme.  The  drinking  water 
supply  system  remains  poorly  developed  and  a  significant  part  of  the  population  is  still  not 
connected. Investments in this sector have been insufficient. The rate of water bill collection 
slightly increased in 2010, but in general, it still remains low. 

Little  progress  has  been  achieved  in  the  field  of  nature  protection.  Several  administrative 
instructions  related  to  last  year's  law  on  nature  protection  were  adopted.  The  strategy  and 
action plan on biodiversity were adopted in July. Institutional and administrative capacity in 
this field remains very weak. 

Limited  progress  has  been  achieved  in  the  area  of  industrial  pollution  control  and  risk 
management.  Administrative  instructions  on  the  forms  and  content  of  an  application  for 
integrated  permit,  and  on  procedures  for  the  development  and  approval  of  Best  Available 
Techniques  reference  documents,  as  well  as  for  the  prevention  of  major  accidents  were 
adopted.  

In the area of chemicals, there has been little progress, with the adoption of an administrative 
instruction on risk assessment. There have been no developments as regards, noise and civil 
protection.  

There has been little progress in the area of climate change. Kosovo is not a Party to the UN 
Framework  Convention  on  Climate  Change.  Kosovo  has  no  climate  change  strategy,  but  is 
beginning  to  compile its inventory of greenhouse gases. Kosovo  participated actively in the 
climate  work  under  the  Regional  Environmental  Network  for  Accession  (RENA).  Kosovo 
needs  to  take  concrete  steps  towards  transposing  and  implementing  the  EU  climate  acquis, 
particularly the Monitoring Mechanism Decision. 

The  administrative  capacity  remains  very  weak  in  the  field  of  environment  and  climate 
change.  Further  efforts  are  required  to  improve  the  institutional  arrangements  to  ensure  co-
ordination and cooperation among the institutions involved in the environment sectors. Efforts 
need to be made to separate political from operational functions in the Ministry. In September, 
the  administrative  instruction  related  to  the  organisation  and  structure  of  the  Kosovo 
the  hydro-
Environmental  Protection  Agency 
meteorological  institute  under  KEPA.  The  Strategic  Development  Plan  for  the  Ministry  of 
Environment has not yet been adopted.  

(KEPA)  was  signed, 

incorporating 

The  budget  of  the  Ministry  of  Environment,  although  already  insufficient,  was  decreased. 
This  has  a  major  negative  impact  on  the  ability  of  various  institutions  to  perform  their 
functions  effectively.  The  Waste  and  Water  Regulator  also  continues  to  be  affected  by  the 
lack of human resources and face significant financial constraints. 

Overall,  alignment  with  European  standards  in  the  area  of  environment  and  climate  change 
remains  at  an  early  stage.  There  has  been  very  limited  progress  in  adopting  legislation. 
Implementation  and  enforcement  of  existing  legislation  is  poor.  Environment  and  climate 
change  continue  to  be  a  low  priority  for  Kosovo.  There  is  an  urgent  need  for  awareness-

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raising and strategic planning in the field of environment and climate change. Further efforts 
are  required  to  improve  the  institutional  arrangements  in  order  to  ensure  co-ordination  and 
cooperation among the institutions involved in environment and climate change. The budget 
devoted  to  the  sector  is  insufficient  to  meet  Kosovo's  huge  environmental  challenges,  in 
particular the considerable investments needs in infrastructure. Water and air quality require 
substantial attention to meet minimum requirements for human health. Kosovo needs to take 
steps  towards  establishing  climate  policies,  particularly  related  to  the  EU  climate  change 
acquis. 

4.2.4.  Transport policy 

In  the  area  of  Trans-European  networks,  Kosovo  has  continued  to  participate  actively  in 
implementing  the  2004  Memorandum  of  Understanding  on  development  of  the  South-East 
Europe  Core  Regional  Transport  Network  and  in  the  South-East  Europe  Transport 
Observatory. The construction of Route 7 has continued. Some rehabilitation and maintenance 
was  carried  out  for  Route  6.  Kosovo's  main  road  infrastructure  project  (the  highway  to  the 
Albanian  border),  remains  an  issue  of  concern  due  to  its  disproportionately  high  costs  as  a 
share of Kosovo's total budget, which continues to crowd out investments in other transport 
areas.  The  Multi-modal  Transport  Strategy  and  Action  Plan  is  being  updated  and  some 
operational objectives being modified. 

There  has  been  limited  progress  in  the  area  of  road  transport.  New  criteria  for  licensing 
freight  transport  operators  were  adopted  in  an  administrative  instruction.  The  Road  Safety 
Council  has  not  met  since  September  2010  and  the  Road  Safety  Programme  has  been 
suspended  in  practice.  The  rate  of  traffic  accidents,  whilst  slightly  decreasing  in  2010, 
remains  very  high.  Vertical  and  horizontal  signalling  is  insufficient.  The  new  Division  for 
Transport  Policies  in  the  Ministry  of  Infrastructure  (which  covers  planning)  still  lacks 
adequate financial and human resources.  

Some  progress  can  be  reported  in  rail  transport.  The  unbundling  of  Kosovo  railway 
infrastructure (Infrakos) and the train operations is underway: the 2 new companies (Trainkos 
and Infrakos) were registered in September. Their operational and financial unbundling still 
needs to happen. The network statement was drafted by Kosovo Railways, but has not been 
published as track access charges are still being discussed. The Railways Regulatory Body is 
now operational, but it lacks both staff and capacity; its budget is insufficient to carry out its 
tasks  effectively.  The  Railway  Safety  and  Accident  investigation  functions  need  to  be 
separated.  The  Joint  Border  Crossing  Agreement  with  the  former  Yugoslav  Republic  of 
Macedonia  was  signed.  Kosovo  Railways  continue  to  be  affected  by  serious  lack  of  human 
resources and adequate financial allocation. A feasibility study for rail route 10, which is part 
of the regional core network, was completed, but no IFIs are interested. 

There is no progress to report on combined transport.  

There  has  been  some  progress  in  the  area  of  air  transport.  Implementation  into  national 
legislation has been progressing as regards economic regulations and other fields required in 
the first phase of the European Common Aviation Area Agreement (ECAA). As regards some 
of the legislation required under phase two, national implementation measures were adopted, 
but  are  subject  to  quality  check.  Pristina  International  Airport  was  reclassified  as  being 
'schedules  facilitated'  from  July  following  a  capacity  analysis.  Kosovo  still  needs  to 
implement elements of the EU Regulation on allocation of slots.  

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The Kosovo Civil Aviation Authority (KCAA) is not a part of the system standardisation and 
safety assessment on foreign aircrafts, as a consequence of disagreement on status. The first 
aviation medical centre was approved in January and it issued its first medical certificates for 
air traffic controllers in March. Laws establishing air navigation services as well as accident 
investigation still need to be adopted. In Air Traffic Management Kosovo continues to make 
good  progress  as  regards  regulatory  convergence  with  the  associated  acquis,  its  ECAA 
obligations, with the focus now being on implementation and ensuring a sustainable structure 
for the National Supervisory Authority. Kosovo's aviation sector continues to suffer as a result 
of overflight restrictions imposed by Serbia for flights coming in and out of Pristina, which 
has a financial impact for the air operators and an environmental impact for the region.  

Overall, alignment with the EU transport acquis is ongoing. Kosovo continues to make solid 
progress in aviation, but is hampered by issues linked to status. The development of railways 
contrasts with the low budgets devoted to this transport mode, a consequence of the oversized 
investment in one road project. Further efforts to improve road safety and to develop Kosovo 
Railways are required. 

4.2.5.  Energy 

The  energy  sector  continues  to  suffer  serious  problems.  Power  cuts  continue  to  occur  as  a 
consequence  of  the  energy  utility's  dire  financial  condition  resulting  from  difficulties 
regarding electricity billing and collection.  

There has been no development regarding security of supply. Kosovo still has no strategy to 
reach  the  required  level  of  oil  reserves.  Implementation  of  investment  and  maintenance 
consistent with the electricity transmission development plan 2010-2019 has made Kosovo's 
transmission  system  more  reliable.  Kosovo's  electricity  transmission  system  operator  still 
does not participate in regional mechanisms to plan and remunerate electricity transit, due to 
differences  over  its  status.  The  resulting  lack  of  control  imperils  the  stability  of  Kosovo's 
power system and Kosovo loses out on transit revenue. 

Some progress has been made regarding the internal energy market and implementation of 
the Energy Community Treaty. In October, the Assembly adopted implementing legislation to 
the laws on energy, electricity and the energy regulator to align Kosovo further with the EU's 
second  internal  energy  market  package.  Work  on  the  development  of  the  new  lignite-fired 
Kosovo  power  plant  has  continued.  A  final  request  for  proposals  was  sent  out  to  the  four 
preselected  bidders.  At  the  end  of  2010,  coal  exploitation  has  started  at  the  Sibovc  Mine, 
which is to be offered to investors as part of the New Kosovo Power Plant. Difficulties with 
regard to expropriation make it impossible to uncover the necessary coal mass, endangering 
coal  supply  to  existing  power  plants  in  the  near  future.  The  legal  unbundling  of  the 
distribution  and  supply  functions  of  the  Kosovo  Energy  Corporation  has  not  taken  place, 
despite the obligation to do so under the law on electricity and the Energy Community Treaty. 
The  privatisation  of  the  distribution  and  supply  functions  of  Kosovo  Energy  Corporation  is 
yet  to  be  concluded.  Until  completion  of  the  new  Kosovo  power  plant  project,  the  other 
functions  remain  integrated  in  Kosovo  Energy  Corporation.  The  Serbian  electrical  power 
utility  maintains  an  unlicensed  branch  in  the  north  of  Kosovo.  As  a  result,  Kosovo  lacks 
control  of  its  own  network,  which  deprives  Kosovo  Energy  Corporation  of  revenue, 
particularly since power is deviated from the Gazivoda hydropower plant to supply the north.  

In  March,  the  Government  began  implementing  the  action  plan  for  decommissioning  the 
remaining  operational  units  of  Kosovo  A  in  order  to  comply  with  the  Large  Combustion 

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Plants Directive. The planned closure has been delayed with respect to the commitment taken 
by the Prime Minister in 2009. 

The Energy Regulatory Office has maintained existing electricity tariffs, due to falling import 
prices and ongoing government subsidies to Kosovo Energy Corporation. With a view to the 
upcoming privatisation of the Corporation's distribution and supply functions and for tariffs to 
reflect  actual  cost  levels  a  gradual  increase  is  unavoidable.  A  decrease  in  government 
subsidies  would  facilitate  this  process.  The  Corporation's  performance  on  billing  and 
collection has improved, but remains an issue of concern. The proportion of power supplied 
that is actually paid for remains dangerously low: losses (whether technical or non-technical) 
account  for  more  than  30%  of  energy  available  for  sale),  resulting  in  a  loss  of  some  € 100 
million.  As  a  result  of  investments,  transmission  losses  were  reduced.  Low  levels  of  bill 
collection (and non-cost-recovery tariffs) continue to fuel an unsustainable growth in power 
demand. 

The law on energy efficiency was adopted in June. The accompanying action plan, aiming to 
increase  efficiency  by  9%  in  2018,  has  still  not  been  adopted.  The  law  foresees  alignment 
with the acquis in areas such as energy labelling, ecodesign, energy performance of buildings 
and  energy  end-use  efficiency.  In  addition,  it  provides  the  legal  basis  for  establishing  an 
energy  efficiency  agency  and  lays  down  the  procedures  for  setting  up  an  energy  efficiency 
fund to promote projects on energy efficiency and renewable energy sources. In September, 
Kosovo  adopted  a  Heating  Strategy,  the  aim  of  which  is,  inter  alia,  to  reduce  the  use  of 
electricity  for  space  heating.  Further  technical  preparations  have  been  made  for  the 
cogeneration  project  at  the  Kosovo  B  power  plant,  to  use  waste  heat  to  produce  district 
heating,  thereby  also  reducing  CO2  emissions.  The  actual  investment  is  in  doubt  given  the 
district heating sector's financial difficulties. 

The  first  draft  of  the  simplified  renewable  energy  action  plan  was  prepared  within  the 
framework of the Energy Community. A binding target for the share of renewable energy in 
the  final  energy  consumption  in  2020  is  prepared  for  Kosovo  within  the  framework  of  the 
Energy Community. Three international companies expressed an interest in constructing the 
300  MW  Zhur  hydropower  plant.  There  were  15  applications  for  constructing  other  small 
hydro power plants with a total capacity of 128 MW. The first three wind turbines in Kosovo, 
with  a  total  capacity  of  1.35  MW  became  operational  and  the  regulator  authorised  an 
additional wind energy capacity of 126 MW. Kosovo needs to make further efforts to increase 
the  share  of  renewable  energy  in  the  final  energy  consumption  and  to  take  measures  to 
promote the use of biofuels in transport. 

In the area of nuclear safety and radiation protection, the Radiation Protection and Nuclear 
Safety Agency is in the process of establishment under last year's law on protection from non-
ionising  radiation,  ionising  radiation  and  nuclear  security.  The  Director  and  two  technical 
personnel  were  appointed,  and  further  recruitments  are  underway.  There  is  no  operator  for 
radioactive  waste  management.  Last  year's  law  is  very  general  and  needs  to  be  amended  in 
order to transpose the EU nuclear safety and radiation protection acquis. Considerable further 
efforts are needed for Kosovo to transpose this acquis and align with international standards. 

Overall,  the  authorities  have  made  some  progress  on  legal  alignment  and  on  the 
implementation  of  the  Energy  Community  Treaty.  In  order  to  attract  investment,  continued 
efforts  are  needed  to  improve  electricity  billing  and  collection  performance  and  to  move  to 
non-subsidised,  cost  reflective  tariffs.  Further  efforts  are  required  to  improve  energy 
efficiency  in  all  relevant  sectors  including  establishing  monitoring  mechanisms  as  well  as 

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improving  the  use  of  renewable  energy  in  all  sectors.  Kosovo  continues  to  be  negatively 
affected by Serbian interference in its power system. 

4.2.6. 

Information society and media 

There  has  been  little  progress  as  regards  electronic  communications  and  information 
technologies.  The  2007  telecommunications  sector  policy  is  scheduled  to  be  reviewed  this 
year.  The  Telecommunications  Regulatory  Authority  (TRA)  adopted  several  implementing 
regulations:  regulation  on  market  analyses  and  definition  of  the  providers  with  significant 
market  power,  regulation  on  full  and  shared  unbundling  of  the  local  loop  and  the  sub-loop, 
and the regulation for the provision of access and interconnection. Kosovo is lagging behind 
with implementing competitive safeguards and still has no international dialling code, nor an 
internet country code top domain name. Unlicensed (Serbian) mobile companies continue to 
operate in Kosovo. This interferes with Kosovo's spectrum management.  

The  process  for  privatising  Post  and  Telecommunication  Kosovo  (PTK)  is  ongoing,  but 
procedural  delays  have  a  negative  impact  on  the  regulatory  development  of  the  market. 
Management of the  telecommunications sector was transferred to the Ministry of Economic 
Development,  but  with  no  improvement  on  administrative  capacity.  The  regulator's  human 
and financial capacity to ensure implementation and enforcement is insufficient, and the TRA 
has  difficulties  attracting  and  retaining  staff.  The  regulator's  financial  independence  is 
undermined as it is financed entirely from the state budget. 

There have been no developments in the area of information society. The law on information 
society government bodies has not been adopted. This law is important to create a legal basis 
for an eGovernment Agency and a Government Forum for Information Society. The division 
of  responsibilities  and  tasks  between  the  different  ministries  and  government  levels  on  the 
information society issues needs to be clarified. 

Some  progress  can  be  reported  in  the  area  of  audiovisual  policy.  The  Independent  Media 
Commission (IMC) issued several regulations such as the regulation on protection of minors 
and children, regulation for the IMC license fee and regulation on cable operators aiming to 
align  legislation  in  Kosovo  with  the  EU  audiovisual  media  services  directive.  For  the  first 
time, IMC monitored the election campaign. The IMC Council also completed the process of 
licensing terrestrial broadcasters and cable operators. During 2010, the IMC has renewed the 
operational licences of all existing TV stations that use a frequency to broadcast. There are no 
must-carry  requirements  to  the  cable  operators  when  it  comes  to  inclusion  of  Kosovo-wide 
and local  terrestrial TV  stations in cable packages. Most of the cable operators are carrying 
Kosovo-wide and local TV stations only on a fee-basis (and drop them from their package in 
the  case  of  late  payments),  which  seriously  limits  the  audience'  right  of  to  access  to  the 
terrestrial free-to-air channels.  

The Assembly of Kosovo has yet to complete the appointment of five IMC Council members. 
The Supreme Court has not appointed the members/ chair of the IMC Media Appeals Board. 
The  administrative  capacity  of  the  Commission  has  been  strengthened,  but  low  salaries 
relative to the industry make it difficult for the IMC to attract and retain staff. 

The  Assembly  has  continued  the  process  of  amending  the  law  on  the  Independent  Media 
Commission  and  Broadcasting.  A  draft  which  failed  to  preserve  the  IMC's  independence  in 
line  with  European  standards  on  broadcast  regulation  was  withdrawn.  The  IMC  has  made 
some  progress  with  respect  to  the  digitalisation  process  including  establishing  five  working 

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groups.  A  digitalisation  strategy  has  not  yet  been  adopted.  Kosovo  is  not  a  member  of  the 
International  Telecommunication  Union  (ITU)  and  has  therefore  not  been  in  a  position  to 
request digital frequencies. Serbia has asked the ITU to allocate one frequency on Kosovo's 
behalf. This is insufficient.  

The  Assembly  of  Kosovo  has  failed  to  take  actions  as  concerns  sustainable  funding  of 
Kosovo's public broadcaster Radio and Television Kosovo. At the same time, there have been 
extensive  discussions  and  an  unsatisfactory  draft  law  was  withdrawn  in  August.  Its  funding 
came from the Kosovo Budget on an ad hoc basis during 2011, and the broadcaster's budget 
was  reduced  from  € 10.5  million  to  around  € 8  million.  The  lack  of  sustainable  funding 
undermines RTK's independence. 

As public fee collection for RTK was suspended, the broadcaster failed to allocate 5% of this 
fee to the fund supporting minority, multiethnic and other special media, as required by law. 
Disbursement  of  the  fund,  which  restarted  in  2009,  was  therefore  halted  again.  Minority 
media were not provided with information on allocation of the initial funds, even after several 
official requests. Inconsistencies between the law on defamation and insults and the criminal 
code  have  still  not  been  resolved.  According  to  European  standards  defamation  is  not  a 
criminal offence. Kosovo does not apply the penal provisions on defamation, but since they 
remain on the statute book, legal uncertainty persists. 

Overall, the administrative capacities of both regulatory  bodies and the Ministry need to be 
strengthened.  In  electronic  communications,  Kosovo  needs  to  complete  introduction  of 
competitive safeguards and build up capacity to enforce regulatory decisions. As a matter of 
urgency, Kosovo needs to develop a solution for the sustainable funding of the public-service 
broadcaster:  the  current  budget-only  funding  undermines  RTK's  independence.  In  addition, 
the  forthcoming  Independent  Media  Commission  law  needs  to  preserve  the  IMC  Council's 
independence. 

4.2.7.  Financial control 

There has been some progress on public internal financial control. An updated PIFC Policy 
Paper  was  adopted  in  May.  The  Central  Harmonisation  Unit  for  financial  management  and 
control  published  a  manual  for  managers  in  budget  organisations  in  order  to  adhere  to  last 
year's  adopted  treasury  rule  on  financial  management  and  control.  Training  material  in  the 
field of FMC is being developed. An administrative instruction was adopted on the tasks and 
functioning  of  internal  audit  committees  in  budget  organisations.  Training  in  the  area  of 
internal  audit  has  continued,  leading  to  more  internal  auditors  being  certified.  This 
certification process needs to continue and the absolute number of internal auditors needs to 
increase. The Central Harmonisation Unit on Internal Audit completed a manual on risk and 
data  management  and  started  a  program  to  raise  awareness  among  ministers,  permanent 
secretaries and CEO's of publicly owned enterprises on the relevance of internal audit. 

The  Office  of  the  Auditor  General  updated  its  corporate  development  strategy.  The  main 
objective to be achieved by 2014 is the establishment of the Office as a sustainable institution, 
carrying  out  its  business  according  to  international  best  practices  and  ensuring  that  audited 
bodies address recommendations effectively. As of September 2010, the Office has conducted 
a  limited  number  of  performance  and  management  audits,  as  well  as  financial  management 
and control health checks in all budget organisations not fully audited to ensure that all budget 
spenders are visited each audit season. The number of regular audits has increased and fewer 
audits of municipalities are contracted out to private audit firms.  

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Overall,  some  progress  has  been  made  on  financial  control.  Concerning  internal  audit,  the 
basic  legal  framework  is  in  place  and  the  attention  is  now  to  be  shifted  towards  its 
implementation. Practical implementation of public internal financial control has remained at 
an  early  stage.  Internal  audit  needs  to  progress  from  compliance  testing  to  being  used  as  a 
managerial tool. Further awareness-raising is required to develop a greater understanding of 
accountability within management and to embed financial management and control systems. 
External audit practice is progressing well.  

4.2.8. 

Statistics 

There  has  been  some  progress  as  regards  the  statistical  infrastructure.  The  cooperation  of 
the Statistical Office of Kosovo's with other institutions has improved. The amendments to the 
law  on  tax  procedures  now  allow  the  tax  administration  to  provide  the  Office  with  the 
necessary administrative data for the statistical business register. The statistical infrastructure 
of Kosovo needs to be strengthened. The Office lacks the necessary resources as well as the 
legal framework to carry out its mandate. 

There  has  been  limited  progress  on  classifications  and  registers.  Efforts  are  needed  to 
implement  the  European  classification  of  economic  activities  NACE  Rev.  2  (NACE  = 
Statistical nomenclature of economic activities in the European community). 

As  regards  sector  statistics,  some  progress  has  been  made.  Very  good  progress  has  been 
achieved in the area of population statistics. In April, Statistical Office conducted the Housing 
and  Population  Census.  Throughout  the  preparatory  phase,  the  Office  met  all  operational 
deadlines  and  was  ready  to  dispatch  close  to  5,000  enumerators  on  1  April.  In  seven 
municipalities  the  enumeration  was  extended  by  four  days  due  to  under-enumeration  or 
technical difficulties. A post-enumeration survey was conducted in order to verify the quality 
of  data.  An  intense  one-month  campaign  had  preceded  the  enumeration  phase.  Special 
outreach  efforts  were  made  to  inform  minority  communities  about  the  census.  Preliminary 
data were published in June. Processing of more detailed data sets is ongoing. 

Enumeration  in  the  three  northern  municipalities  and  in  northern  Mitrovicë/Mitrovica  could 
not  take  place.  UNOPS  (United  Nations  Office  for  Project  Services)  had  been  mandated  to 
implement the census in the northern municipalities, but the lack of cooperation of the Serbia-
supported municipalities prevented UNOPS from conducting the enumeration. 

As regards other areas of sector statistics, limited progress has been achieved. This is mainly 
due to the resources spent on the census and the limited budget of the Statistical Office: both 
the labour force survey and the agricultural household survey were cancelled in 2010 due to 
lack  of  resources.  Macroeconomic  statistics  were  produced  in  a  timely  manner.  Since 
November, the Ministry of Finance publishes monthly public expenditure and revenue data on 
its website. The Economic Accounts for Agriculture were published for the first time in July 
2011, covering the period 2005-2008. 

Overall, some progress has been achieved in the area of statistics. The authorities conducted 
the population and housing census in a satisfactory manner. This provides an important basis 
for  improving  statistics  in  Kosovo.  The  census  could  not  be  organised  in  northern 
municipalities.  Due  to  the  limited  resources  of  the  Statistical  Office,  progress  has  slowed 
down  in  other  areas.  The  legal  framework  needs  to  be  improved  and  the  capacity  of  the 
Statistical Office needs to be strengthened. Statistics are essential for evidence-based decision 
making, and the lack of reliable statistics in Kosovo needs to be addressed as a priority. 

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4.3. 

Justice, freedom and security 

4.3.1.  Visa, border management, asylum and migration 

Kosovo has no visa policy. The government has launched the procedure for establishment a 
visa policy system, and the Ministry of Foreign Affairs has put in place a working group for 
this  purpose.  In  compliance  with  the  law  on  foreigners,  the  Ministry  of  Internal  Affairs  has 
started  implementing  the  "visitors  procedure",  whereby  foreigners  are  required  to  send  a 
number of documents before coming to Kosovo. 

By  the  end  of  June,  more  than  827,000  passports  were  issued  in  total  by  the  civil  register 
agency, around 1,600 of which to Kosovo Serbs. The small number of valid UNMIK travel 
documents  (30)  will  expire  in  December  2011.  Some  Kosovo  residents  have  kept  the  old 
Yugoslav passport, which remains valid until December 2011. 

The  amended  law  on  civil  status  was  adopted  in  June.  The  Ministry  of  Internal  Affairs  has 
started  addressing  shortcomings  of  its  civil  registration  system  through  the  digitalisation 
process  by  finalising  the  scanning  of  14,000  civil  status  registry  books  (4  million  records). 
This will be followed by the second phase of entering the data into the new central civil status 
database. The database needs to be integrated with the Kosovo civil register. The inspectorate 
unit  of  the  civil  registration  agency,  established  in  early  2011  with  a  mandate  to  check  the 
integrity of the processes related to civil status, civil registry books, vehicle registration and 
issuing of driving licences, is working well albeit with limited capacity. 

Preparations for issuing Kosovo biometric passports have continued. The process of issuing 
biometric  passports  needs  to  be  accompanied  by  an  accurate  and  reliable  civil  registration. 
The cooperation between local embassies/offices and the agency for civil registration needs to 
be  strengthened  to  improve  the  proper  handling  of  reported  fraud  involving  civil  status 
certificates or ID documents.  

Overall, Kosovo is at an early stage as regards the visa policy. 

In relation to border management, Kosovo has made some progress. The improved version 
of  the  EU-funded  border  management  IT  system  became  operational  at  almost  all  BCPs  as 
well as in regional and central police command centres. The joint task force of Customs and 
Police  Services  which  was  established  to  fight  cross-border  criminality  and  smuggling  has 
started  producing  joint  risk  assessments.  The  three  agencies  involved  in  integrated  border 
management  (border  police,  customs  and  the  Food  and  Veterinary  Agency)  have  organised 
joint patrols along the border line. Joint operational actions have also been organised at border 
crossing points. Many structures of the integrated border management have been put in place. 

Agreements  enabling  joint  and  synchronised  police  patrols  of  borders  were  signed  between 
Kosovo and Albania and the former Yugoslav Republic of Macedonia. The joint patrols have 
been launched. Kosovo border police issued a new standard operating procedure for checking 
procedures  at  borders.  Kosovo  Police  took  over  the  responsibility  from  KFOR  for  the 
surveillance of the border with the former Yugoslav Republic of Macedonia and Montenegro. 
The border demarcation process with Montenegro has not yet started. 

In  January,  the  customs  signed  two  memoranda  of  understanding  with  the  Kosovo 
Intelligence  Agency  and  with  the  State  Prosecutor's  office  with  the  aim  to  strengthen 
cooperation.  The  border  police  and  customs  signed  a  cooperation  protocol  in  May  aimed  at 

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improving  cooperation  on  border  procedures,  the  fight  against  illegal  trafficking  and  the 
implementing the integrated border management. 

The quality and consistency of border checks still need to be improved. The integrated border 
management  principles  are  not  sufficiently  implemented  in  practice.  The  joint  operational 
centre for border control is not fully operational, as the border police do not have access to its 
own  databases.  Further  synergies  between  the  different  stakeholders  are  needed  in  order  to 
develop and implement common operational plans, use common equipment and integrate data 
management systems on the basis of the adopted standard operating procedures. Insufficient 
exchange  of  information  with  regional  and  international  partners  impedes  the  fight  against 
cross-border crime. The north of Kosovo remains a particular challenge for integrated border 
management.  

Overall,  Kosovo  has  made  some  progress,  but  it  is  still  at  an  early  stage  of  addressing  the 
challenges of integrated border management. 

In the area of asylum, progress has been achieved. Kosovo has faced an increase in asylum 
requests  (31  persons  claimed  asylum  in  2009,  in  2010  this  number  reached  271,  and  there 
were 147 requests in the first half of 2011). With a proper implementation of the new asylum 
model introduced in 2010, the numbers are expected to come down in the future. The number 
of  asylum  seekers  in  procedure  was  25  in  July.  Most  of  the  applicants  misused  the  asylum 
procedure to legalise their entry and stay in Kosovo before continuing their journey towards 
EU countries. 

Based on the law on asylum, Kosovo authorities have systematised issuance of identification 
documents  to  asylum  seekers.  By  the  end  of  June,  over  300  first  instance  decisions  were 
issued  by  Department  of  Citizenship,  Asylum  and  Migration.  Most  of  the  decisions  taken 
regarding  asylum  requests  were  negative  decisions  in  abstentia  (the  asylum  seekers  having 
already  left  Kosovo).  Only  a  limited  number  of  cases  were  adjudicated  based  on  merit.  An 
explanatory  guide  about  the  rights  and  obligations  of  asylum  seekers  was  developed  and 
disseminated.  The  asylum  system,  established  with  EULEX  assistance,  allows  Kosovo  to 
abide  by  its  international  obligations,  enabling  Kosovo  to  distinguish  between  persons  who 
need international protection and those who do not. The implementation remains a challenge. 

There  are  shortcomings  in  the  asylum  procedure.  Capacity  and  training  is  currently 
insufficient. The lack of appropriate interpretation services hampers communication with the 
asylum seekers and the initial screening of the case, determining the origin of the person, and 
the  operational  information  that  can  be  acquired.  There  is  a  lack  of  adequate  premises  for 
those asylum seekers who are awaiting return after their claims were rejected. The capacity of 
the asylum centre is limited to 25. If the centre is full, asylum seekers are housed in hotels. 
The  lack  of  readmission  agreements  with  the  countries  of  origin  or  transit  is  also  a  major 
concern.  There  are  cases  for  determining  refugee  status  that  were  not  processed  within  the 
time period foreseen in the law. The capacity of the national commission for refugees to deal 
with  the  appeals  against  a  decision  in  first  instance  is  insufficient.  From  the  seven  appeals 
made against the first instance decision, the national commission for refugees ruled negatively 
in six cases. No appeals have been made to the Supreme Court.  

There  are  also  cases  for  which  a  negative  decision  was  issued  and  no  appeal  has  been 
submitted.  These  rejected  asylum  seekers  have  remained  accommodated  in  the  temporary 
facilities, awaiting execution of the return decision or any other measure. A reliable database 
for  asylum-seekers  is  still  lacking.  There  is  a  simple  database,  but  the  link  between  the 

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Department  of  Citizenship,  Asylum  and  Migration  and  the  police  responsible  for  the  initial 
screening,  is  still  missing.  All  these  challenges  contribute  to  the  fact  that  the  majority  of 
asylum seekers leave Kosovo even before the procedures are finalised. 

Overall,  progress  has  been  made  on  asylum.  Kosovo  needs  to  continue  addressing  the 
remaining challenges. 

Kosovo  has  achieved  progress  in  the  field  of  migration.  The  Department  of  Citizenship, 
Asylum and Migration issued residence permits and ID cards to foreigners. There has been an 
increase  of  irregular  migrants  attempting  to  enter  Kosovo  through  air  or  land  borders, 
particularly  with  the  former  Yugoslav  Republic  of  Macedonia  and  Albania.  Kosovo  border 
police prohibited entry to some of them on the basis of the law on foreigners. 

Kosovo  signed  new  agreements  on  readmission  with  third  countries.  A  total  of  thirteen 
countries  are  covered  by  such  agreements  (Albania,  Austria,  Belgium,  Czech  Republic, 
Denmark,  France,  Germany,  Luxembourg,  Montenegro,  the  Netherlands,  Norway,  Slovenia 
and  Switzerland).  The  Department  of  Citizenship,  Asylum  and  Migration  has  continued  to 
deal  with  readmission  requests  from  European  countries  in  an  efficient  way.  Kosovo  has 
achieved  considerable  progress  with  regard  to  reintegration  of  repatriated  persons.  It  has 
strengthened  its  capacity  for  reintegrating  repatriated  persons,  including  at  municipal  level. 
Over  € 3  million  were  allocated  for  reintegration  of  repatriated  persons  under  the  2011 
budget. An office dealing with repatriated persons was opened at the airport. There have been 
renewed  efforts  to  train  municipal  officials  and  improve  the  communication  with  and 
information  to  repatriated  persons.  Civil  registration  has  improved.  Inter-ministerial 
coordination  has  improved  as  well  as  the  communication  and  coordination  between  central 
and local levels. Temporary services, such as medical care, transport and accommodation are 
in place and provided. Cooperation with international organisations has improved. 

Kosovo  needs  to  make  additional  progress  in  managing  migration  flows,  based  on  a 
professional integrated information system. This would make tracking the repatriated persons 
and  their  needs  possible,  as  well  as  provide  reliable  statistical  data  and  information.  The 
number of proposals for reintegration assistance to repatriated persons from municipalities is 
increasing,  but  is  still  low.  Only  a  limited  number  of  persons  have  benefited  from  the 
reintegration  fund.  Updated  and  upgraded  trainings  are  necessary.  Exchange  of  information 
between  sending  countries  and  Kosovo  needs  to  be  strengthened.  Repatriation  offices  still 
need  to  be  established  in  four  municipalities.  Unemployment  continues  to  be  an  obstacle  to 
reintegrated repatriated persons.  

Kosovo also needs to make further efforts to ensure full alignment with the acquis on legal 
migration notably on the right to family reunification. 

Overall,  progress  has  been  achieved  on  migration.  Readmission  has  continued  to  function 
satisfactorily  and  there  has  been  considerable  improvement  as  regards  reintegration  of 
repatriated persons, notably at the municipal level. Efforts to tackle irregular migration need 
to  continue.  Some  challenges  in  the  reintegration  process  remain  and  sustained  efforts  and 
commitments in this area need to continue. 

4.3.2.  Money laundering 

Kosovo  has  made  limited  progress  in  addressing  economic/financial  crime  and  money-
laundering.  Implementing  legislation  on  the  prevention  of  money-laundering  is  largely  in 

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place.  A  gradual  transfer  of  the  responsibilities  of  the  Financial  Intelligence  Centre  from 
EULEX to Kosovo authorities has started. A Kosovan Director for the Centre was appointed 
in  March.  EULEX  has  retained  some  executive  powers.  The  organisational  framework 
dealing  with  economic,  financial  and  money-laundering  crimes  is  complex.  The  financial 
investigation  unit  under  the  Directorate  for  Investigation  of  Organised  Crime  is  only 
responsible  for  so-called  integrated  cases  (financial  cases  closely  connected  to  organised 
crime),  but  not  for  independent  financial  crime  cases.  The  Directorate  for  Economic  Crime 
and Corruption Investigation of the Kosovo Police (DECCI) and the newly established anti-
corruption task force, supervised by the Special Prosecutor's Office (SPRK-ACTF), deal with 
all  types  of  financial  crimes.  DECCI  tackles  regular  financial  crime  and  money-laundering 
cases and the SPRK-ACTF focuses on high profile and complex cases. 

The eight banks of Kosovo have improved the quality and reliability of their financial reports 
to  the  Financial  Intelligence  Centre.  Exchange  offices  and  money  remitters  have  also 
improved the way they fulfil their reporting obligations. The cooperation between the Centre 
and the customs has remained good and one Kosovo customs officer was seconded inside the 
Centre as a financial analyst and liaison officer. In 2010, the Directorate for Economic Crime 
and  Corruption  investigated  over  700  cases  from  which  about  500  with  known  perpetrators 
were  sent  to  the  prosecution.  Over  170  suspects  were  arrested.  The  estimated  damage  is 
around € 27 million. The Agency for the management of confiscated and sequestrated assets, 
established in 2010, is almost fully staffed. The staff has received some training. EULEX has 
also  trained  judges  and  prosecutors  on  the  application  of  the  existing  legislation  on 
confiscation of assets. Very few assets have been confiscated to date. 

The level of cooperation between the Centre and the reporting entities is mixed. NGOs have 
to  fulfil  their  financial  reporting  obligations  towards  the  NGO  registration  office  in  the 
Ministry  of  Public  Administration.  This  reporting  is  not  systematic,  which  is  a  matter  of 
concern,  because  of  the  heterogeneous  status  of  NGOs  in  Kosovo.  Under  the  current  anti-
money-laundering law, unlike the previous UNMIK regulation 2004/2, business organisations 
do  not  have  to  report  cash-based  transactions  for  more  than  € 10,000  to  the  Centre.  The 
capacity of Kosovo to investigate and prosecute economic crimes remains limited. Follow-up 
by law enforcement bodies to reports sent by the Centre is limited. The confiscation of assets 
in cases of money-laundering and economic crime needs to be strengthened and addressed at 
an earlier stage of the investigation. 

Large  amounts  of  money  continue  to  be  invested  in  real  estate,  restaurants  and  casinos 
without adequate supervision. Business-related financial transactions on private accounts and 
large numbers of entities doing business without being registered continue to be widespread. 
The operation launched in 2010 with the aim of identifying illegal activity in relation to the 
import and export of large amounts of money at Kosovo's airport remained ad hoc. This has 
not been incorporated into the routine work of customs. 

Prosecutors  and  judges  lack  experience  and  specialisation  in  this  area.  There  are  major 
difficulties  to  identify,  monitor  and  confiscate  earnings  from  crimes  connected  to  organised 
groups.  There  are  gaps  in  the  existing  legislation,  especially  with  the  money-laundering 
provisions and sanctions of the criminal code. These are inadequate, and need to be addressed 
urgently.  

Overall,  money-laundering  remains  an  issue  of  serious  concern  and  Kosovo  is  at  an  early 
stage  in  this  area.  Kosovo  continues  to  lack  the  adequate  technical  and  human  resources  to 
address these crimes.  

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4.3.3.  Drugs  

Kosovo  has  made  limited  progress  in  the  fight  against  drugs-trafficking.  Flows  continue  to 
include  heroin  and  synthetic  drugs  coming  from  the  Middle  East  through  Turkey  and  the 
former  Yugoslav  Republic  of  Macedonia  along  one  of  the  main  Balkan  routes  to  European 
markets,  and  cocaine  coming  through  Albania  and  Montenegro.  Drug  shipments  are 
repackaged  in  Kosovo  and  sent  to  European  markets  in  smaller  amounts.  The  domestic 
market  has  also  grown,  notably  for  cocaine.  There  are  movements  of  narcotics  across  the 
borders involving trucks, buses and private vehicles.  

There are some tangible results in the fight against drug-trafficking. The police have increased 
the  number  of  arrests  for  narcotics  offences  including  trafficking  offences;  around  200 
narcotic  related  cases  were  investigated  between  October  and  end  of  June  resulting  in  over 
300 arrested suspects. In the first half of 2011, the police made more than 200 arrests. About 
180 of those arrested were detained awaiting court procedure. Some criminal groups involved 
in drug-trafficking were dismantled. Kosovo has also carried out some joint operations with 
neighbouring countries. Cooperation and exchange of data with Albania and with Montenegro 
is good and first contacts with colleagues from the former Yugoslav Republic of Macedonia 
have taken place. The Directorate for Investigation of Drug Trafficking of the police has built 
up  its  capacities  and  recruited  new  staff.  It  participated  in  a  joint  exercise  on  controlled 
delivery of illicit drugs involving cooperation with other law enforcement agencies of Kosovo 
and  third  countries.  Data  collection  and  data  registration  methodology  have  improved. 
Following  the  ongoing  implementation  of  the  strategy  against  drugs  there  is  an  improved 
cooperation between police, customs and correctional services. 

The amount of seizures remains low: in the first half of 2011, over 30 kg of heroin, nearly 90 
kg of marijuana, 2.5 kg of cocaine and nearly 700 ecstasy tablets were seized. The judiciary 
follow-up remains inadequate. There is a lack of experienced and specialised prosecutors. The 
position  of  counter-narcotics  coordinator  remains  vacant.  The  resources  to  implement  the 
counter-narcotics policies are insufficient (lack of staff, working space and equipment) and an 
intelligence-led approach is also lacking. With the exception of some trained officers, there is 
also  no  proper  undercover  unit  in  the  police.  Canine  units  are  present  at  some 
border/boundary  crossing  points  and  working  in  accordance  with  the  plan  of  border  police 
department. Other police units can call in the assistance of canine units, if required, but their 
services are not frequently called on. Data sharing with Montenegro and the former Yugoslav 
Republic  of  Macedonia  is  still  limited.  There  are  serious  shortcomings  in  addressing  the 
challenges  of  local  drug  demand,  including  the  inappropriate  in-treatment  capacities  at  the 
hospital. The methadone maintenance programme remains unavailable. 

Overall, Kosovo's efforts in fighting drug-trafficking have not been sufficient to address the 
challenge Kosovo is facing in this area. 

4.3.4.  Police 

Kosovo has made some progress as regards policing. The police General Director appointed 
in October 2010 took a number of decisions improving the functioning of the police, i.e. by 
better  integrating  the  crime  pillar,  and  aiming  to  limit  the  level  of  political  influence.  The 
annual  action  plan  for  2011  was  adopted  and  is  implemented  in  line  with  the  2011-2015 
development plan. The six months review of the organisation was completed and led to the 
adoption of an improved organisational structure. Kosovo finalised the information strategic 
plan,  which  is  the  outline  of  an  overall  plan  that  aims  to  make  police  IT  developments 

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sustainable  during  the  next  years.  The  law  on  the  police  inspectorate  was  adopted  and  the 
responsibilities  between  the  Inspectorate  and  the  police  standards  unit  were  clarified.  The 
police  regional  commander  in  Prizren  was  arrested  and  indicted  as  part  of  a  war  crime 
investigation.  The  contracts  of  four  of  the  seven  police  station  commanders  in  northern 
Kosovo  were  terminated,  based  on  a  recommendation  from  the  senior  appointments  and 
disciplinary commission of the police. 

The police also established the International Law Enforcement Coordination Unit in June to 
facilitate cooperation with law enforcement agencies from third countries. The Interpol liaison 
office is still under UNMIK responsibility and some Kosovo police officers are detached to 
this  office.  Cooperation  between  the  UNMIK  Interpol  liaison  office,  Kosovo  police  and 
judicial authorities has improved. In 2010, the UNMIK office facilitated an increased number 
of  published  international  arrest  warrants  against  internationally  wanted  persons  for 
provisional arrest (27 compared to 4 in 2009 and 12 in 2008) and seven extraditions from/to 
Kosovo were carried out. 

The  cooperation  of  Kosovo  police  with  EULEX  was  not  consistent  during  the  reporting 
period. Joint investigations on some criminal cases have been initiated. Police took over from 
KFOR  the  full  responsibility  of  protecting  some  religious  sites.  It  successfully  supervised 
events such as the Kosovo elections or the enthronement of the new head of the Raska-Prizren 
diocese of the Serbian Orthodox Church. 

There  was  undue  political  interference  in  senior  police  appointments  and  the  conduct  of 
sensitive  police  operations.  Police  have  made  limited  progress  in  implementing  the 
community  policing  methodology  in  all  regions.  There  has  been  no  systematic  contact 
between police with municipalities in the local public safety committees. New police stations 
have  not  been  established  in  all  newly  established  municipalities.  The  Police  Inspectorate, 
under direct control of the Ministry of Internal Affairs, still does not have a chief executive 
and has not initiated any investigations in 2011. The collection of data has improved, but the 
ability  to  transform  information  into  actionable  intelligence  continues  to  be  limited. 
Intelligence-led  policing  remains  a  challenge.  There  are  serious  challenges  in  terms  of 
managing human resources. A performance-based indicators system and a promotion system 
still  need  to  be  established.  The  operations  pillar  of  police  lacks  the  capacity  in  terms  of 
strategic planning and analytical capabilities. The traffic directorate lacks the capacity needed 
to  generate  traffic  analysis  in  order  to  develop  a  traffic  policing  strategy.  The  capacities  of 
police in the area of developing ICT infrastructure need to be further strengthened. 

The environment for policing in northern Kosovo has remained challenging.  

Overall, police have taken on increased responsibilities. Police need to address structural and 
organisational challenges and improve its ability to fight complex types of crime. Steps need 
to be taken to avoid political interference in police matters. 

4.3.5.  Fighting organised crime and terrorism 

Limited progress has been achieved in tackling organised crime. Cooperation with EULEX 
in  organised  crime  cases  was  good  at  the  level  of  police  and  prosecutors.  The  police 
successfully  provided  close  protection  to  special  prosecutors  involved  in  investigations  of 
organised crime cases. Kosovo police has started building up capacities to deal with witness 
protection.  Seized  assets  have  been  temporarily  stored  in  the  premises  of  the  Kosovo 
correctional service. The police have increasingly used and rewarded informants in organised 

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crime  cases  and  improved  their  legal  interception  capabilities.  In  the  absence  of  a  law  on 
interception  of  telecommunications,  police  signed  agreements  with  telecommunications 
operators, providing a legal framework for initiating lawful interception. Future legislation on 
interception  needs  to  clearly  distinguish  between  judicial  interception  and  interception  for 
intelligence services, in line with European best practice.  

A  number  of  investigations,  indictments  and  convictions  were  achieved  in  organised  crime 
cases.  Some  operations  targeted  government  officials  and  premises.  There  were  six 
convictions  (by  mixed  panels  of  EULEX  and  Kosovo  judges),  and  five  cases  pending  trial. 
Six  cases  were  brought  to  main  trial  between  January  and  June  (four  handled  by  Kosovo 
special prosecution office and two by EULEX prosecutors). In June, in the Tisza river verdict 
–  a  case  of  smuggling  of  migrants  –  a  mixed  panel  of  Kosovo  and  EULEX  judges  at  the 
district  court  in  Pristina  sentenced  seven  defendants  to  a  total  of  66  years  in  prison  (terms 
ranging from 2 to 19 years) and € 450,000 in fines for their role in the death of fifteen persons 
who  drowned  in  the  river  Tisza  trying  to  cross  the  border  between  Serbia  and  Hungary  in 
October 2009. Regional cooperation was important in this case and the lead in the case was 
taken  by  Kosovo  rule  of  law  institutions.  The  case  inter  alia  exposed  an  organised  crime 
group  that  offered  migrants  illegal  passage  to  EU  countries  and  other  European  countries, 
making significant illicit profits. 

Cross-border  crime  detection  capacities  remain  low.  The  flow  of  information  between  the 
Department against Organised Crime and regional police centres is not at an appropriate level. 
Logistical  challenges,  including  lack  of  office  space,  staffing,  identification  of  secure 
locations for covert activities, insufficient vehicles and specialised equipment remain issues of 
concern. The Department is slow in adapting to constantly changing criminal techniques and 
changes  in  legislation.  Only  minor  cases  were  initiated  by  the  police.  The  current  weak 
Kosovo  witness  protection  programme  and  legislation  does  not  provide  the  public  with  the 
necessary confidence to cooperate with the authorities as witnesses. 

Overall, Kosovo's capacities to fight organised crime are still at an early stage. Serious efforts 
are needed to address these challenges, in particular witness protection. 

Kosovo has made some progress in tackling trafficking of human beings. Kosovo remains a 
place  of  origin,  transit  and  destination  for  victims  of  trafficking.  The  trend  of  local  women 
trafficked  within  Kosovo  and  in  countries  throughout  Europe  for  the  purpose  of  sexual 
exploitation  has  continued.  There  was  an  increase  in  the  number  of  underage  victims 
trafficked  for  sexual  exploitation.  Child-trafficking  and  exploitation  for  the  purpose  of 
begging remain at high levels. The number of identified victims increased slightly during the 
reporting period. 

The strategy and action plan against trafficking of human beings for 2011-2014 was adopted 
on  1  September  and  a  trafficking  awareness  campaign  was  organised  in  autumn  2010.  The 
inter-ministerial working group on anti-trafficking has continued to meet on a regular basis. A 
national coordinator was appointed and is in charge of ensuring the strategy's implementation. 

The  efficiency  and  capacity  of  the  police  Directorate  for  Investigation  of  Trafficking  in 
Human  Beings  has  increased.  The  police  identified  over  20  cases  of  trafficking  of  human 
beings.  They  arrested  more  than  70  suspects  and  identified  more  than  30  victims  of 
trafficking.  The  rate  of  convictions  remains  very  low.  Only  one  organised  crime  case 
concerning trafficking of human beings was brought to trial in the first half of 2011 (Medicus 
case) after the indictments were confirmed by a mixed appeal panel of EULEX and Kosovo 

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judges  at  Pristina  District  Court.  The  prosecution  of  this  case  is  under  the  supervision  of 
Kosovo's special prosecution office.  

The overall number of identified victims remains relatively low with an average of one victim 
for every ten raids conducted. The capacity of Kosovo prosecution and courts to investigate, 
prosecute  and  render  judgments  in  trafficking  cases  is  still  limited.  Trafficking  in  human 
beings is rarely followed-up by courts from an organised crime perspective. Perpetrators, even 
if acting in a group, are indicted individually, thus receiving lower sentences than if they were 
indicted as acting in a group.  

Overall,  Kosovo  has  made  some  progress  in  tackling  trafficking  in  human  beings,  but 
enhanced  efforts  are  needed  to  enforce  the  strategies  and  legislation.  The  judicial  follow  up 
remains largely ineffective and capacities need to be strengthened.  

Kosovo has made limited progress in the fight against terrorism. Implementing legislation 
on the prevention of money-laundering and financing of terrorism is largely in place. There 
are concerns about extremist groups, both religious and nationalistic and illegal cross-border 
traffic in Kosovo. The extradition of a terrorist suspect to the US for prosecution failed, due to 
the lack of a valid extradition agreement.  

Kosovo's capacity to enforce relevant legislation and strategic documents such as the Kosovo 
security strategy, the  counter-terrorism strategy, the law on prevention of  money-laundering 
and  financing  of  terrorism  remains  a  concern.  The  Directorate  on  Counter  Terrorism  faces 
some operational and organisational challenges. There is a lack of strategic planning capacity, 
which  means  very  few  investigations  have  been  undertaken.  Surveillance  capacities  have 
increased due to the fusion of the police counter terrorism surveillance and organised crime 
surveillance units in the last police reform. The link to the Kosovo intelligence agency is kept 
only  on  a  strategic  level  outside  of  the  Directorate.  When  it  comes  to  the  fight  against 
terrorism, cooperation with countries in the region is limited and the Directorate is not directly 
involved.  

Overall,  in  the  fight  against  terrorism  Kosovo  needs  to  make  further  efforts  to  enforce  its 
policies and legislation. 

4.3.6.  Protection of personal data 

Kosovo has made little progress on personal data protection. In May, the Assembly approved 
the  five  council  members  (chief  national  supervisor  and  four  national  supervisors)  of  the 
agency for the protection of personal data proposed by the government, which was followed 
by the establishment of the agency in July. Awareness of data protection remains very low. 
Capacities  of  all  institutions  to comply  with  data  protection  legislations  continue  to  be  very 
limited.  In  the  absence  of  mechanisms  regulating  the  use  of  personal  data,  the  newly-
introduced  procedure  to  register  SIM  cards  involving  the  collection  of  personal  data  by 
mobile operators raises concerns.  

Overall,  the  lack  of  personal  data  protection  remains  an  issue  of  serious  concern.  Kosovo 
needs to make major efforts in this area. 

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Statistical Annex 

Note

Note
1) 

2) 

STATISTICAL DATA (as of 30.09.2011) 
Kosovo 

Basic data 
Population (thousand) 
Total area (km²) 

National accounts 
Gross domestic product (GDP) (million euro) 
GDP (euro per capita) 
GDP (in Purchasing Power Standards (PPS) per capita) 
GDP per capita in PPS (EU-27 = 100) 
Real GDP growth rate (growth rate of GDP volume, national currency, % change on previous year) 
Employment growth (national accounts, % change on previous year) 
Labour productivity growth: GDP growth per person employed (% change on previous year) 
Real unit labour cost growth (national accounts, % change on previous year) 
Labour productivity per person employed (GDP in PPS per person employed, EU-27 = 100)  
Gross value added by main sectors (%) 

Agriculture and fisheries 
Industry 
Construction 
Services 

Final consumption expenditure, as a share of GDP (%) 
Gross fixed capital formation, as a share of GDP (%) 
Changes in inventories, as a share of GDP (%) 
Exports of goods and services, relative to GDP (%) 
Imports of goods and services, relative to GDP (%) 

Industry 
Industrial production volume index (2000=100) 

Inflation rate 
Annual average inflation rate (CPI, % change on previous year) 

Balance of payments 
Balance of payments: current account total (million euro) 
Balance of payments current account: trade balance (million euro) 
Balance of payments current account: net services (million euro) 
Balance of payments current account: net income (million euro) 
Balance of payments current account: net current transfers (million euro) 

of which government transfers (million euro) 
Net foreign direct investment (FDI) (million euro) 
Foreign direct investment (FDI) abroad (million euro) 

2000 
: 

2002 
2004 
2 016 
: 
10 887  10 887 10 887 10 887 10 887

2003 
1 985 

2001 
: 

2005 
2007 
2 127 
2 041 
10 887  10 887  10 887  10 887  10 887 

2006 
2 100 

2008 
2 153 

2009 
2010 
2 181p  2 208p 

2000 
: 
: 
: 
: 
: 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 
: 
: 
: 

2002 

2001 
2004 
1 624  1 735p 1 797p 2 913p
905p  1 427p

2003 

: 
: 
: 
: 
: 
: 
: 
: 

: 
: 
: 
1.2p 
: 
: 
: 
: 

: 
: 
: 
: 

: 
: 
: 
: 

: 
: 
3.1p 
: 
: 
: 
: 

: 
: 
: 
: 

: 
: 
: 
: 
: 
: 
: 

: 
: 
: 
: 

163.1  151.6  147.5  110.3p
20.0p 
40.7 
4.0 
: 
10.7p 
16.6 
12.5p  10.4p 
45.0p 
120.4  98.6p  87.1p 

29.3 
: 

34.5 
: 

2008 
3 851 

2009 
2007 
2006 
2005 
3 003p  3 120p  3 394p 
3 912p 
1 451p  1 486p  1 593p  1 789p  1 795p 
: 
: 
: 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 
: 

: 
: 
: 
: 

: 
: 
: 
: 

: 
: 
: 
: 

: 
: 
: 
: 
112.1p  111.1p  112.3p  112.8p  109.4p 
21.9p 
19.7p 
4.4p 
4.3 
15.1p 
11.1p 
53.7p 
47.3p 

21.1p 
4.5 
14.1p 
50.8p 

26.2 
3.6 
15.6p 
54.8p 

24.4p 
4.1p 
14.8p 
56.0p 

: 
: 
: 
: 

: 

2010 
: 
: 
: 
: 
: 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 
: 
: 
: 

Note

2000 
: 

2001 
: 

2002 
: 

2003 
: 

2004 
: 

Note

2000 
: 

2001 
: 

2002 
: 

2003 
1.3 

2004 
1.1 

Note

2000 
: 
: 
: 
: 
: 
: 
: 
: 

2001 
228 
-646 
10 
141 
723 
809 
: 
: 

2002 
-104 
-890 
-23 
154 
655 
661 
: 
: 

2003 
-204 
-941 
-14 
152 
599 
490 
: 
: 

2004 
-209 
-983 
-19 
138 
655 
372 
43 
0 

2005 
: 

2005 
1.4 

2005 
-248 
-1 079 
-8 
139 
700 
348 
108 
0 

2006 
: 

2006 
0.6 

2006 
-226 
-1 173 
29 
159 
759 
320 
284 
-6 

2007 
: 

2007 
4.4 

2007 
-354 
-1 368 
59 
186 
769 
245 
431 
-10 

2008 
: 

2008 
9.4 

2008 
-629 
-1 668 
81 
164 
794 
256 
342 
-25 

2009 
: 

2009 
2.4 

2009 
-604 
-1 673 
121 
83 
866 
401 
281 
-11 

2010 
: 

2010 
3.5 

2010 
-684 
-1 735 
37 
125 
889 
361 
311 
-3 

EN 

60 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
of which FDI of the reporting economy in EU-27 countries (million euro) 

Foreign direct investment (FDI) in the reporting economy (million euro) 

of which FDI of EU-27 countries in the reporting economy (million euro) 

Public finance 
General government deficit/surplus, relative to GDP (%) 
General government debt relative to GDP (%) 

Financial indicators 
Gross foreign debt of the whole economy, relative to GDP (%) 
Gross foreign debt of the whole economy, relative to total exports (%) 
Money supply: M1 (banknotes, coins, overnight deposits, million euro) 
Money supply: M2 (M1 plus deposits with maturity up to two years, million euro) 
Money supply: M3 (M2 plus marketable instruments, million euro) 
Total credit by monetary financial institutions to residents (consolidated) (million euro) 
Interest rates: day-to-day money rate, per annum (%) 
Lending interest rate (one year), per annum (%) 
Deposit interest rate (one year), per annum (%) 
euro exchange rates 
Effective exchange rate index (2000=100) 
Value of reserve assets (including gold) (million euro) 

External trade 
Value of imports: all goods, all partners (million euro) 
Value of exports: all goods, all partners (million euro) 
Trade balance: all goods, all partners (million euro) 
Terms of trade (export price index / import price index) 
Share of exports to EU-27 countries in value of total exports (%) 
Share of imports from EU-27 countries in value of total imports (%) 

Demography 
Natural growth rate: natural change (births minus deaths) (per 1000 inhabitants) 
Infant mortality rate: deaths of children under one year of age per 1000 live births 
Life expectancy at birth: male (years) 
Life expectancy at birth: female (years) 

Labour market 
Economic activity rate (15-64): share of population aged 15-64 that is economically active (%) 
* Employment rate (15-64): share of population aged 15-64 in employment (%) 

Employment rate male (15-64) (%) 
Employment rate female (15-64) (%) 

Employment rate of older workers (55-64): share of population aged 55-64 in employment (%) 
Employment by main sectors (%) 

Agriculture 
Industry 

EN 

Note

Note

3) 
3) 
1) 

Note

Note

Note

61 

: 
: 
: 

2000 
: 
: 

2000 
: 
: 
761 
761 
: 
3 
: 
: 
: 

: 
: 
: 

: 
: 
: 

: 
: 
: 

: 
43 
: 

2001 
: 
: 

2002 
8.4 
: 

2003 
2.2 
: 

2004 
2.7 
: 

2003 
2002 
2001 
: 
: 
: 
: 
: 
: 
891 
998 
971 
1 096  1 126  1 111 
: 
87 
: 
: 
: 

: 
233 
: 
: 
: 

: 
26 
: 
: 
: 

1.000  1.000  1.000  1.000 

: 
62 

: 
296 

: 
337 

: 
423 

2000 
: 
: 
: 
: 
: 
: 

2000 
: 
: 
: 
: 

2000 
: 
: 
: 
: 
: 

2001 
: 
: 
: 
: 
: 
: 

2001 
: 
: 
: 
: 

2001 
45.6 
19.6 
31.1 
8.1 
16.7 

2002 
: 
: 
: 
: 
: 
: 

2002 
: 
11.2 
: 
: 

2002 
52.8 
23.8 
39.4 
8.8 
18.4 

2003 
: 
: 
: 
: 
: 
: 

2003 
12.8 
15.1 
: 
: 

2003 
50.3 
25.3 
42.8 
8.3 
20.1 

2004 
: 
: 
713 
1 128 
: 
374 
: 
14.7 
2.8 
1.000 
: 
311 

56.6 
-993.8 
: 
29.3 
40.3 

2004 
14.1 
11.8 
: 
: 

2004 
46.2 
27.7 
46.4 
9.9 
23.9 

: 
: 

: 
: 

: 
: 

: 
: 

: 
: 

: 
108 
: 

2005 
: 
: 

2005 
: 
: 
572 
1 092 
: 
514 
: 
14.4 
2.9 
1.000 
: 
278 

: 
289 
: 

2006 
: 
: 

2006 
: 
: 
: 
: 
: 
637 
: 
14.5 
3.0 
1.000 
: 
356 

0 
441 
340 

2007 
: 
: 

2007 
: 
: 
: 
: 
: 
892 
: 
14.6 
3.3 
1.000 
: 
647 

-9 
366 
212 

2008 
: 
: 

2008 
: 
: 
: 
: 
: 
1 183 
: 
14.8 
4.2 
1.000 
: 
670 

-2 
291 
184 

2009 
: 
: 

2009 
: 
: 
: 
: 
: 
1 289 
: 
14.1 
4.0 
1.000 
: 
501 

-1 
315 
188 

2010 
: 
: 

2010 
: 
: 
: 
: 
: 
1 459 
: 
14.3 
3.4 
1.000 
: 
587 

2005 

2004 

2007 
1 050.4 1 180.0 1 314.6 1 576.1 1 930.0 1 933.8  2 157.7 
288.1 
147.3 

165.3 

196.4 

2006 

2008 

2009 

2010 

48.9 

81.7 

-1 131.1 -1 232.9 -1 428.8 -1 733.6 -1 768.5  -1 869.6 

: 
37.9 
38.4 

2005 
14.5 
9.6 
: 
: 

2005 
49.2 
28.5 
45.8 
11.7 
25.2 

: 
: 

: 
35.7 
34.2 

2006 
12.6 
12.0 
: 
: 

2006 
52.3 
28.7 
46.1 
11.8 
26.3 

: 
: 

: 
42.6 
35.2 

2007 
12.4 
11.1 
: 
: 

2007 
46.8 
26.2 
40.1 
12.7 
24.6 

: 
: 

: 
47.7 
36.2 

2008 
12.7 
9.7 
: 
: 

2008 
46.2 
24.1 
37.7 
10.5 
23.8 

: 
: 

: 
43.1 
39.0 

2009 
12.5 
9.9 
: 
: 

2009 
48.1 
26.1 
39.7 
12.5 
27.9 

: 
: 

: 
44.9 
38.3 

2010 
: 
: 
: 
: 

2010 
: 
: 
: 
: 
: 

: 
: 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
  
 
 
Construction 
Services 

Unemployment rate: share of labour force that is unemployed (%) 

Share of male labour force that is unemployed (%) 
Share of female labour force that is unemployed (%) 

Unemployment rate of persons < 25 years: share of labour force aged <25 that is unemployed (%) 
Long-term unemployment rate: share of labour force that is unemployed for 12 months and more (%)

Social cohesion 
Average nominal monthly wages and salaries (national currency) 
Index of real wages and salaries (index of nominal wages and salaries divided by the CPI/HICP) 
(2000=100) 
* Early school leavers - Share of population aged 18-24 with at most lower secondary education and 
not in further education or training (%) 

Standard of living 
Number of passenger cars per 1000 population 
Number of subscriptions to cellular mobile telephone services per 1000 population 

Infrastructure 
Density of railway network (lines in operation, per 1000 km²) 
Length of motorways (thousand km) 

Innovation and research 
Spending on human resources (public expenditure on education in % of GDP) 
* Gross domestic expenditure on R&D in % of GDP 
Percentage of households who have Internet access at home (%) 

Environment 
* Greenhouse gas emissions, CO2 equivalent (tons, 1990=100) 
Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP) 
Electricity generated from renewable sources in % of gross electricity consumption 
Road share of inland freight transport (% of tonne-km)  

Energy 
Primary production of all energy products (thousand TOE) 
Primary production of crude oil (thousand TOE) 
Primary production of hard coal and lignite (thousand TOE) 
Primary production of natural gas (thousand TOE) 

Net imports of all energy products (thousand TOE) 
Gross inland energy consumption (thousand TOE) 
Electricity generation (thousand GWh) 

: 
: 
: 
: 
: 
: 
: 

: 
: 
57.1 
51.8 
69.9 
80.0 
47.6 

: 
: 
55.0 
45.2 
74.5 
77.7 
47.3 

: 
: 
49.7 
40.3 
71.9 
74.9 
42.7 

: 
: 
39.7 
31.5 
60.7 
66.5 
34.9 

: 
: 
41.4 
32.9 
60.5 
70.5 
34.7 

: 
: 
44.9 
34.6 
61.6 
75.5 
41.1 

: 
: 
43.6 
38.5 
55.2 
70.0 
37.1 

: 
: 
47.5 
42.7 
59.6 
73.0 
38.9 

: 
: 
45.4 
40.7 
56.4 
73.0 
37.1 

: 
: 
: 
: 
: 
: 
: 

Note

2000 
: 

2001 
: 

2002 
: 

2003 
: 

2004 
: 

2005 
: 

2006 
: 

2007 
: 

2008 
: 

2009 
: 

2010 
: 

Note

Note

Note

Note

Note

4) 

: 

: 

2000 
: 
: 

2000 
: 
0 

2000 
: 
: 
: 

2000 
: 
: 
: 
: 

2000 
: 
: 
: 
: 
: 
: 
: 

: 

: 

2001 
: 
: 

2001 
: 
0 

2001 
: 
: 
: 

2001 
: 
: 
: 
: 

2001 
: 
: 
: 
: 
: 
: 
: 

: 

: 

2002 
: 
: 

2002 
: 
0 

2002 
: 
: 
: 

2002 
: 
: 
: 
: 

2002 
: 
: 

: 

: 

: 

: 

2003 
: 
158.7 

2004 
: 
169.5 

2003 
: 
0 

2003 
: 
: 
: 

2003 
: 
: 
: 
: 

2003 
: 
: 

2004 
39.5 
0 

2004 
: 
: 
: 

2004 
: 
: 
: 
: 

2004 
: 
: 
3 944 
: 
: 
: 
3.5 

: 

: 

2005 
50.1 
: 

2005 
: 
0 

2005 
: 
: 
: 

2005 
: 
: 
: 
: 

2005 
: 
: 
4 455 
: 
: 
: 
4.0 

: 

: 

2006 
69.9 
: 

2006 
: 
0 

2006 
: 
: 
: 

2006 
: 
: 
: 
: 

2006 
: 
: 
4 553 
: 
: 
: 
4.0 

: 

: 

2007 
68.7 
: 

2007 
: 
0 

2007 
: 
: 
: 

2007 
: 
: 
: 
: 

2007 
: 
: 
4 681 
: 
: 
: 
4.3 

: 

: 

: 

: 

2008 
74.1 
376.2 

2009 
: 
369.1 

2008 
: 
0 

2008 
: 
: 
: 

2008 
: 
: 
: 
: 

2008 
: 
: 
5 466 
: 
: 
: 
: 

2009 
30.6 
0.6 

2009 
: 
: 
: 

2009 
: 
: 
: 
: 

2009 
: 
: 
7 842 
: 
: 
: 
5.3 

: 

: 

2010 
: 
: 

2010 
: 
0.6 

2010 
: 
: 
: 

2010 
: 
: 
: 
: 

2010 
: 
: 
7 960 
: 
: 
: 
5.5 

3 853  4 507 

: 
: 
: 
3.2 

: 
: 
: 
3.2 

Agriculture 
Agricultural production volume index of goods and services (producer prices, previous year=100) 

Note

2000 
: 

2001 
: 

2002 
: 

2003 
: 

2004 
: 

2005 
: 

2006 
: 

2007 
: 

2008 
: 

2009 
: 

2010 
: 

EN 

62 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total utilised agricultural area (thousand hectare) 
Livestock: cattle (thousand heads, end of period) 
Livestock: pigs (thousand heads, end of period) 
Livestock: sheep and goats (thousand heads, end of period) 
Production and utilisation of milk on the farm (total whole milk, thousand tonnes) 
Crop production: cereals (including rice) (thousand tonnes, harvested production) 
Crop production: sugar beet (thousand tonnes, harvested production) 
Crop production: vegetables (thousand tonnes, harvested production) 

: 
289 
59 
193 
: 
: 
: 
: 

539 
347 
75 
230 
: 
459 
: 
169 

: 
319 
110 
116 
: 
396 
: 
135 

: 
: 
: 
: 
: 
: 
: 
: 

: 
335 
55 
106 
: 
408 
: 
150 

: 
352 
47 
152 
: 
441 
: 
159 

: 
382 
68 
113 
: 
392 
: 
172 

: 
322 
40 
152 
: 
295 
: 
117 

: 
342 
27 
180 
: 
438 
: 
176 

: 
344p  
51p  
217p  
: 
411p  
: 
144p  

: 
: 
: 
: 
: 
: 
: 
: 

: = not available 
p = provisional 
e = estimated value 
b = break in series 
* = Europe 2020 indicator 

The  balance  of  payments  sign  conventions  are  used  for  FDI.  For  FDI  abroad  a  minus  sign  means  investment  abroad  by  the  reporting  economy  exceeded  its  disinvestment  in  the  period,  while  an  entry 
without sign means disinvestment exceeded investment. For FDI in the reporting economy an entry without sign means that investment into the reporting economy exceeded disinvestment, while a minus 
sign indicates that disinvestment exceeded investment. 

Footnotes: 
1) 
2) 
3) 
4) 

Euro is the currency in use. 
Investment: including Donor sector, General government, Private investment (Housing and Other). 
Since 2008, interest rate on loans includes disbursement fee charged by banks. 
Local production of coal in thousand tones. 

EN 

63 

EN