COMMISSION STAFF WORKING DOCUMENT accompanying the document Commission Communication on a Feasibility Study for a Stabilisation and Association Agreement between the European Union and Kosovo*
Date: 2012-10-10
Institutions: European Commission
Subjects: Kosovo, administrative reform, economic reform, financial cooperation, health control, judicial reform, market economy, political cooperation, political reform, protection of minorities, stabilisation and association agreement

EUROPEAN 
COMMISSION 

Brussels, 23.10.2012  
SWD(2012) 339 final/2 

CORRIGENDUM 
Annule et remplace le document SWD(2012) 339 final 
du 10.10.2012. Modification sur la page 19, par. 3 du chapitre 3.2. 

COMMISSION STAFF WORKING DOCUMENT 
accompanying the document 

Commission Communication on a Feasibility Study for a Stabilisation and Association 
Agreement between the European Union and Kosovo*  

{COM(2012) 602 final} 

*  

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

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COMMISSION STAFF WORKING DOCUMENT 
accompanying the document 

Commission Communication on a Feasibility Study for a Stabilisation and Association 
Agreement between the European Union and Kosovo*  

Table of Contents 

1. 

1.1. 

POLITICAL CRITERIA.............................................................................................. 5 

Democracy and the rule of law .................................................................................... 5 

1.1.1.  Legislature.................................................................................................................... 5 

1.1.2.  Executive and President ............................................................................................... 6 

1.1.3.  Public administration ................................................................................................... 7 

1.1.4.  Reform of the security sector ....................................................................................... 8 

1.1.5.  The judicial system ...................................................................................................... 8 

1.1.6.  The fight against corruption ....................................................................................... 10 

1.1.7.  Relations with the international community .............................................................. 11 

1.2. 

Human Rights and the protection of minorities ......................................................... 12 

1.2.1.  Civil, political, economic and social rights................................................................ 12 

1.2.2.  Respect for and protection of minorities, cultural rights ........................................... 13 

2. 

2.1. 

ECONOMIC CRITERIA ........................................................................................... 15 

Economic situation and stability ................................................................................ 15 

2.1.1.  Economic situation..................................................................................................... 15 

2.1.2.  Fiscal policy ............................................................................................................... 17 

2.2. 

2.3. 

Price and trade liberalisation...................................................................................... 17 

Privatisation, private sector development and financial reform................................. 17 

2.3.1.  Privatisation and private sector development ............................................................ 17 

2.3.2.  Financial sector reform .............................................................................................. 18 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

ABILITY TO ASSUME THE OBLIGATIONS RESULTING FROM AN SAA .... 19 

Political dialogue........................................................................................................ 19 

Regional cooperation ................................................................................................. 19 

Free Movement of Goods .......................................................................................... 20 

Movement of workers, establishment, services and capital....................................... 22 

3.4.1.  Movement of workers ................................................................................................ 22 

*  

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

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3.4.2.  Establishment ............................................................................................................. 23 

3.4.3.  Supply of services ...................................................................................................... 23 

3.4.4.  Current payments and movement of capital............................................................... 24 

3.5. 

Approximation, implementation and enforcement of legislation .............................. 24 

3.5.1.  Competition................................................................................................................ 24 

3.5.2. 

Intellectual property rights ......................................................................................... 25 

3.5.3.  Public procurement .................................................................................................... 26 

3.5.4.  Standardisation, accreditation, conformity assessment, metrology and market 

surveillance ................................................................................................................ 27 

3.5.5.  Consumer protection .................................................................................................. 28 

3.6. 

Justice and home affairs ............................................................................................. 29 

3.6.1.  Reinforcement of institutions and rule of law............................................................ 29 

3.6.2.  Asylum, migration, visa policy, control of borders/boundary ................................... 30 

3.6.3.  Combating money laundering.................................................................................... 32 

3.6.4.  Preventing and combating organised crime and other criminal activities, including 

terrorism ..................................................................................................................... 33 

3.7. 

Cooperation policies .................................................................................................. 34 

3.7.1.  Economic, monetary, statistical cooperation and the protection of EU financial 

interests ...................................................................................................................... 34 

3.7.2. 

Investment promotion and protection, industrial cooperation, small and medium-
sized Enterprises (SMEs) and tourism ....................................................................... 35 

3.7.3.  Agriculture ................................................................................................................. 37 

3.7.4.  Customs, taxation and financial control..................................................................... 38 

3.7.5.  Employment, social policy, public health policy, education and training, and research 
technology and development (RTD).......................................................................... 40 

3.7.6.  Culture, audio-visual, telecommunications and postal services and information 

society ........................................................................................................................ 42 

3.7.7.  Transport .................................................................................................................... 43 

3.7.8.  Energy, including nuclear safety................................................................................ 45 

3.7.9.  Environment and climate change ............................................................................... 46 

3.8. 

Financial cooperation ................................................................................................. 47 

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INTRODUCTION 

The  main  principles  of  the  Stabilisation  and  Association  Process  (SAP)  were  set  out  in  a 
Commission Communication of May 19991 and were confirmed by the Council in June 1999. 
Through  this  process,  the  European  Union  (EU)  expresses  its  determination  to  take  up  the 
challenge  and  responsibility  to  contribute  to  the  stability  of  the  Western  Balkans  region.  In 
return  for  compliance  with  the  relevant  conditions,  the  EU  offers  the  countries  tailor-made 
contractual  relations:  Stabilisation  and  Association  Agreements.  The  conditions  for 
establishing  contractual  relations  with  the  Western  Balkans  countries  are  set  in  the  Council 
Conclusions  of  April  1997.  The  main  elements  include  a  credible  engagement  to  undertake 
democratic reforms, respect and protect human rights, minorities and freedom of expression, 
and free and regular elections. The Council also expects implementation of the first economic 
reforms, readmission from Member States and commitment to the regional cooperation. 

The Feira European Council (June 2000) gives a clear signal to the Western Balkans region 
establishing  the  status  of  potential  candidates  for  membership.  This  message  is  further 
reinforced by the summit in Zagreb (November 2000). The European Council Conclusions of 
March 2003 state that the future of the Western Balkans is within the EU and strong political 
will and sustained efforts are required to secure it. The Thessaloniki agenda for the Western 
Balkans  of  June  2003  makes  clear  that  the  Western  Balkans  countries  and  support  to  their 
preparation  for  the  future  integration  into  the  European  structures  and  ultimate  membership 
into the Union is a high priority for the EU.  

To date, feasibility studies have been prepared for Albania, Bosnia and Herzegovina, Croatia, 
the  former  Yugoslav  Republic  of  Macedonia,  Serbia  and  Montenegro.  Stabilisation  and 
Association  Agreements  have  subsequently  been  signed  with  all  these  countries.  The 
December  2011  Council  recalls  the  EU's  willingness  to  assist  the  economic  and  political 
development  of  Kosovo  through  a  clear  European  perspective,  in  line  with  the  European 
perspective of the region. The Council underlines the need to take concrete steps to that effect. 
In  February  2012,  the  Council  takes  note  of  the  intention  of  the  Commission  to  launch  the 
feasibility study for a Stabilisation and Association Agreement between the European Union 
and Kosovo, without prejudice to Member States' position on status, or any future decisions to 
be taken by the Council.  

The purpose of this Staff Working Document is to provide a technical analysis of the political, 
economic and legislative developments in Kosovo. The document describes the progress that 
Kosovo has achieved in the past three years and considers whether Kosovo is ready to start 
negotiating an SAA. It also describes the outstanding challenges that Kosovo faces to meet its 
obligations under such an agreement and gives an indication of the required commitments in 
this  context.  This  analysis  is  without  prejudice  to  the  legal  status  of  Kosovo  and  Member 
States' positions on the status of Kosovo.  

The document is based on extensive contributions from the Kosovo authorities, the EU Office 
in Pristina, international organisations and relevant international and local non-governmental 
organisations. The Commission has also substantially drawn on information obtained during 
the  sectoral  and  plenary  meetings  of  the  Stabilisation  and  Association  Process  Dialogue 
organised  between  January  and  July  2012.  The  findings  of  this  Staff  Working  Document 
constitute  the  basis  of  the  Commission  Communication  on  a  feasibility  study  for  a 
Stabilisation and Association Agreement between the European Union and Kosovo2. 

1 
2 

COM(1999) 235 final. 
COM(2012) 602 final. 

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1. 

1.1. 

POLITICAL CRITERIA 

Democracy and the rule of law 

1.1.1.  Legislature 

Kosovo's  political  system  is  based  on  the  principles  of  a  parliamentary  democracy.  The 
Assembly  of  Kosovo  is  the  primary  legislative  institution  and  is  directly  elected  for  a  four 
year  mandate.  Over  the  past  three  years,  the  Kosovo's  Assembly  has  been  strengthening  its 
capacities and its supervision of the executive. Improvements can also be noted with regard to 
the  preparation  of  legislation  and  monitoring  of  its  implementation  by  parliamentary 
committees  through  outreach  activities  and  public  hearings.  Kosovo  has  just  undertaken  a 
major  reform  of  its  constitution,  in  which  the  Constitutional  Reform  Committee  of  the 
Assembly has played an important. 

In  September  2011,  the  Constitutional  Court  clarified  that  deputies  have  only  a  functional 
immunity. Therefore, outside of the scope of his/her responsibilities a deputy is to be treated 
as any other citizen. This is sufficient protection for deputies to exercise freely their duties as 
members of the Assembly.  

In general, Kosovo has put in place an institutional framework for legislation and control of 
executive which is based on democratic principles.  

To  meet  its  obligations  under  an  SAA,  Western  Balkans  countries  need  to  have  credible 
engagement to undertake democratic reforms and free and regular elections. Kosovo has held 
elections regularly at both central and municipal levels. The system is based on a competition 
of political parties and voters can chose freely between them. Over the past three years, there 
have been different coalition governments and new parties, including those highly critical of 
the  governing  coalition,  could  enter  the  Assembly.  However,  the  last  general  elections  in 
2010/2011 were marked by serious shortcomings and technical difficulties. It is important that 
the legislation better reflects best practice in the EU and implementation is also in line with 
international  standards.  To  this  end,  the  Assembly  has  established  an  ad  hoc  committee  on 
electoral reform. 

It  is  also  important  that  the  Assembly  and  the  government  continue  to  improve  their 
coordination  and  joint  planning.  The  Assembly's  legislative  capacity  needs  to  be  further 
enhanced, notably the Assembly's Department for Legal and Procedure Issues. The legislative 
procedure needs to be strengthened to ensure cross-sectoral expertise and compliance with the 
acquis.  The  responsible  bodies  of  the  Assembly  need  to  ensure  a  stronger  oversight  of  the 
budget expenditure of the parliament during the course of the financial year. Furthermore, the 
Assembly  needs  to  strengthen  its  oversight  function  of  the  executive,  through  improved 
scrutiny of legislation and monitoring of implementation of policies and laws. 

The budget of the Assembly, as well as proposals on changes to its administration, need to be 
approved  by  the  government.  These  processes  need  to  be  made  more  independent  from  the 
government.  This  can  be  achieved  through  adopting  legislation  on  the  status  of  the 
Assembly's civil servants. It is also important that the government consults the Assembly on 
modifications to the draft budget of the Assembly before the government submits the budget 
to the Assembly for adoption. 

With  regard  to  the  appointments  to  independent  institutions  such  as  the  Institution  of 
Ombudsperson,  but  also  regulatory  agencies  and  bodies,  the  Assembly  faces  challenges  in 
terms of delays and allocation of sufficient budgetary means. Delays and lack of budget cause 
serious difficulties for the institutions to function properly and to implement their mandate.  

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Under an SAA, Kosovo would commit itself to further strengthen the democratic principles of 
its governance. Respect for the principles of international law and rule of law in general will 
form the basis of the domestic and external policies of parties to an SAA. 

1.1.2.  Executive and President 

The  government  holds  regular  and  frequent  meetings  and  proposes  ambitious  legislative 
strategies.  The  government  has  good  capacities  to  draft  legislation  and  has  the  potential  to 
increase legislative alignment with the acquis in the short period of time. The inter-ministerial 
coordination of policies has improved over the past three years.  

The Ministry of European Integration leads the overall coordination of the EU agenda through 
a  Task  Force  for  European  Integration.  The  Ministry  has  demonstrated  strong  capacities  by 
successfully  coordinating  the  third  year  of  the  sectoral  and  plenary  meetings  of  the 
Stabilisation and Association Process Dialogue, as well as through a comprehensive input of 
institutions  of  Kosovo  to  the  preparation  of  this  study.  The  President  is  also  active  in 
promoting the EU integration agenda in Kosovo. A National Council on European Integration 
(placed  under  the  office  of  the  President  and  inaugurated  in  March  2012)  serves  as  a  high-
level coordination body. Its aim is to build a consensus on the European agenda through an 
inclusive and cross-party approach.  

The President is elected by the Assembly. His/her election requires a two thirds majority of all 
deputies  for  a  five  year  term.  In  its  July  judgement,  the  Constitutional  Court  confirmed  the 
full  length  of  the  mandate  of  the  current  President.  The  President  actively  enforces  her 
constitutional duties and takes steps to oppose legislation, for example if it is not in line with 
European practices and standards (e.g., the legislation related to criminalisation of defamation 
and  the  requirement  for  journalists  to  disclose  their  sources  of  information).  This 
demonstrates that there is a separation of powers in Kosovo today. 

Over  the  past  three  years,  Kosovo  has  made  significant  progress  on  decentralisation.  The 
Ministry  of  Local  Government  Administration  (MLGA)  has  taken  steps  to  ensure  a  more 
efficient monitoring of the local government structures. 

Kosovo  has  put  in  place  the  necessary  institutions  of  the  executive  and  there  has  also  been 
sufficient political stability enabling progress in its reform process. 

To meet its obligations under an SAA, Kosovo needs to improve its governance. The focus of 
Kosovo needs to be on implementing its ambitious EU reform agenda. The government needs 
to  ensure  its  legislative  agenda  better  corresponds  to  the  capacities  of  individual  ministries 
and to the available budget. The coordination between the government and the Assembly also 
needs further strengthening.  

Efforts  to  implement  the  decentralisation  need  to  continue,  including  by  strengthening  the 
administration  at  the  municipal  level.  The  challenges  include  budgetary  constraints, 
absorption  capacities,  weak  professional  expertise  at  municipal  level  as  well  as  a  lack  of 
political  will  at  central  level  to  decentralise  its  competencies  in  certain  fields.  Inclusive 
decision-making as well as administrative and budgeting processes are hampered by a lack of 
data  management  and  evidence-based  planning  capacities.  The  municipal  authorities  need  a 
tailor-made  central  level  guidance  and  enhanced  capacity  development.  The  newly-
established  Serb-majority  municipalities  also  face  these  challenges.  Furthermore,  some  of 
them require further assistance from the central level to ensure their sustainability given their 
small size. 

Decentralisation  remains  a  specific  challenge  in  the  north  of  Kosovo.  The  government  has 
opened  a  new  administrative  office  in  northern  Mitrovicë/Mitrovica  to  provide  services  to 
people.  It  is  clear  that  the  solution  to  these  political  challenges  requires  a  constructive  and 

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proactive  approach  of  all  involved  parties.  In  the  context  of  these  challenges  in  the  north, 
successful implementation of the decentralisation south of the river Ibër/Ibar is essential.  

Under  an  SAA,  Kosovo  would  need  to  respect  and  implement  democratic  principles  of 
governance.  Furthermore,  the  governance  of  Kosovo  would  need  to  be  ensured  through  an 
adequate and more effective executive at all levels of administration. 

1.1.3.  Public administration 

In  view  of  an  SAA,  a  legislative  framework,  accompanied  by  the  relevant  policies  and  the 
relevant  institutions  for  its  future  implementation  need  to  be  in  place.  The  independence  of 
public administration bodies, like the Ombudsperson Institution, needs to be respected.  

The  existing  legal  framework  in  the  area  of  public  administration  is  appropriate.  The 
legislation is inspired by the latest approaches to public administration in Europe. The laws on 
civil  service  and  on  salaries  in  the  civil  service  provide  the  legal  conditions  for  a  stable, 
unified and professional civil service. The legal framework needs to be completed, notably by 
adopting  some  important  implementing  regulations.  Delays  in  applying  the  new  legislation 
undermine the establishment of a professional public administration and create the conditions 
for a legal vacuum that is detrimental to the reform process. In the short term, Kosovo needs 
to adopt all secondary legislation for the laws on civil service and salaries for the civil service. 

The Ombudsperson Institution of Kosovo (OIK) is one of the key independent bodies related 
to public administration. It is an instrumental human rights protection body and it faces major 
challenges, notably in terms of budget and premises. There are also occasional interventions 
from  the  Ministry  of  Finance  into  its  budget,  although  the  Ombudsperson  Institution  is 
supposed  to  be  financially  independent.  Kosovo's  government  and  the  Assembly  need  to 
enhance  considerably  their  political  support  to  the  Ombudsperson  and  put  emphasis  on  the 
follow-up of its decisions. In the short term, Kosovo needs to allocate suitable premises to the 
Ombudsperson  and  ensure  its  budgetary  independence  through  obliging  the  government  to 
include  the  Ombudsperson's  draft  proposal  for  budget,  without  any  changes,  into  the  global 
draft budget submitted to the parliament. 

To meet its obligations under an SAA, Kosovo needs to focus in particular on implementing 
the policies and actions on public administration reform, reflected in the strategy, action plan 
and relevant legislation, including through allocating sufficient and sustainable resources. To 
date, there has been little progress in implementation of the strategy. There are also concerns 
with  regard  to  the  budgetary  costs  of  the  strategy  and  the  financial  sustainability  of  the 
proposed reform. 

The  second  important  independent  body  related  to  the  public  administration  is  the 
Independent Oversight Board (IOB). The IOB plays an essential role for the functioning of an 
accountable and law-based administration. Better compliance with the IOB decisions remains 
of  high  importance  for  the  proper  functioning  of  the  administration  and  for  an  effective 
system of checks and balances. 

The Ministry of Public Administration (MPA) is the legal and policy making institution in the 
field  of  public  administration  and  public  administration  reform.  However,  the  Ministry  is 
insufficiently  staffed  to  pilot  these  key  reforms  effectively.  This  undermines  its  capacity  to 
perform a coordination role, and to implement strategies and legislation. In addition, the MPA 
has very little capacity to influence the government's political agenda and reforms related to 
public administration, and it does not obtain sufficient political support.  

Under an SAA, Kosovo would need to enhance further its efforts to improve professionalism, 
accountability, efficiency and effectiveness of its public administration at all levels, which is 
fundamental  for  a  successful  implementation  of  the  necessary  future  reforms.  The  ultimate 

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aim of these efforts would be the proper functioning of state institutions for the population's 
benefit. 

1.1.4.  Reform of the security sector 

Kosovo has put in place the constitutional and legal framework to regulate its security sector. 
There  are  also  institutional  structures  for  democratic  control  of  the  security  sector  (e.g. 
parliamentary  Committee  for  Internal  Affairs,  Security  and  Supervision  of  the  Kosovo 
Security  Force,  and  Oversight  Committee  for  Kosovo  Intelligence  Agency).  The  Kosovo 
Security Council, chaired by the Prime Minister, is the key authority for policy-making and 
advising  on  security  issues.  In  emergency  situations,  the  Council  can  assume  an  executive 
role.  The  main  actors  in  the  security  sector  are  the  Kosovo  Police,  the  Kosovo  Intelligence 
Agency  and  the  Kosovo  Security  Force.  No  local  security  force  currently  has  defence 
capacities.  A  full  strategic  review  of  the  security  sector  has  been  launched  and  should  be 
concluded in June 2013.  

NATO's  KFOR  and  EU's  rule  of  law  mission  EULEX  continue  to  contribute  to  Kosovo's 
security. The Commission puts particular emphasis on the need for Kosovo to maintain good 
cooperation with EULEX and actively support implementation of its mandate. 

To meet its obligations under an SAA, the scrutiny of the security sector by the parliamentary 
committees needs to be further enhanced. The Kosovo Assembly needs to develop further its 
capacity  to  perform  an  effective  oversight  of  this  sector.  Furthermore,  the  main  political 
parties  continue  to  rely  on  their  own  informal  security  arrangements,  which  is  an  issue  of 
serious concern. 

Under  an  SAA,  Kosovo  would  need  to  further  strengthen  the  democratic  control  of  the 
security sector. 

1.1.5.  The judicial system 

Over the past three years, there has been significant reform of the judiciary. A comprehensive 
legal  framework  (laws  on  courts,  on  the  Kosovo  Prosecutorial  Council,  on  the  Kosovo 
Judicial Council, and on Prosecution) was adopted in 2010. The full implementation of these 
laws, which constitutes a major judicial and prosecutorial reform, will lead to the introduction 
of a new court system on 1 January 2013 (with seven Basic Courts and one Appeal Court). 
The principles of independence, impartiality, accountability and efficiency are at the heart of 
this  reform.  Judicial  independence  is  enshrined  in  Kosovo's  legislation,  which  requires  the 
judiciary to act in an independent and impartial manner. 

The Supreme Court is the highest judicial authority in Kosovo. The Constitutional Court, as 
the  guardian  of  the  Kosovo  constitution,  is  independent  in  the  performance  of  its 
responsibilities.  The  Court  has  issued  a  number  of  important  decisions  with  strong  political 
impacts, which have been respected by all authorities and political leaders.  

In addition to the overall court structure, Kosovo has put in place the key institutions of the 
judiciary, notably the Kosovo Judicial Council (KJC) and the Kosovo Prosecutorial Council 
(KPC). Remuneration in the judiciary has improved since 2011, placing the judiciary on equal 
footing with the executive and legislative pillars, which enables the sector to attract qualified 
professionals,  and  has  the  potential  to  help  preventing  external  influence  on  judicial  staff. 
Kosovo  has  reached  sufficient  capacity  in  this  area.  The  major  elements  of  the  legislative 
framework, as well as the key institutions, with improved capacities and a good understanding 
of  the  remaining  challenges,  are  in  place.  While  implementing  the  judicial  reform,  Kosovo 
needs to ensure that the competencies of the Special Prosecution are not amended in light of 
the new court structure. Introduction of a special chamber on corruption and organised crime 
needs to mirror the current competence and scope of the Special Prosecution. 

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To meet its obligations under an SAA, Kosovo needs to focus in particular on improving the 
independence, effectiveness, accountability and impartiality of the judiciary. Kosovo needs to 
ensure  successful  implementation  of  the  judicial  reform.  Kosovo  also  needs  to  provide 
appropriate  security  and  protection  measures  for  judges,  prosecutors,  witnesses  and 
complainants as well as court staff, and needs to provide effective safeguards against threats 
or  intimidation.  Kosovo's  international  judicial  cooperation  needs  to  be  more  proactive 
leading  to  investigations.  The  KJC  and  KPC  need  to  increase  recruitment  of  judges  and 
prosecutors from minorities, as set out in the legislative framework.  

There are further challenges for the judiciary on which progress needs to be made by Kosovo. 
The  election  procedure  of  the  KJC  voting  members  needs  to  be  brought  in  line  with  the 
relevant European standards (and recommendations of the Venice Commission) to ensure that 
the  majority  of  voting  members  are  elected  by  their  peers.  To  ensure  successful 
implementation  of  the  new  court  system  from  1  January  2013,  its  financial  and  human 
resources  need  to  be  increased.  Further  amendments  to  the  package  of  four  laws  and  to  the 
law on the Special Prosecution, which are currently under preparation, may disrupt the justice 
system and cause difficulties in the transition to the new court structure.  

In 2009, all sitting judges and prosecutors underwent a vetting and re-appointment process led 
by the International Judicial and Prosecutorial Commission (IJPC). The number of judges is 
currently insufficient; there is a particular lack of civil judges in the courts of second instance. 
Efforts are needed to finalise the selection process for judges and prosecutors by filling in the 
remaining  vacant  positions  (currently  29  for  prosecutors  and  51  for  judges),  especially  for 
minorities for which Kosovo legislation reserves a specific number of positions. Judicial and 
Prosecutorial  Councils  conducted  an  outreach  campaign  to  these  minorities,  notably  Serbs, 
but  further  efforts  are  necessary  in  this  regard.  Local  Kosovo  Serb  judges  and  prosecutors 
refused  to  undergo  the  vetting  process  (led  by  the  IJPC)  and  are  still  reluctant  to  apply  for 
vacant positions advertised by the Kosovo Judicial Council.  

The Judicial Council has the legal mandate to ensure the independence and impartiality of the 
judicial system, as enshrined in the legislation. The Council needs to act decisively to protect 
judges' independence and impartiality. External influence and political interference remain a 
serious  challenge  for  the  judicial  system  in  Kosovo.  The  constitution  establishes  that  the 
appointment  criteria  for  judges  and  prosecutors  are  defined  by  law.  However,  the  current 
legislation is weak and is not harmonised. Newly-recruited judges are subject to a three-year 
probationary period, which is not in line with Venice Commission recommendations.  

Allegations  of  corrupt  behaviour  in  the  judiciary  continue.  The  limited  independence  and 
impartiality  of  the  judiciary  in  practice  is  a  serious  impediment  to  strengthening  the  rule  of 
law.  Judicial  and  Prosecutorial  Councils  need  to  ensure  that  any  disciplinary  or  criminal 
offences committed are addressed vigorously to improve the reputation of the judiciary. The 
Councils and other Kosovo institutions need to address the reluctance of Kosovo prosecutors 
and  judges  to  prosecute  and  try  politically  sensitive  or  high-profile  cases  against  influential 
defendants.  

Allegations  of  threats  and  intimidation  are  frequent  and  continue  to  persist  in  the  judiciary. 
The law on courts provides the legal basis for protective measures, but Kosovo needs to do 
more to enhance security for the judiciary. Access to, and control of, court premises remains 
lax,  the  public  has  unhindered  access  to  the  offices  of  judges  and  some  trials  are  held  in 
judges' offices instead of the courtroom. This is not only an issue from the perspective of rule 
of  law,  but  also  has  the  potential  to  create  security  risks  for  the  judges  and  court 
administrative  staff.  Appropriate  security  measures  should  also  be  provided  for  prosecutors, 
witnesses and complainants. 

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Enforcement  of  judgments,  in  both  civil  and  criminal  cases,  is  weak.  This  is  a  major 
impediment  towards  creating  confidence  in  the  judiciary.  Kosovo  needs  to  focus  more  on 
creating the means to implement and enforce legislation and judicial decisions. In this regard, 
the  current  bailiff  system  needs  to  be  reformed  to  be  more  efficient  when  it  comes  to 
enforcing civil case judgments. 

In terms of increasing efficiency, the Judicial Council adopted a strategy to reduce backlogs to 
deal with over 160,000 cases accrued by 31 December 2008. To date, more than 55% of this 
caseload  has  been  adjudicated.  However,  the  overall  trend  reveals  an  increase  in  the  total 
number  of  pending  court  cases  since  the  number  of  filed  cases  (after  31  December  2008) 
continues  to  be  higher  than  the  number  of  cases  resolved.  This  could  partly  be  due  to  the 
registration system, which needs to be streamlined. 

Access  to  justice  is  hindered  in  the  north  of  Kosovo.  The  District  Court  based  in  northern 
Mitrovicë/Mitrovica is staffed only with 6 international judges and 2 international prosecutors 
from  EULEX.  The  Serb  community  in  the  north  does  not  accept  local  judges  in  the  Court. 
Parallel Serbian municipal courts exist in the north, but they deal mainly with civil cases. For 
criminal offences there are no law enforcement mechanisms in the north other than EULEX.  

Under an SAA, respect for the principle of the rule of law is reflected in the cooperation on 
consolidating  the  rule  of  law,  and  reinforcement  of  institutions  in  general  and  of  law 
enforcement  and  the  administration  of  justice  in  particular.  Cooperation  under  an  SAA 
requires further strengthening of the judiciary's independence and improving its efficiency.  

1.1.6.  The fight against corruption 

In  view  of  an  SAA,  Kosovo  needs  to  have  an  anti-corruption  legislative  framework, 
accompanied by polices and institutions for its implementation. 

Over  the  past  three  years,  Kosovo  has  taken  a  number  of  important  steps  to  fight  against 
corruption by adopting the necessary elements of the legal framework: laws on declaration of 
assets, preventing conflicts of interest in exercising public functions, whistle-blowers, public 
procurement  and  financing  of  political  parties.  The  current  legal  framework  has  provisions 
strong enough to bring tangible results in this area.  

Kosovo  set  up  the  independent  Anti-Corruption  Agency  in  2006.  The  Agency  is  the  lead 
institution to monitor the implementation of the law on the prevention of conflicts of interest 
and the law on the declaration of assets of public officials, as well as of the anti-corruption 
strategy  and  action  plan.  It  also  deals  with  processing  individual  complaints  on  potential 
corruption  cases  and  has  the  obligation  to  notify  other  authorities  such  as  police  and 
prosecution, if it finds grounds for further investigation. A National Anti-Corruption Council 
was  set  up  by  the  President  of  Kosovo  in  February  2012.  The  Council  aims  to  improve 
coordination  and  to  raise  awareness  among  all  bodies  and  institutions  involved  in  the  fight 
against corruption.  

In terms of the administrative capacity, over the past three years, prosecution and police have 
been  reorganised  with  the  aim  to  improve  the  fight  against  corruption.  In  2010,  the  Special 
Prosecution  established  an  anti-corruption  task  force  composed  of  prosecutors  (from  both 
Kosovo  and  EULEX)  and  police  investigators.  The  aim  of  this  task  force  is  to  investigate 
economic  and  financial  crime.  The  police  also  established  a  Directorate  against  economic 
crime  and  corruption.  Inspection  departments  have  been  set  up  in  many  authorities  and 
institutions, with the objective to address and monitor the situation with regard to corruption 
and/or  criminal  behaviour  within  the  organisation  itself.  In  general,  Kosovo  has  sufficient 
elements of the legal framework in place as well as the relevant institutions. In the short term, 
Kosovo  needs  to  demonstrate  a  clear  commitment  to  deliver  results  in  the  fight  against 

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corruption,  including  launching  investigations,  in  close  coordination  with  EULEX.  Kosovo 
needs to adopt a new anti-corruption strategy. 

To  meet  its  obligations  under  an  SAA,  Kosovo  needs  to  deliver  on  investigations  and 
prosecution of corruption cases and to improve the reliability of statistics on the fight against 
corruption. It is clear that there are further challenges that Kosovo needs to address. The law 
on the prevention of conflicts of interest needs relevant reporting obligations since currently 
conflict  of  interest  cases  continue  to  be  largely  un-reported.  The  sanctions  provided  in  the 
laws on declaration of assets and conflict of interest (fines up to a maximum of € 2,500, or a 
prohibition  to  exercise  a  public  function  for  the  maximum  period  of  one  year)  are  rather 
symbolic and the laws need to provide for dissuasive and proportionate sanctions. 

Financing of political parties is not sufficiently transparent. The law on financing of political 
parties contains several weaknesses that need to be addressed. It needs to prohibit or strictly 
regulate donations from legal entities that provide goods or services to public administration. 
It also needs to oblige political parties to have a single bank account and to define timeframes 
for publishing their financial reports.  

Kosovo also needs to adopt the new strategy and action plan for the fight against corruption. 
The evaluation of the anti-corruption strategy 2009-2011 suggests its limited implementation 
is due to a lack of inter-institutional cooperation and coordination, and a lack of support and 
commitment by the senior leadership in all public institutions.  

To ensure that the new strategy is implemented successfully, and that tangible progress will 
be made in the fight against corruption, Kosovo needs to simplify the institutional set-up for 
the fight against corruption and avoid overlapping responsibilities. Successful investigations 
and  prosecutions  are  key.  It  therefore  needs  to  improve  the  cooperation  between  the 
enforcement and judicial authorities to make them more efficient and effective, and improve 
the reliability and comparability of statistics in this area. High-level political support needs to 
be  ensured  in  support  of  the  work  in  the  fight  against  corruption;  the  political  willingness 
expressed in the meetings of the Anti-Corruption Council needs to be put into practice.  

Under an SAA, cooperation would be aimed at further strengthening the independence of the 
judiciary and improving its efficiency and at improving the functioning of the police and other 
law enforcement bodies in fighting corruption. 

1.1.7.  Relations with the international community 

Kosovo has been recognised by 92 countries. Kosovo is not a member of the United Nations 
(UN), the Organisation for Security and Cooperation in Europe (OSCE) or of the Council of 
Europe  (CoE),  and  thus  is  not  able  to  fully  benefit  from  the  evaluation  mechanisms  of  the 
relevant conventions. All three organisations are present in Kosovo. Kosovo is not a member 
of  the  World  Trade  Organisation.  It  is  a  member  of  the  World  Bank  and  International 
Monetary  Fund  (IMF)  with  which  it  has  a  Stand-By  Arrangement.  Kosovo  has  good 
cooperation with the International Criminal Tribunal for the former Yugoslavia. 

The  EU  maintains  a  strong  presence  in  Kosovo.  In  early  2012,  the  European  Commission 
Liaison Office and the office of the Special Representative were merged into an EU Office, 
and a double-hatted EUSR/Head of Office was appointed. This has streamlined and enhanced 
the EU's visibility in Kosovo. 

The  EU  has  extended  the  mandate,  including  certain  executive  powers,  of  its  rule  of  law 
mission,  EULEX,  to  expire  in  June  2014.  The  EULEX  mandate  was  endorsed  by  the 
Assembly in September. The Kosovo authorities have committed to cooperate fully with the 
EULEX  Special  Investigative  Task  Force,  which  investigates  the  allegations  raised  by  the 
Parliamentary  Assembly  of  the  Council  of  Europe  in  its  resolution  of  January  2011. 

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Strengthened  cooperation  between  EULEX  and  local  institutions,  such  as  the  Special 
Prosecution, has led to an increased number of arrests and search warrants. Kosovo needs to 
maintain  good  cooperation  with  EULEX,  needs 
to  actively  support 
implementation of its mandate, including of the Special Investigative Task Force. 

to  continue 

KFOR has also continued to assist in providing security, notably in the north of Kosovo. Its 
overall presence is about 5,600.  

The  International  Steering  Group  (ISG),  having  determined  that  Kosovo  had  substantially 
implemented  the  terms  of  the  Comprehensive  Settlement  proposal  and  Kosovo  having 
adopted the necessary constitutional and legal framework, declared the end of the supervision 
of  Kosovo's  independence,  and  the  end  of  the  mandate  of  the  International  Civilian 
Representative on 10 September.  

1.2. 

Human Rights and the protection of minorities 

1.2.1.  Civil, political, economic and social rights 

Kosovo  has  a  solid  legal  basis  for  the  protection  of  human  and  fundamental  rights.  These 
guarantees are directly enshrined in Kosovo's constitution. Kosovo has obligations to ensure 
that  its  own  legislation,  policies  and  practices  meet  the  international  requirements.  The 
constitution  lists  the  main  international  agreements  and  instruments  directly  applicable  in 
Kosovo including the Universal Declaration of Human Rights, the European Convention for 
the  Protection  of  Human  Rights  and  Fundamental  Freedoms,  and  its  Protocols.  In  case  of 
conflict,  the  latter  take  precedence  over  domestic  laws.  This  is  an  important  mechanism,  as 
Kosovo is not a member of the UN or of the Council of Europe, due to status considerations. 
Furthermore, the constitution provides individuals with the right to refer violations by public 
authorities  of  their  individual  rights  and  freedoms,  guaranteed  by  the  constitution,  to  the 
Constitutional Court. The Ombudsperson may also refer matters to the Constitutional Court. 

The  Kosovo  Assembly  has  a  specialised  Committee  on  Human  Rights,  Gender  Equality, 
Missing  Persons  and  Petitions.  Its  mandate  is  to  review  draft  legislation  and  ensure 
compliance with international and European legislation on human rights. Over the past three 
years, Kosovo has established several structures at central and municipal level to assist with 
the  protection,  promotion  and  enforcement  of  human  and  fundamental  rights.  The 
international community has been intensively involved in building Kosovo capacities in this 
area over the past three years.  

In general, Kosovo's institutions have taken good initiatives to start implementing the human 
and fundamental rights, as well as to increase the general awareness about these rights.  

To  meet  its  obligations  under  an  SAA,  Kosovo  needs  to  focus  in  particular  on  streamlining 
and simplifying the multitude of bodies dealing with the protection of these rights to ensure 
effective  monitoring  and  enforcement  of  the  legal  framework  in  this  area.  Furthermore,  the 
focus needs to be on freedom of expression. Freedom of expression and freedom of the media 
are  guaranteed  in  the  constitution.  More  needs  to  be  done  to  ensure  they  are  respected  in 
practice.  Kosovo  needs  to  investigate  and  prosecute  any  physical  attacks  against  journalists 
and  to  complete  the  parliamentary  procedure  to  change  the  Criminal  Code  on  criminal 
liability  of  media  and  protection  of  journalist  sources.  Regarding  property  rights,  there  are 
weaknesses in the existing systems and legal frameworks, as well as in the implementation. 
Kosovo needs to make progress on enforcing and ensuring respect of the property rights, for 
example through decreasing the backlog of cases and improving enforcement of judicial and 
administrative decisions. 

Following the October 2011 report of the Council of Europe's Committee for the Prevention 
of  Torture  and  Inhuman  or  Degrading  Treatment  or  Punishment  (CPT),  conditions  in  some 

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detention facilities have improved. In this context, Kosovo needs to continue monitoring the 
situation with regard to torture and ill-treatment, ensuring improvements in all facilities. Over 
the  past  three  years,  Kosovo  has  also  been  gradually  improving  the  standards  in  the  prison 
system. The Ministry of Justice needs to continue its efforts to increase the professionalism of 
the correctional staff. 

At  the  same  time,  Kosovo  needs  to  continue  addressing  other  issues.  Further  efforts  are 
required to tackle the issues of impunity and access to justice by making the judiciary work 
more efficiently. Slow procedures need to be effectively eliminated and judgments enforced. 
This includes the need to ensure access to justice in practice, especially to the more vulnerable 
groups  in  society,  including  victims  of  trafficking.  The  unresolved  fate  of  persons  gone 
missing in the conflicts in the 1990s (1,770 cases as of August 2012) remains a humanitarian 
concern. To identify the fate of missing persons requires further resources and active regional 
cooperation. Freedom of assembly and association as well as freedom of thought, conscience 
and religion are guaranteed through adequate legislation and are generally respected, although 
they could be more actively implemented. 

Kosovo's legal framework provides for women's rights. Gender equality is also well enshrined 
in the legal system, but implementation is slow. The implementation of the law on protection 
against domestic violence needs to be improved. The Convention on the Rights of the Child is 
directly  applicable  in  Kosovo.  The  juvenile  justice  system  is  operating  on  the  basis  of  the 
Juvenile  Justice  Code,  which  is  broadly  in  line  with  EU  standards.  Legislation  on  anti-
discrimination  is  adequate  although  its  practical  enforcement  remains  a  challenge.  There 
needs to be more political will to promote tolerance. Persons with disabilities are faced with 
little  access  to  employment,  goods  and  services,  transportation  and  education.  The  key 
challenge for persons with disabilities is socio-economic. Special care needs to be paid to this 
group of persons when designing employment policies. The enforcement of labour and trade 
union  rights  needs  to  be  further  improved,  including  through  increasing  the  capacity  and 
quality of labour inspectors. 

Under  an  SAA,  Kosovo  would  need  to  respect  and  implement  democratic  principles  and 
human rights as set out in key international documents such as the Universal Declaration of 
Human Rights and the European Convention of Human Rights. Respect for the principles of 
international law and rule of law in general would form the basis of the domestic and external 
policies of parties to an SAA. Kosovo would need to ensure that the basic rights and freedoms 
are guaranteed and their enforcement gradually improved. 

1.2.2.  Respect for and protection of minorities, cultural rights 

In view of an SAA, there needs to be a legislative framework guaranteeing the protection of 
minorities and of cultural rights. The enforcement of these rights needs to be supported by an 
adequate institutional structure. 

Kosovo has a solid legal basis for the protection of minorities and of cultural heritage. These 
guarantees are directly enshrined either in Kosovo's constitution and regulated by the law on 
the protection and rights of minorities. As the Council of Europe Framework Convention for 
the  Protection  of  National  Minorities  is  directly  applicable  in  Kosovo  and  takes  precedence 
over  Kosovo  legislation,  Kosovo  has  clear  obligations  to  ensure  that  its  own  legislation, 
policies  or  practices  meet  the  international  requirements.  This  is  important  taking  into 
consideration that Kosovo is not a member of the Council of Europe. 

Following  the  end  of  supervised  independence,  Kosovo's  constitution  and  legislation 
continues  to  have  guarantees  of  representation,  cultural  rights,  language  rights  to  its 
minorities,  as  well  as  rights  of  the  Serbian  Orthodox  Church.  Currently,  representatives  of 

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minorities have 25 seats guaranteed in the Assembly as a result of the system of guaranteed 
and reserved seats (13 for the Serbian community and 12  for  members  of  other  minorities). 
Two  of  the  five  deputies  of  the  Assembly's  Speaker  are  from  non-Albanian  minorities. 
Persons belonging to minorities are also well represented in the government.  

In terms of language rights, the reformed Language Commission has the potential to improve 
the protection of linguistic rights. Budget, staff and premises need to be allocated to the Office 
of the Language Commissioner. The law on the Public Broadcaster provides for establishing a 
channel in the Serbian language. This needs to start broadcasting. In her annual address, the 
President  addressed  the  Assembly  in  Serbian  as  well  as  Albanian:  a  positive  sign,  which 
needs to be followed by other political leaders and Kosovo institutions. 

With regard to the Roma, Ashkali and Egyptians, Kosovo's application for the Roma Decade 
membership is a positive initiative. With the support of the international community, Kosovo 
has been closing the lead contaminated camps.  

With  strong  support  of  international  community,  Kosovo  has  continued  offering  the 
possibility  of  return.  Overall,  over  23,000  persons  belonging  to  minorities  have  returned  to 
Kosovo since the conflict in 1990s. 

As  regards,  cultural  rights  including  cultural  heritage,  Kosovo  has  been  taking  steps  to 
implement the Council of Europe and UNESCO conventions on cultural rights. Protection of 
cultural  heritage  has  somewhat  improved  following  the  adoption  of  related  legislation,  but 
implementation  is  lagging  behind,  especially  at  municipal  level.  Kosovo  authorities  have 
successfully taken over from KFOR the security of most of the cultural and religious sites of 
the Serbian Orthodox Church; only two sites – the Pejë/Peć Patriarchate and the Manastiri i 
Deçanit/Visoki Dečani Monastery – are still protected by KFOR. 

In the short term, Kosovo needs to ensure existence of a body enabling direct consultation on 
the  promotion  and  protection  of  religious  and  cultural  heritage  with  religious  communities, 
notably the Serbian Orthodox Church. 

To  meet  its  obligations  under  an  SAA,  Kosovo  needs  to  focus  on  promoting  multi-ethnic 
Kosovo. It needs to create conditions for Serbs to feel part of Kosovo's future and conditions 
for return for persons who wish to do so. Budget, staff and premises need to be allocated to 
the  Office  of  the  Language  Commissioner.  It  is  equally  important  to  implement  legislation 
related to the protection of cultural heritage and of the Serbian Orthodox Church notably laws 
on the historic centre of Prizren and on the village Hoçë e Madhe/Velika Hoča. Broadcasting 
by the public broadcaster needs to be ensured in Serbian language. Physical attacks motivated 
on the basis of ethnicity or religion need to be investigated and perpetrators brought to justice. 
Kosovo  also  needs  to  progress  on  implementing  the  strategy  and  action  plan  for  the  Roma, 
Ashkali and Egyptians, including through the allocation of the necessary funds. Kosovo needs 
to increase the overall share of persons belonging to minorities in public administration. 

It is clear that there are further issues in this area that Kosovo needs to address. Challenges 
relate both to the enforcement of legislation and to the political framework. Kosovo needs to 
improve  further  the  implementation  of  legislation  on  the  use  of  official  languages  at  an 
institutional  and  social  level  throughout  Kosovo.  The  "Forty  Actions"  to  integrate  Roma, 
Ashkali  and  Egyptians  need  to  be  implemented  both  at  central  and  municipal  levels.  These 
minorities  are  vulnerable  and  they  suffer  both  direct  and  indirect  discrimination.  Also  they 
have limited access to the Kosovo education system. The access to education, the fight against 
school  drop-out,  and  qualitative  education  outputs  need  to  complement  the  recent  Romani 
curriculum. Similar issues persist with regard to Turkish, Bosniak and Gorani minorities. The 
teaching and learning of other minority languages is not sufficiently promoted. 

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It  is  important  that  security  incidents  targeting  returnee  sites  and  properties  are  thoroughly 
investigated and tried. Incidents targeting the Serb returnee community in certain areas south 
of  the  river  Ibër/Ibar  have  negative  impact  on  this  community  and  increase  their  feeling  of 
vulnerability and lack of confidence in the authorities in ensuring their security. 

Under an SAA, Kosovo would need to respect and implement the rights of persons belonging 
to minorities on the basis of international and European standards. Kosovo would also need to 
offer the possibility of return for displaced persons who may wish to come back. 

2. 

ECONOMIC CRITERIA 

Respect  for  market  economy  principles  should  form  the  basis  for  domestic  and  external 
policies. This entails a stable macroeconomic environment supported by a stable institutional 
framework,  a  comprehensive  liberalisation  of  prices,  and  trade  and  current  account 
transactions.  The  creation  of  a  strong  private  sector  through  de-monopolisation  and 
privatisation  and  the  establishment  of  a  prudently  managed  financial  sector  are  also 
important factors. These policies should be supported by a stable and transparent legal and 
regulatory framework. 

Kosovo has implemented the initial essential reforms towards establishing a fully functioning 
market economy. This is sufficient to establish contractual relations with countries from the 
Western Balkans, as stated in the Council Conclusions of April 1997. 

2.1. 

Economic situation and stability 

2.1.1.  Economic situation 

Economic  policies  have  been  volatile  over  the  past  three  years.  Kosovo  has  undergone  a 
period of marked fiscal expansion, which boosted economic growth and budget revenue. At 
the same time, this has increased external imbalances and economic vulnerabilities. Since the 
second  half  of  2011,  fiscal  consolidation  steps  have  been  undertaken  in  reaction  to  existing 
financial  constraints.  The  government  has  also  advanced  reforms  to  improve  the  economy's 
regulatory business environment. There is broad consensus in the society on pursuing market-
based  policies.  At  the  same  time,  corruption  and  informal  business  practices  are  still 
widespread,  and  remain  important  challenges  to  economic  development.  In  this  context,  the 
rule of law needs to be strengthened. 

Economic  stability  has  largely  been  preserved.  Kosovo's  fully  euroised  economy  has  been 
relatively  insulated  from  the  global  economic  crisis,  due  to  its  limited  integration  in  the 
international  economy.  Banks'  lending  is  funded  from  domestic  sources  and  the  sector 
remains  well-capitalised  and  profitable.  After  failing  to  implement  an  IMF  Stand-By 
Arrangement  (SBA)  in  2010,  economic  policies  have  recently  been  anchored  by  a  Staff-
monitored programme and a new SBA, aiming at restoring fiscal sustainability. Nevertheless, 
the economic situation is challenging. The economy provides few employment opportunities. 
External imbalances are high and economic activities are predominantly concentrated in the 
services sector, in particular retail and wholesale trade. Reliance on remittances and direct or 
indirect support of donors has been declining but remains significant. 

The  economy  expanded  on  average  by  around  4%  over  the  last  three  years.  Growth  is 
expected to have accelerated to 5% in 2011, mainly driven by domestic demand with strong 
increases  in  government  consumption  and  investments.  Exports  of  goods  and  services  have 
also increased, but still cover only about a third of total imports. The production base remains 
extremely narrow. Agriculture, mostly semi-subsistence, contributes about 17% of the value 
added  in  the  economy.  Manufacturing  is  limited  and  concentrated  in  the  extraction  of  raw 
materials, which also dominate the exports of goods. 

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Data  on  employment  is  scarce  and  often  not  reliable.  Employment  and  activity  levels  are 
extremely  low3.  Estimates  suggest  that  only  about  a  quarter  of  the  working  age  population 
have a job and only one woman out of eight is employed. Unemployment is above 40% and 
especially pronounced among the youth – more than 70% of whom are without a job. About 
80%  of  all  unemployed  have  been  without  a  job  for  more  than  a  year,  revealing  deep 
structural challenges. There has been relatively high growth over the last three years, but job 
creation  is  lagging  and  not  enough  jobs  are  created  to  reduce  labour  market  pressures.  In 
addition,  the  economic  structure  is  largely  based  on  sectors  relying  on  low-skilled  labour. 
Most  of  the  labour  force  is  unskilled  or  semi-skilled,  implying  potential  constraints  for 
businesses  trying  to  develop  in  sectors  with  higher  value  added.  High  remittances  inflows 
have an important impact on the labour market, as they tend to increase the reservation wage 
and reduce incentives to work. The lack of perspective for a job, especially among the young 
population, is putting strains on social cohesion and encourages emigration. 

Inflation  has  been  volatile,  moving  from  a  deflation  of  -2.4%  in  2009  to  an  average  annual 
inflation  of  7.4%  in  2011.  Food  and  energy  prices  are  by  far  the  biggest  contributors  to 
inflation  dynamics.  Domestic  prices  are  highly  dependent  on  international  commodity  price 
movements. Food prices have a share of about 35% in the consumer basket, marking a decline 
over  the  recent  years4.  After  increases  ranging  between  30-50%  in  2011,  the  net  monthly 
average wage in the public sector reached € 368 in December 2011. Public sector wages have 
risen more than 60% altogether in the last three years, far surpassing productivity gains. There 
is scarce information about private sector wages but a survey done by the Kosovo Business 
Alliance shows that their average levels are below public sector wage levels. 

Kosovo uses the euro as a legal tender and the Central Bank has limited policy instruments. 
Banking  supervision  and  conservative  lending  policies  of  the  commercial  banks  have  been 
key  in  preserving  financial  sector  stability.  Credit  is  financed  out  of  domestic  deposits  and 
banks  observe  an  informal  80%  threshold  for  the  loans-to-deposits  ratio.  As  part  of  the 
agreement  with  the  IMF,  the  central  bank  and  the  Ministry  of  Finance  have  established  a 
special reserve fund for providing emergency liquidity assistance to the financial sector. 

High and persistent external imbalances represent a particular challenge for the economy. The 
current account deficit widened from 10.5% in 2009 to 14.5% of GDP in 20115. Trade deficits 
have  stayed  above  40%  of  GDP  and  have  even  expanded  lately.  They  are  only  partially 
financed  by  surpluses  in  the  trade  in  services  and  in  the  income  account.  Current  transfers, 
both to the government and the private sector, have declined but still remain significant and 
finance  about  half  of  the  deficit  in  the  trade  in  goods.  Kosovo  is  a  recipient  of  large 
remittances  inflows,  which  are  mostly  channelled  to  finance  consumption.  Capital  inflows 
have  been  dominated  by  foreign  direct  investments,  averaging  7.7%  of  GDP  since  2009. 
However, most investments have gone into the non-tradable sectors – in particular financial 
intermediation,  construction  and  real  estate,  re-enforcing  the  existing  structure  of  the 
economy. Kosovo's total external indebtedness has remained stable at around 30% of GDP in 
the  last  three  years.  Most  of  the  debt  is  private,  long-term  and  linked  to  foreign  direct 
investments. The Central Bank of Kosovo has recently published the international investment 
position  (IIP),  which  measures  the  difference  in  external  financial  assets  and  liabilities, 
showing a solid 2.3% of GDP. 

3 

4 
5 

The  latest  official  data  from  the  Labour  Force  Survey  are  from  2009.  In  2010  and  2011  the  surveys 
were cancelled due to financial constraints. 
The decline has been driven mainly by methodological changes. 
Data from the Central Bank of Kosovo. 

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2.1.2.  Fiscal policy 

In a euroised economy, the role of fiscal policy is key in preserving macroeconomic stability. 
In the last three years, fiscal policy has been expansionary and volatile, but the government is 
taking  efforts  to  stabilise  expenditures.  The  budget  deficit  increased  from  0.7%  in  2009  to 
2.6% of GDP in 2010, before corrective actions brought it down to 1.9% in 2011. Excluding 
significant one-off dividend receipts and budget grants, the deficit averaged just under 5% of 
GDP  between  2009  and  2011.  Primary  spending  grew  by  a  nominal  45%  over  this  period, 
driven mainly by strong increases in capital expenditure and spending on wages. Government 
priorities  have  been  heavily  oriented  towards  road  infrastructure,  leaving  little  resources  to 
finance  other  pressing  development  and  social  needs.  The  construction  of  a  highway  to 
Albania  launched  in  2010  has  weighed  heavily  on  the  budget,  suppressing  other  capital 
expenditure  and  reducing  fiscal  space  to  finance  other  expenditure  that  could  contribute  to 
improving social cohesion and prospects for sustainable long-term employment and growth. 
By the end of 2011, total revenue increased by around 38% in comparison to 2008 as both tax 
and  non-tax  revenue  increased  strongly.  In  this  period,  the  government  drew  significant 
dividends  from  the  public  telecom  company.  Moreover,  tax  revenue  has  been  boosted  by 
increased indirect taxation and improved tax collection. Most of the revenue is collected at the 
border, reflecting the structural dependency on imports to meet even basic consumption and 
investment needs. 

Budget  deficits  have  been  financed  mainly  by  withdrawals  of  previously  accumulated 
government deposits, which since 2008 have fallen by around 7 percentage points to 3.5% of 
GDP in 2011. In 2009, Kosovo assumed obligations towards the World Bank. This accounts 
for most of the government debt, which stood at about 6% of GDP by the end of July 2012. 
This  is  well  within  the  legally-binding  limit  of  40%  of  GDP  for  government  and 
government-guaranteed  debt.  In  2012,  the  government  started  issuing  treasury  bills  and 
declared  its  intention  to  develop  further  the  domestic  market  for  government  securities. 
Overall, in view of the significant contingent and implicit liabilities, especially in the energy 
sector, and the numerous expenditure priorities, future government indebtedness needs to be 
carefully managed and monitored. 

2.2. 

Price and trade liberalisation 

Kosovo is not a member of the World Trade Organisation (WTO) and, consequently, has not 
had to undergo the deep reform and trade liberalisation which membership in this organisation 
implies.  Kosovo  is  a  member  of  the  CEFTA  and  as  such  a  signatory  to  the  agreement 
eliminating  barriers  to  trade  between  its  members  and  harmonising  provisions  on  modern 
trade policy issues such as competition rules and State aid. 

The  price-setting  mechanism  in  Kosovo  is  mostly  free,  with  independent  regulatory  bodies 
regulating  the  prices  of  electricity,  district  heating,  water,  solid  waste,  postal  services  and 
some  telecommunication  services.  Current  governance  arrangements  as  regards  publicly-
owned  enterprises  ensure  that  government  does  not  directly  interfere  in  the  price  setting 
mechanism of their services. 

2.3. 

Privatisation, private sector development and financial reform 

2.3.1.  Privatisation and private sector development 

The  privatisation  of  socially-owned  enterprises  begun  in  2002.  The  Privatisation  Agency  of 
Kosovo  has  privatised  (fully  or  partially)  306  socially-owned  enterprises.  The  Agency  has 
accumulated  significant  proceeds  in  the  process,  which  have  been  ring-fenced  to  satisfy 
creditors  and  workers  claims.  In  2011,  a  new  legislative  framework  was  adopted  that  is 

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expected  to  speed  up  the  liquidation  process.  However,  the  privatisation  of  some  large 
socially-owned enterprises still needs to be addressed. 

A  number  of  large  publicly-owned  enterprises  in  key  sectors  have  been  tendered  for 
privatisation.  In  addition,  the  government  has  entered  into  or  is  considering  long-term 
public-private  partnerships  (PPPs)  as  a  way  to  draw-in  private  investments  and  develop  the 
infrastructure.  In  2010,  a  20-year  contract  was  awarded  to  an  international  consortium  to 
operate the Pristina airport. The tender has been completed for the Electricity Distribution and 
Supply Company in June 2012. The privatisation of the public telecom company is currently 
on-going and is due to be finalised by the end of the year. Large privatisations and PPPs have 
the potential to attract investments and improve efficiency. They should however be managed 
carefully to limit government exposure to future liabilities and provide the right incentives for 
improved business and operational performance of the companies. 

Services are the key component of Kosovo's private sector. Enterprises tend to be very small 
and  mostly  family-run.  There  is  vigorous  business  creation,  but  most  companies  do  not 
achieve  significant  growth.  The  obstacles  to  private  sector  development  are  numerous, 
ranging  from  a  weak  rule  of  law,  corruption  and  unfair  competition  to  unstable  electricity 
supply, unskilled labour force as well as difficult and costly access to finance. 

In  the  past  year,  the  government  has  taken  some  initiatives  to  improve  the  business 
environment.  The  process  of  business  registration  has  been  simplified  and  facilitated,  the 
number of required documents for exporting and importing has been reduced, and a number 
of  licences  have  been  removed.  Kosovo  has  made  important  steps  towards  improving  its 
legislative  and  regulatory  framework  but  still  faces  a  major  challenge  with  regard  to  its 
implementation. 

2.3.2.  Financial sector reform 

The financial sector (excluding the Central Bank) has expanded by more than 40% over the 
last three years, reaching around 75% of GDP in the end of 2011. The sector is dominated by 
eight  commercial  banks  (76%  share  in  total  assets),  followed  by  pension  funds  (17%), 
microfinance institutions (4%) and insurance companies (3%). Concentration is high and the 
three biggest banks hold 73% of the assets. Close to 90% of all bank assets are managed by 
banks  under  foreign  ownership.  All  banks  have  capital  adequacy  ratios  above  the  required 
minimum  of  12%  and  the  average  ratio  for  the  whole  system  is  around  18%.  Banks' 
profitability  and  liquidity  indicators  are  also  high.  Non-performing  loans  remain  at 
manageable levels, although they have slightly increased to about 7% in the first half of 2012. 
Financial  intermediation  has  steadily  deepened  and  total  deposits  and  lending  has  increased 
on  average  by  double-digit  rates  over  the  last  three  years.  The  system  relies  on  domestic 
sources  of  finance.  Deposit  levels  have  been  kept  constantly  above  lending,  providing  an 
additional source of stability in a relatively risk-averse system. 

In  April,  a  new  law  on  banks,  microfinance  institutions  and  non-bank  financial  institutions 
was adopted. It enhances governance standards, introduces tighter restrictions for lending to 
bank-related parties and allows consolidated supervision for banking groups. Additionally, the 
law  strengthens  the  existing  framework  for  bank  resolutions.  This  includes  establishing  a 
framework  that  authorises  the  Central  Bank  to  take  control  of  a  bank  before  it  reaches 
insolvency.  It also provides a clear legal framework for oversight of  microfinance and non-
bank financial institutions.  

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3. 

ABILITY TO ASSUME THE OBLIGATIONS RESULTING FROM AN SAA 

3.1. 

Political dialogue  

There is a broad convergence between the external policies of Kosovo and those of the EU. A 
formalised  process,  a  political  dialogue,  in  which  the  EU  and  Kosovo  would  have  an 
opportunity to meet and discuss regional and international issues, would have the potential to 
contribute to improving further Kosovo's understanding of EU priorities in this area. Kosovo 
has established the institutions to undertake a political dialogue. 

An  SAA  would  provide  the  framework  for  a  political  dialogue  that  focuses  on  integration, 
gradual rapprochement, further convergence of positions on international issues, as well as 
regional cooperation and good neighbourly relations.  

3.2. 

Regional cooperation 

Following the UN General Assembly Resolution of September 2010, the EU has facilitated a 
dialogue  between  Pristina  and  Belgrade.  The  dialogue  was  launched  in  March  2011  to 
promote  cooperation,  achieve  progress  on  the  path  to  the  European  Union  and  improve  the 
lives  of  the  people.  The  parties  reached  agreements  on  free  movement  of  persons,  customs 
stamps,  recognition  of  university  diplomas,  cadastre  records,  civil  registries,  IBM  and  on 
regional  cooperation.  It  is  essential  that  Kosovo  continues  implementing  in  good  faith  all 
agreements reached between Belgrade and Pristina to date and that it engages constructively 
on the full range of issues with the facilitation of the EU. 

The  agreement  on  regional  cooperation  of  24  February  provided  for  the  modalities  for 
Kosovo's participation and representation in regional cooperation arrangements. This has been 
an important step towards ensuring an effective participation of Kosovo in regional initiatives. 
Both  parties  need  to  continue  implementing  the  agreement.  Inclusive  and  representative 
regional  cooperation  requires  that  the  February  agreement  is  implemented  by  both  Kosovo 
and Serbia. 

Kosovo  also  chaired  the  Central  European  Free  Trade  Agreement  in  2011,  including  the 
ministerial  meeting  in  November  2011.  Kosovo  participates  in  the  Regional  Cooperation 
Council. Kosovo participated in the meetings of the South East Europe Transport Observatory 
(SEETO)  forum,  including  the  ministerial  meeting  at  the  end  of  2011.  Kosovo  also 
participates  in  the  Energy  Community  Treaty.  Kosovo  was  accepted  into  the  South  East 
Europe (SEE) Centre for Entrepreneurial Learning, the Regional Rural Development Standing 
Working  Group  in  the  SEE,  the  Regional  Environmental  Network  for  Accession,  and  the 
Network of Associations of Local Authorities of the SEE. 

Kosovo  is  ready  to  participate  in  other  regional  initiatives.  The  agreement  on  regional 
cooperation of February should allow Kosovo to increase and extend its direct participation in 
regional  mechanisms.  This  includes  the  Transport  Community  Treaty,  judicial  cooperation, 
and  arrangements  for  employment  and  social  policies  within  the  framework  of  the  SEE 
Employment and Social Policy Network and the SEE Health Network. It should also ensure 
Kosovo's full participation in the Roma Decade. 

According  to  the  Council  Conclusions  of  April  1997,  regional  cooperation  is  one  of  the 
conditions  for  contractual  relations  with  the  EU.  To  meet  its  obligations  under  such  an 
Agreement, Kosovo needs to ensure active and constructive cooperation with all partners from 
the region. 

Under an SAA, Kosovo would commit itself to the active promotion of regional cooperation, 
in all areas covered by the agreement.  

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3.3. 

Free Movement of Goods 

Trade policy 

In view of an SAA, Kosovo needs to have the administrative capacity to conduct negotiations 
in trade-related areas. It needs to be able to identify the benefits and costs of changes in trade 
regimes resulting from negotiations with the EU and take meaningful commitments which can 
then  be  implemented.  An  appropriate  negotiating  structure  also  must  be  in  place  and  there 
need  to  be  mechanisms  for  consulting  the  relevant  stakeholders.  This  capacity  needs  to  be 
maintained  throughout  the  negotiation  process,  and  Kosovo  needs  to  be  able  to  provide 
evidence  that  the  reforms  requested  as  a  result  of  the  negotiations  can  be  implemented 
progressively after signature. 

The  Ministry  for  Trade  and  Industry  has  been  reorganised.  The  Trade  Department  of  the 
Ministry for Trade and Industry has been reinforced, but other trade-related departments still 
need  to  be  restructured.  The  new  organisational  structure  is  not  yet  fully  operational  or 
staffed. To negotiate effectively and to implement the trade-related parts of an SAA, Kosovo 
needs to strengthen further its administrative capacity. In the short term, it needs to implement 
fully the government decision on the restructuring of the Ministry.  

A Council for Trade Policy has been established, as the inter-ministerial platform for the trade 
policy  coordination.  At  the  operational  level,  the  policy  dialogue  among  all  relevant 
Ministries and also with businesses within the framework of the Trade Policy Working Group 
and its five sectoral subgroups has been recently established. It has become the centre of the 
Ministry's trade policy activity in the short period of time.  

These bodies are designed to help define Kosovo's negotiating positions for the trade related 
aspects  of  an  SAA  and  other  trade  negotiations.  In  the  short  term,  to  improve  the 
understanding  of  the  impacts  of  trade  provisions  of  the  Stabilisation  and  Association 
Agreement on Kosovo's economy, Kosovo needs to prepare an analytical study, including a 
clear statement of its negotiating priorities. Kosovo also needs to appoint a chief negotiator. 
The negotiator must have the full collaboration of relevant colleagues in the Ministry and in 
the other relevant Ministries to have a fully operational negotiating team capable of covering 
all  aspects  of  trade  negotiations.  Finally,  appropriate  institutional  arrangements  and 
mechanisms need to ensure the overall coordination of the negotiation process.  

Kosovo  has  been  modernising  the  trade-related  regulatory  framework  with  a  view  to 
approximation  to  the  acquis  by  adopting  new  legislation  in  line  with  EU  standards  and 
eliminating  non-EU  compatible  regulations.  To  meet  its  obligations  under  an  SAA,  Kosovo 
needs to implement this new legal framework.  

Kosovo is a member of CEFTA. As such, it has a tariff-free regime for all industrial goods 
and agriculture products with all CEFTA members. As a member of CEFTA, Kosovo applies 
only occasional non-tariff and technical barriers to trade, within the tariff free regime for all 
industrial goods and agriculture products with all its members. Kosovo also enjoys customs-
free  access  to  the  EU  Market  for  manufactured  products,  through  the  unilateral  regime. 
Kosovo has the right to establish protective measures against unfair trade practices (dumping 
and subsidised imports). 

A flat 10% custom tariff is applied on goods imported from the EU into Kosovo, with some goods 
enjoying  duty-free  access,  such  as  pharmaceutical  products,  certain  agricultural  products  and 
livestock, fertilisers, and others. Kosovo's trade balance is marked by a significant trade deficit, 
which exceeded € 2 billion in 2011 (45% of GDP). The EU is by far Kosovo's most important 
trading  partner,  accounting  for  nearly  half  of  its  external  trade.  The  share  of  exports  to 

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CEFTA  member  countries  was  about  26%  in  2011  with  Albania  and  the  former  Yugoslav 
Republic of Macedonia and Serbia being the main trading partners. 

90%  of  Kosovo's  exports  consist  of  raw  materials,  on  which  the  EU  applies  no  restrictions. 
Industrial  products  benefit  from  the  Community's  autonomous  trade  measures  (ATMs)  in 
place  until  2015,  with  no  quantitative  restrictions  or  duties.  The  only  exceptions  are  veal, 
wine,  sugar  and  certain  fishery  products,  which  are  subject  to  tariff  quotas.  The  ATMs  are 
important for Kosovo's economy and for its weak export sector. The value of Kosovo's export 
grew in 2011; this was largely due to increased world commodity prices. Exporters focused 
mainly  on  maintaining  existing  markets  rather  than  expanding  exports  and  penetrating  new 
markets. There is a good potential to exploit the preferences further for business development. 

Trade in industrial goods 

Kosovo  has  not  yet  made  use  of  the  full  potential  of  the  benefits  granted  through  the  EU 
preferential  trade  regime  and  has  a  substantial  trade  deficit  in  industrial  goods.  To  take  full 
advantage  of  an  SAA,  Kosovo  needs  to  undertake  structural  change  towards  higher  added 
value in export goods, especially in intra-industry trade with EU companies. Within the scope 
of  the  Kosovo's  Economic  Vision  Strategy  and  Action  Plan,  aimed  at  boosting  the  private 
sector, the number of documents necessary for export and import of traded goods have been 
reduced. Only two documents are now required for exports and three for imports.  

A  significant  proportion  of  Kosovo's  total  exports  (61%)  are  primary  products  such  as  raw 
materials or goods with a low level of processing and relatively low value added, essentially 
base metals. Consequently, the overall performance of the country's exports remains sensitive 
to developments in external demand. Mineral products represent the second largest category, 
with  over  12%  of  total  exports.  Manufactured  exports  mainly  consist  of  machinery,  plastic 
and  leather.  Imports  are  generally  of  a  higher  processing  stage,  either  intermediate  or 
consumer goods. In 2011, Kosovo's imports exceeded € 2.1 billion, with an annual increase of 
almost  15%.  The  structure  of  Kosovo  imports  is  stable.  The  largest  category  is  mineral 
products  (mostly  fuel  and  ceramic  products).  Industrial  goods,  machinery  and  equipment 
represent about 11% of total imports, or about 28% of total imports from the EU. 

Trade in agricultural goods and fisheries 

Agriculture is a key sector in Kosovo. Agriculture and fishing has a share of about 17% in the 
total  value  added  in  the  economy.  It  is  the  main  source  of  income  for  the  majority  of  the 
population.  The  sector  has  further  growth  potential,  both  in  terms  of  production  and  trade. 
Kosovo is a net importer  of agricultural products. Import  of agricultural products  (food and 
beverages, live animals and vegetables) amounts to almost 22% of all imports but less than 
8% of all exports. 

The main agricultural exports are beverages, spirits and vinegar (wine, edible vegetables and 
vegetable  and  fruit  preparations).  The  most  important  imports  of  agricultural  products  in 
terms  of  value  are  beverages,  spirits  and  vinegar,  edible  meat,  dairy  products,  pastries  and 
milk  preparation.  Kosovo's  main  trading  partners  are  the  EU,  Albania,  Serbia,  the  former 
Yugoslav  Republic  of  Macedonia  and  Turkey.  For  all  agricultural  and  food  categories,  a 
negative  trade  balance  prevails.  Kosovo  faces  a  large  agriculture  trade  deficit.  With  the  EU 
alone, this deficit amounted to € 138 million in 2011.  

Organic  agriculture  is  at  an  early  stage  of  development.  The  produce  has  to  be  certified  in 
Albania and the former Yugoslav Republic of Macedonia. 

To  meet  its  obligations  under  an  SAA,  Kosovo  needs  to  continue  agricultural  structural 
reforms.  It  needs  to  accelerate  the  harmonisation  of  veterinary,  sanitary  and  phytosanitary 
rules  with  EU  standards  to  help  its  exports  meet  international  requirements.  Privatising 

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processing  plants  and  their  upgrade  to  the  level  fulfilling  the  required  quality  and  safety 
standards  would  improve  their  commercial  competitiveness  and  thus  prepare  for  an  SAA. 
This  would  also  help  improve  the  trade  balance  between  the  EU  and  Kosovo  and  improve 
export performance for all agricultural products. Kosovo also needs to improve its statistical 
data  collection  as  there  are  significant  differences  between  the  EU  and  Kosovo  data  on 
agricultural trade. 

Under  an  SAA,  ensuring  free  movement  of  goods  is  one  of  the  main  objectives.  The  parties 
establish gradually a free trade area, within a transitional period to be determined during the 
negotiations.  This  free  trade  area  would  have  to  be  in  conformity  with  relevant  WTO 
provisions.  

Kosovo  would  commit  not  to  establish  quantitative  restrictions  or  measures  having  an 
equivalent  effect,  to  progressively  dismantle  its  respective  customs  duties  and  equivalent 
measures  on  almost  all  trade  with  the  EU.  It  would  commit  to  prevent  practices 
discriminating  directly  or  indirectly  against  EU  producers.  The  EU  autonomous  trade 
measures already contain a standstill clause making them conditional on the beneficiaries not 
introducing  new  import  duties  and  measures  having  equivalent  effect  in  trade  with  the  EU. 
This  would  become  a  contractual  obligation  under  an  SAA.  The  customs  authorities  in 
Kosovo would need to be able to enforce and safeguard these demanding trade regimes. 

3.4.  Movement of workers, establishment, services and capital 

3.4.1.  Movement of workers  

The  main  elements  of  institutional  and  legal  framework  with  regard  to  equal  treatment  of 
workers are in place. Foreign citizens who want to work in Kosovo for a minimum of three 
months need to have a work permit issued by the Ministry of Labour and Social Welfare. The 
Ministry sets the number of employment permits for foreign persons, in accordance with the 
employment opportunities. The number of permits for the following year is set at the end of 
each calendar year. The Labour Inspectorate supervises the implementation of the legislation 
and controls work permits. 

Several categories of foreign workers are exempt from the obligation to obtain a work permit, 
which  facilitates  the  access  to  the  labour  market  for  foreign  nationals  in  certain  sectors. 
Kosovo  has  also  undertaken  measures  to  assist  foreign  nationals  in  specific  areas.  For 
example, in the construction sector Kosovo recognises foreign licences, thus making it easier 
for foreign companies to bring employees to work in Kosovo. Lawyers, who are permanent 
residents, are also allowed to provide services in Kosovo.  

A  lack  of  reliable  statistics  on  the  labour  market  makes  it  difficult  to  assess  the  short-  and 
long-term  needs  of  foreign  labour.  A  labour  market  assessment  would  help  Kosovo  to 
determine when there is a need to recruit third-country nationals. 

To  meet  its  obligations  under  an  SAA,  Kosovo  needs  to  continue  in  strengthening  the  legal 
framework  and  its  needs  to  enhance  considerably  its  administrative  capacity.  At  present, 
Kosovo  has  limited  legal  and  institutional  capacity  necessary  to  introduce  a  limited 
coordination of social security systems as foreseen by an SAA. The social security system in 
Kosovo  is  still  in  its  very  early  stages.  The  existing  legislation  is  rudimentary.  There  is 
currently, depending on the sector, either no insurance system at all or no system suitable for 
coordination. The negotiation of bilateral agreements on social security proves to be difficult 
and some branches of social security do not yet exist in Kosovo.  

Under an SAA, Kosovo would need to ensure equal treatment as regards working conditions, 
remuneration and dismissal of workers who are legally established in its territory. The legally 

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resident spouse and children of a worker legally employed in Kosovo would have access to 
the  labour  market  during  the  period  of  the  worker's  authorised  stay.  Kosovo  would  be 
required to lay down the rules for the limited coordination of  social security systems to EU 
nationals legally employed in Kosovo and their family members residing with them. 

3.4.2.  Establishment 

The legal framework for the right of establishment is the law on business organisations, which 
allows foreign-owned companies to establish their business under the same conditions as local 
businesses  as  long  as  they  are  registered  with  the  Kosovo  Business  Registration  Agency 
(KBRA). In support of inter alia business establishment and registration, 25 one-stop-shops 
have been established in different municipalities.  

The business registration certificate, fiscal number and VAT certificate will be issued on the 
spot  in  these  25  one-stop-shops.  The  business  registration  process  has  been  simplified  by 
removing  the  provision  requiring  the  deposit  of  the  minimum  start-up  capital  (€ 5,000)  for 
limited  liability  companies  and  by  reducing  start-up  capital  for  joint  stock  companies  from 
€ 25,000  to  € 10,000.  These  simplifications  will  facilitate  business  start-ups,  and  reduce  the 
time to start a business. The legal framework and the practices are non-discriminatory. 

To meet its obligations under an SAA, Kosovo needs to continue in a progressive alignment 
with the EU provisions. The alignment with EU standards on the recognition of professional 
qualifications and company law, including accounting, auditing and corporate governance is 
limited. Further progress in those two areas will contribute to make Kosovo a more attractive 
location for business. 

Under  an  SAA,  Kosovo  would  need  to  ensure  that  EU  companies  have  the  right  of 
establishment in Kosovo. EU companies established in Kosovo should be granted either local 
treatment  or  most-favoured-nation  (MFN)  treatment,  whichever  is  more  favourable.  During 
the transition period, the issue of extending these rights to EU nationals or Kosovans wishing 
to  establish  themselves  as  self-employed  independents  would  be  examined.  Notwithstanding 
the  provisions  governing  the  free  movement  of  workers  under  the  agreement,  special 
establishment provisions could be introduced for "key personnel". 

3.4.3. 

Supply of services 

The  legal  framework  for  trade  in  services  allows  for  a  relatively  open  economy  to  foreign 
service providers. In terms of market access, for most services, there are no legal restrictions 
on  foreign  firms  establishing  a  commercial  presence  in  Kosovo.  Once  they  are  established, 
foreign-owned firms are subject to the same rules as domestic ones. The share of services in 
the economy has been stable in the last years, at approximately 60%. 

Foreign-owned  local  firms  are  free  to  determine  their  ownership  structure  (allowing  up  to 
100% foreign ownership) and whether they will enter into a joint venture with local or other 
foreign-owned firms. Within the overall privatisation policy, specific service providers are in 
the process of being privatised, such as the Post and Telecommunications of Kosovo (PTK). 

Overall,  Kosovo  is  a  net  exporter  of  services.  This  is  the  only  sector,  where  Kosovo  has  a 
positive trade balance. The export of services represents approximately 10% of GDP, while 
imports  account  for  approximately  7.5%  of  GDP.  The  positive  balance  mainly  reflects 
increased  revenues  from  the  communication  and  travel  services.  Service  exports  have  an 
important  potential  for  faster  economic  growth.  During  the  next  three  years,  exports  of 
services are expected to grow by 6.5% in real terms. The main contributors to this growth are 
travel services, which mainly depend on visits of diaspora in Kosovo. In general, Kosovo has 
a relatively liberal regime for the supply of services. 

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To meet its obligations under an SAA, Kosovo needs to continue in the progressive alignment 
of its legislation with the acquis. It also needs to improve its statistics on services. 

Under an SAA, a liberal regime for the supply of services, consistent with the relevant WTO 
rules, in particular Article V of GATS, would be provided for. Companies not established in 
the  territory  of  the  respective  other  contracting  party  would  gradually  acquire  the  right  to 
provide services, in accordance with the GATS provisions and taking account, in particular, 
of  progress  in  approximation  of  laws  in  the  various  fields.  The  agreement  would  contain  a 
stand-still clause. The implementation of this liberalisation would be closely monitored under 
the agreement. 

3.4.4.  Current payments and movement of capital 

Kosovo  already  enjoys  a  liberal  regime  for  capital  movements,  including  foreign  direct 
investment.  There  are  no  restrictions  regarding  foreign  ownership  or  investment  in  the 
financial sector or in other assets. The liberalised rules constitute an important economic and 
regulatory  achievement  and  should  in  the  long-term  help  attract  the  foreign  capital.  The 
repatriation  of  profits  is  also  liberalised.  Kosovo  has  concluded  a  number  of  bilateral 
investment treaties, inter alia with Albania, Belgium and Luxembourg.  

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.  The 
banking sector seems solid both in terms of legal rules and capitalisation, and is progressively 
becoming more fluid. Kosovo only has an embryonic financial market and no stock exchange. 
The supervision capacities and procedures are established and efficient, with competent staff 
in the Central Bank of Kosovo.  

To  meet  its  obligations  under  an  SAA,  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. 

Under  the  SAA,  Kosovo  would  commit  itself  to  ensuring  a  liberal  and  non-discriminatory 
regime of both inward and outward movements of capital, in particular for direct investments. 
Protection of investors as regards liquidation and repatriation of investments and profits will 
also need to be covered. 

3.5. 

Approximation, implementation and enforcement of legislation 

European  integration  departments  have  been  set  up  in  all  ministries,  coordinated  by  the 
Ministry  of  European  Integration  (MEI)  and  there  is  a  good  basis  to  improve  further  the 
coordination  across  the  central  administration.  Over  the  past  three  years,  Kosovo  has  made 
progress in approximation of legislation to the EU acquis. The legal framework is complex, 
since it comprises a mixture of applicable legislation from the previous administrations from 
before 1999, from UNMIK and now the Kosovo authorities.  

To meet its obligations under an SAA, Kosovo needs to increase  the capacities and level of 
expertise in the field of legislative alignment to the EU acquis. It needs to continue improving 
the coordination mechanism with the focus on implementing and enforcing the legislation. 

Under an SAA, Kosovo would commit itself to ensure gradual approximation of existing and 
future Kosovo legislation to that of the EU. Kosovo would have to ensure that approximation 
would extend to all elements of the EU acquis referred to in the agreement. 

3.5.1.  Competition 

Kosovo has a law on State aid. The independent Kosovo Competition Commission is in place 
and became operational in 2009. During its four years of activity, some important cases have 

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been  investigated.  Between  2009  and  2011,  the  Commission  dealt  with  32  cases  related  to 
cartels,  mergers,  concerted  practices  (including  10  insurance  companies  for  agreement  on 
fixed-prices  in  third  party  liability  insurance),  and  also  dominant  position.  The  decisions  of 
the competition authority can be appealed to the Supreme Court. Several appeals are currently 
pending. The Competition Commission has not been involved in the competition aspects of 
privatisation of large publicly owned enterprises.  

To meet the obligations of the SAA, considerable further efforts are required. The law on State 
aid needs to be supplemented by the necessary  secondary legislation. Certain  aspects of the 
law on protection of competition need to be amended to be compatible with EU competition 
rules, in particular as regards the definition of dominant market position. Particular emphasis 
needs to be put on building the institutional capacities in this area. The State aid board and the 
independent  State  aid  commission  for  approval  of  aid  need  to  be  established.  The  Kosovo 
Competition  Commission  also  requires  suitable  premises.  Overall,  enforcement  of  the 
legislation and a significant strengthening of the administration in charge of competition are 
necessary to ensure the application of provisions in line with the EU standards. 

Under an SAA, Kosovo would commit itself to prohibit and police i) all agreements between 
undertakings and concerted practices which prevent, restrict or distort competition; ii) abuse 
of a dominant position by one or more undertakings, iii) any state (public) aid which distorts 
or  threatens  to  distort  competition  by  favouring  certain  undertakings  or  certain  products. 
Kosovo would commit itself to apply these rules to public undertakings and undertakings with 
special  rights.  Kosovo  would  also  commit  itself  to  adjust  state  monopolies  of  a  commercial 
character  so  that  no  discrimination  exists  regarding  the  conditions  under  which  goods  are 
procured and marketed. Kosovo would also need to ensure transparency in the area of state 
(public)  aid  by  establishing  comprehensive  inventories  of  aid  schemes  and  by  reporting 
annually to the European Commission. 

3.5.2. 

Intellectual property rights 

Laws on copyright and related rights, patents and trademarks are in place and are broadly in 
line the acquis. Provisions on infringement of copyrights were inserted in the Criminal Code. 
The  law  on  trademarks  includes,  inter  alia,  provisions  on  provisional  measures  and  other 
enforcement issues but does not make a reference to the Paris Convention. Local and foreign 
trademarks are treated equally provided that foreign trademarks are registered in Kosovo.  

As regards enforcement, the Industrial Property Office (IPO) is an independent agency within 
the  Ministry  of  Trade  and  Industry.  There  is  also  a  Committee  of  Appeal.  A  trademark 
database  is  operational  and  its  data  is  currently  being  digitalised.  With  the  adoption  of  the 
intellectual property rights strategy 2010 – 2014, the IPO created a comprehensive strategy, 
which provides for an inter-institutional implementing and monitoring body, the IP Council. 
Its  role  is  to  steer  and  oversee  IP  implementation  and  includes  members  from  the  customs, 
police  and  judicial  council.  Non-governmental  organisations  are  invited  to  participate  on  an 
ad hoc basis. 

The  Copyrights  and  Related  Rights  Office  was  established  in  2010  within  the  Ministry  of 
Culture.  Its  mission  is  to  accredit  and  supervise  the  organisations  representing  right  holders 
and  other  stakeholders  active  in  IPR  matters.  Recently,  the  Copyright  Office  launched  a 
public awareness campaign and sponsors some inter-institutional initiatives, such as a strategy 
against  forgery.  The  Copyright  Office  has  also  developed  cooperation  with  foreign  IPR 
institutions. 

A task force has been established to fight piracy. An intellectual property rights Unit was set 
up within the Customs and became fully operational in January 2011. The IPR sector was also 

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included  in  the  Kosovo  Customs  Strategic  Operation  Framework  2011-2014.  Customs  have 
approved  22  applications  for  action  and  referring  to  129  trademarks.  Judges  in  commercial 
courts are dealing with IPR infringements and have received some training on these matters. 

To meet its obligations under an SAA, key secondary legislation still needs to be completed. A 
law on geographical indications needs to be adopted. The capacity of the IPO remains limited 
and the office premises are inadequate making it difficult for the IPO to process registration 
applications in reasonable time. Kosovo needs to put particular emphasis on enforcement of 
the legislation. The fight against counterfeited goods needs to be more vigorously addressed. 
The police needs a specialised unit dealing with the IPR and police officers needs appropriate 
training.  Effective  inter-institutional  mechanisms  need  to  be  further  improved  and  efforts  in 
addressing  IPR  infringement  need  to  be  significantly  increased  notably  by  signing 
memoranda of understanding between IP offices. 

Under an SAA, Kosovo would commit itself to granting to EU companies a level of protection 
comparable to that of domestic companies. Progressively, Kosovo will need to work towards 
a comparable level of protection as granted in the EU. 

3.5.3.  Public procurement 

The public procurement law (PPL) constitutes the basis for the legal framework. It has been 
amended frequently in the past few years with the aim of increasing its compliance with the 
acquis. The current law reflects adequately the main principles of a sound public procurement 
system and is consistent with international good practices in public procurement. The new law 
has been almost completely harmonised with the EU directives and all secondary legislation 
has been in force since March 2012. 

With the current regime, the economic operators are well informed about procurement rules. 
The tender notice includes sufficient information on what is intended to be purchased as well 
as  the  evaluation  and  qualification  criteria.  The  restricted  procedure  is  defined  as  a  normal 
procedure that can be chosen  as an alternative to the open procedure. Large value contracts 
need  to  be  signed  by  the  Chief  Executive  Officers  and  Ministers.  E-procurement  is  being 
implemented.  The  contracting  authorities  are  directly  responsible  if  they  do  not  publish  the 
tender notice for a negotiated procedure and if they do not follow the general requirement for 
a minimum of three tenderers. 

The  public  procurement  system  in  Kosovo  consists  of  161  Contracting  Authorities  (530 
procurement  officers  are  currently  working  in  public  procurement  bodies).  The  institutional 
setup  comprises  the  Public  Procurement  Regulatory Commission responsible  for the  overall 
development,  operation  and  supervision  of  the  public  procurement  system,  including 
monitoring  the  use  of  the  negotiated  procedure,  the  selected  qualification  criteria  and  the 
independent 
validity  of  contract  signature.  The  Procurement  Review  Body 
administrative  review  body  dealing  with  complaints.  The  Central  Procurement  Agency  has 
refocused  on  central  purchasing.  These  three  institutions  now  have  new  rules  of  procedures 
and new operational guidelines. 

is  an 

The Board and the Commission remain independent institutions. They are nominated by the 
Government  and  appointed  by  the  Assembly.  They  report  directly  to  the  Assembly.  The 
Agency is now placed under the Ministry of Finance and is administered by a Director who is 
yet to be appointed. The government has not yet approved the lists of common-use items for 
mandatory central purchasing, which weakens the Agency's ability to carry out its functions.  

The review of complaints is conducted exclusively by the Procurement Review Body and the 
law  does  not  provide  for  the  complaints  to  be  filed  with  the  contracting  authority  at  a  first 
stage. A panel comprised of one or three board members reviews cases. The review procedure 

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includes also public hearings and decisions are available on the website. The complaints fee is 
€ 500 whereas fines imposed are systematically no less than € 5,000.  

Kosovo  has  also  legislation  on  public-private  partnerships,  which  establishes  a  consistent 
legal framework on work concessions and which is largely compatible with EU legislation.  

There  is  no  discrimination  between  domestic  and  foreign  companies  in  Kosovo,  the  legal 
framework  is  compatible  with  the  EU  and  international  practices,  and  the  administration  in 
charge of procurement is functioning.  

To  meet  its  obligations  under  an  SAA,  Kosovo  needs  to  put  more  emphasis  on  ensuring 
compliance, in particular as concerns the Procurement Agency. The integrity and transparency 
of the processes needs to be increased. Further efforts are required to ensure that corruption 
and  fraud  cases  are  addressed  and  prosecuted  successfully.  Corruption  in  the  field  of 
procurement needs to be addressed. The professionalism of procurement officers needs to be 
further improved with more emphasis on high-quality trainings. The turnover of procurement 
officers is still significant and needs to be addressed.  

Under an SAA, Kosovo would be required to ensure that EU companies are granted access to 
contract  award  procedures  under  treatment  no  less  favourable  that  of  domestic  companies, 
subject to a transitional period to be negotiated for EU companies not established in Kosovo. 
Kosovo would need to ensure that its public procurement legislation is in line with that of the 
EU.  It  would  also  need  to  strengthen  the  relevant  institutions  and  judiciary  so  that  public 
procurement procedures are properly implemented. 

3.5.4. 

Standardisation,  accreditation,  conformity  assessment,  metrology  and  market 
surveillance 

The  basic  legislation  on  standardisation,  general  product  safety,  technical  requirements  for 
products  and  conformity  assessment  as  well  as  on  accreditation  has  been  progressively 
adopted.  The  professional  Standardisation  Council,  the  highest  coordinating  and  policy-
making body for standardisation, is operational and is composed of members from both public 
and  private  sectors.  The  Council  decides  on  the  establishment  of  technical  committees. 
Kosovo also has a Standardisation Agency, an executive agency of the Ministry of Trade and 
Industry.  

18 technical committees have been established and approximately 4,000 European standards 
(ENs) have been adopted as Kosovo standards, including a number of harmonised standards 
related  to  the  New  Approach  Directives.  The  Kosovo  Standardisation  Agency  adopts 
standards via the Albanian national standardisation body. The Agency applies the principles 
of  transparency,  inclusivity  and  accountability  of  the  WTO  code  of  good  practice  for 
standardisation,  despite  Kosovo  not  being  a  member  of  any  European  or  international 
standards bodies.  

The  Kosovo  Accreditation  Directorate  is  placed  under  the  Ministry  of  Trade  and  Industry. 
The Directorate chairs the professional Council on Accreditation that meets once a year and 
includes  representatives  from  business  organisations  and  the  chamber  of  commerce.  The 
Directorate has a cooperation contract with the European Cooperation for Accreditation (EA). 
In November 2010, it applied to sign a bilateral agreement with the EA under the conditions 
applicable  to  signatories  of  the  EA  multilateral  agreement  on  testing  laboratories.  The 
Accreditation  Directorate  has  accredited  18  testing  laboratories  and  1  inspection  body  as 
Conformity assessment bodies. The accredited laboratories cover food analysis, fuel chemical 
testing, as well as physical-chemical testing and mechanical testing of construction materials.  

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The  legislation  and  policy  on  conformity  assessment  is  developed  and  implemented  by  the 
Department  of  Industry,  within  the  Ministry  of  Trade  and  Industry.  The  Department  of 
Metrology  within  the  Ministry  is  the  only  institution  in  Kosovo  responsible  for  establishing 
and  directing  the  metrology  system  in  Kosovo.  Two  laboratories  located  in  Pristina  and 
Prizren have started their operation in 2010.  

The  market  surveillance  legislation  is  partially  harmonised  with  the  acquis.  Market 
surveillance  functions  are  being  centralised.  The  Market  Surveillance  Department  of  the 
Ministry  has  recently  launched  an  initiative  to  develop  a  sectoral  strategy  on  market 
surveillance  including  customs,  health,  food  and  sanitary  inspection,  and  labour  inspection. 
Approximately  30,000  inspections  have  been  carried  out  since  the  Department's  creation  in 
2005. 

Overall,  important  elements  of  the  legal  and  institutional  framework  for  standardisation 
accreditation and conformity assessment are in place. Over the past three years, the capacity 
of the Ministry of Trade and Industry in this area has improved.  

To  meet  its  obligations  under  an  SAA,  Kosovo  needs  to  complete  the  legal  framework  and 
continue  its  alignment  with  the  acquis.  Further  efforts  are  necessary  in  terms  of  capacity 
building of the Ministry and of its agencies, of training and awareness raising. For example, 
the  capacity  of  the  Standardisation  Agency  needs  to  be  enhanced.  The  operations  of  the 
metrology  laboratories  still  do  not  meet  international  standards.  The  inter-institutional 
cooperation  on  market  surveillance  needs  to  be  improved,  notably  with  the  customs. 
Cooperation  with  the  customs  is  crucial  given  the  level  of  Kosovo's  imports.  An  effective 
surveillance  has  to  be  carried  out  on  products  available  on  the  domestic  market.  Data  on 
market inspection is only partially available as a database has not yet been established.  

Under  an  SAA,  Kosovo  would  commit  itself  to  progressively  align  its  legislation  with  the 
acquis,  adopt  the  European  standards  (ENs)  and  build  institutional  capacities  to  ensure 
enforcement of the legislation. In particular, Kosovo would be required to i) promote the use 
of EU technical regulations, European standards and conformity assessment procedures, ii) 
conclude,  when  appropriate,  an  agreement  on  conformity  assessment  and  acceptance  of 
industrial  products,  iii)  foster  the  development  of  quality  infrastructure:  standardisation, 
metrology, accreditation and conformity assessment and market surveillance.  

3.5.5.  Consumer protection 

Kosovo has legislation on consumer protection. There is also a Consumer Protection Office. 
Kosovo adopted a Consumer Protection Programme 2010-2014 which aims to strengthen the 
role  of  the  Council  for  Consumer  Protection  and  its  supervisory  activities,  along  with  the 
transparency  and  accountability  of  institutions  responsive  to  consumers.  The  Council  is 
from  business  associations  and  consumer  protection 
composed  of 
organisations and individual experts. The Council is the main policy and legislative-making 
body.  

representatives 

To meet its obligations under an SAA, Kosovo needs to continue in further alignment of the 
legislation  with  the  acquis.  The  Consumer  Protection  Office  still  needs  to  be  significantly 
reinforced  to  ensure  an  effective  consumer  protection.  The  overall  system  of  collecting  and 
processing consumer claims needs to be enhanced to achieve concrete impact and improve the 
quality of the market and of the general product safety. The role of the Consumer Protection 
Department in evaluating and coordinating  market surveillance information and data related 
to consumer products has not been defined. Kosovo needs to improve the implementation of 
the Consumer Protection Programme.  

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Under  an  SAA,  Kosovo  would  need  to  develop  active  consumer  protection  policies,  in 
accordance  with  the  acquis,  to  guarantee  consumer  representation,  information  and 
education.  The  capacities  of  the  administrative  structures  responsible  for  consumer 
protection  need  to  be  enhanced  to  ensure  essential  health  and  safety  requirements  and  the 
safeguard of consumers' economic interests. 

3.6. 

Justice and home affairs 

3.6.1.  Reinforcement of institutions and rule of law 

For  a  detailed  analysis  of  the  situation  in  judiciary  and  prison  system  see  the  Political 
Criteria. 

The  main  elements  of  the  legal  framework  are  in  place.  At  the  same  time,  they  can  be 
complex,  comprising  a  mixture  of  different  legal  acts  applicable  in  Kosovo,  including 
legislation of the former Yugoslavia and form the Federal Republic of Yugoslavia, UNMIK 
and the Kosovo authorities. This has led to legal inconsistencies. Application at the court level 
consequently  creates  difficulties  and  delays.  There  are  ongoing  efforts  to  eliminate 
fragmentation and enhance approximation with the EU in this important area. 

Over the past three years, Kosovo has established the necessary institutions in charge of the 
rule  of  law  in  Kosovo.  The  Ministry  of  Internal  Affairs  oversees  the  work  of  the  Kosovo 
Police, with a total staff of nearly 8,500 (including 1,100 civil officers). Persons belonging to 
minorities  occupy  13%  of  positions.  The  Kosovo  Police  has  established  good  capacities  for 
providing general public safety and security. 

Kosovo  Police  operates  with  a  single  chain  of  command  and  continues  to  have  a  token 
presence  in  the  north  of  Kosovo.  There  are  communication  channels  between  officers  from 
the  northern  municipalities  with  the  regional  police  command  in  the  southern  part  of 
Mitrovicë/Mitrovica. At the same time, EULEX frequently needs to facilitate communication. 
Police officers in the north of Kosovo work in difficult circumstances preventing them from 
fully discharging their duties. Parallel security structures also operate in the north. 

In  2011,  the  police  established  the  International  Law  Enforcement  Coordination  Unit 
(ILECU)  to  facilitate  cooperation  with  law  enforcement  agencies  from  third  countries.  The 
Interpol liaison office is still with UNMIK; some Kosovo Police officers are detached to this 
unit.  

The Police Inspectorate of Kosovo (PIK) was established in June 2011 as an executive body 
of  the  Ministry  of  Internal  Affairs,  independent  of  the  Kosovo  Police.  The  PIK  handles 
complaints,  involves  the  Professional  Standards  Unit  when  disciplinary  investigation  is 
needed, and has the authority to launch criminal investigations.  

Capacities in the Kosovo Police to investigate complex criminal activities remain limited and 
need  to  be  considerably  enhanced.  Political  leaders  in  Kosovo  need  to  establish  an 
environment conducive to independent and professional investigations. 

Personal data protection is a key component of effective law enforcement cooperation in the 
EU. Kosovo has adopted the primary legislative framework on personal data protection. The 
National Agency for the Protection of Personal Data has been established as an independent 
body reporting to the parliament. Currently, personal data protection is not fully guaranteed. 
Kosovo  needs  to  focus  on  implementation,  drafting  secondary  legislation  and  strengthening 
capacity.  Public  authorities,  including  law  enforcement,  and  the  private  sector  need  to  be 
made aware of personal data protection requirements.  

For Kosovo to make progress in consolidating the rule of law, it is essential it cooperates with 
EULEX,  and  it  supports  the  implementation  of  the  EULEX  mandate  including  the  Special 

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Investigative  Task  Force.  Fragmentation  of  legislation  needs  to  be  addressed  and  law 
enforcement improved to ensure that the rule of law is effectively applied. 

Under  an  SAA,  the  contracting  parties  would  attach  particular  importance  to  the 
consolidation of the rule of law in Kosovo and strengthening the relevant institutions in the 
administration in general and in law enforcement and the judiciary in particular. An effective 
SAA  will  depend  upon  a  safe,  efficient  and  predictable  legal  space.  Authorities  and  an 
independent judiciary working in line with proper democratic and professional standards are 
not only essential for establishing the rule of law for the immediate benefit of the public but 
also  for  international  cooperation  and  as  regards  the  economic  development  including 
attracting  foreign  investment.  Contracting  parties  would  cooperate  on  personal  data 
protection legislation, ensuring sufficient resources for the independent supervisory  body to 
monitor and guarantee the enforcement of the legislation. 

3.6.2.  Asylum, migration, visa policy, control of borders/boundary 

A  new  asylum  system  was  established  in  April  2010.  Kosovo  has  a  comprehensive  law  on 
asylum. The Department of Citizenship, Asylum and Migration (DCAM) in the Ministry of 
Internal Affairs (MIA) is in charge of the asylum policy. Kosovo is mainly a transit country 
for asylum seekers and irregular migrants, mostly arriving via the former Yugoslav Republic 
of Macedonia and continuing towards the EU. Kosovo authorities have taken steps to increase 
awareness about the rights and obligations of the asylum seekers. The DCAM is in charge of 
the  first  instance  asylum  decisions  whereas  the  National  Commission  on  Refugees  is  in 
charge of the second instance decisions. Between 2009 and 31 July 2012, 511 asylum claims 
were  processed,  none  of  which  led  to  refugee  status  being  recognised.  The  majority  of  the 
decisions  regarding  asylum  requests  are  negative  decisions  in  absentia  (the  asylum  seeker 
having  already  left  Kosovo).  A  new  asylum  centre  in  Lipjan/Lipljan  municipality  was 
inaugurated in February 2012, improving the accommodation facilities for asylum seekers in 
Kosovo. 

Kosovo has  a strategy and  action plan on migration. These are currently under review. The 
legal  framework  on  foreigners  and  citizenship  is  in  place.  A  public  information  campaign 
addressing  irregular  migration  from  Kosovo  to the EU  was  held in 2011.  Kosovo has  made 
progress on readmission over the past three years. A law on readmission was adopted in 2010. 
Readmission  agreements  covering  seventeen  countries  have  been  concluded.  Since  2010, 
Kosovo has made considerable progress in improving the framework on the reintegration of 
repatriated  persons.  A  strategy  and  an  action  plan  on  reintegration  set  the  priorities  in  this 
area. A Reintegration Fund for repatriated persons was established in 2010. The reintegration 
office  at  Pristina  Airport  is  the  first  entry-point  for  repatriated  persons.  In  2012,  seven 
regional  coordinators  were  appointed  as  focal  points  for  municipalities  aiming  to  improve 
communication between the central and municipal level. 

Kosovo's visa policy is due to enter into force on 1 January 2013. This will establish a list of 
citizens  who  need  to  be  in  possession  of  visa  to  enter  Kosovo.  In  this  context,  Kosovo  has 
signed  an  agreement  with  Albania  on  consular  representation.  Kosovo  residents  mainly  use 
the  Kosovo  passports  introduced  in  2008,  although  some  use  Serbian  biometric  passports. 
Kosovo started issuing biometric passports in October 2011.  

A legal framework on civil status is largely in place. Some secondary legislation still needs to 
be completed. Since 2011, the inspectorate unit of the Civil Registration Agency (CRA) has 
been  checking  the  integrity  of  the  processes  related  to  civil  status.  Measures  have  been 
adopted to prevent municipal civil status officers from illegally editing personal data without 
prior permission. The civil status registry books have been digitalised and will be entered into 
the new central civil status database. Certified copies of the original civil registration books 

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for  the  territory  of  Kosovo,  which  are  located  in  Serbia,  are  in  the  process  of  being  handed 
over, based on the agreement reached in the EU-facilitated Belgrade/Pristina dialogue.  

The  legal  framework  and  institutions  (Kosovo  Border  Police,  Kosovo  Customs,  and  the 
Kosovo  Veterinary  and  Food  Agency)  to  secure  Kosovo's  borders/boundary  are  largely  in 
place. There is also a strategy and an action plan for the border/boundary management. The 
Kosovo  Police  has  taken  over  the  responsibility  from  KFOR  for  border  surveillance  with 
Montenegro  and  with  the  former  Yugoslav  Republic  of  Macedonia.  Synchronised  border 
patrols  are  performed  on  the  basis  of  agreements  with  Albania  and  the  former  Yugoslav 
Republic of Macedonia. 

To meet its obligations under an SAA, Kosovo needs to continue in further alignment of the 
legislation  with  the  acquis  and  capacity  building  of  institutions  responsible  for  these  areas. 
The  law  on  asylum  needs  to  be  further  aligned  to  international  and  EU  standards.  Lack  of 
information  concerning  the  origin  of  asylum  seekers  and  the  absence  of  identity  documents 
are  obstacles  for  removing  asylum  seekers  whose  applications  for  international  protection 
have been rejected. Formal operational procedures for the removal of rejected asylum seekers 
need to be adopted. 

On  migration,  the  necessary  administrative  instructions  and  standard  operating  procedures 
still have to be adopted. Kosovo's legislation in this area conflicts with the legislation on work 
permits.  This  needs  to  be  addressed.  Sustainable  solutions  are  needed  for  the  status  of 
internally-displaced  persons  (including  access  to  personal  identity  documents),  family 
reunification  conditions,  stay  permits  for  asylum  seekers,  refugees  and  persons  under 
subsidiary  protection,  stateless  persons,  victims  of  trafficking  as  well  as  for  people  who,  at 
their request, have been released from their Kosovo citizenship.  

A comprehensive data collection mechanism is not yet in place, but database on asylum and 
migration is expected to contribute positively to data collection and analysis, once effectively 
applied.  A  migration  profile  for  Kosovo  needs  to  be  developed.  Inter-institutional 
coordination needs to be enhanced and administrative capacities improved.  

Pending  readmission  requests  are  largely  due  to  challenges  in  verifying  identity  and 
determining citizenship as well as delays in communicating negative replies. Cooperation on 
readmission  between  different  authorities  needs  to  be  improved.  The  deadlines  stipulated  in 
the readmission agreements and in the law needs to be applied. The exchange of information 
between  requesting  states  and  Kosovo  needs  to  be  strengthened.  The  lack  of  readmission 
agreements with countries of origin or transit, and the lack of application of the readmission 
law, is also a concern.  

The  number  of  requests  for  the  reintegration  fund  assistance  is  increasing.  Overall, 
disbursement remains low in response to individual requests. The employment schemes and 
housing projects to which larger parts of the budget have been allocated are in an early phase 
of  development.  Since  the  reintegration  fund  is  provided  from  the  state  budget  the  final 
financial disbursement decisions are made at the central level. The Office for Reintegration, 
which  manages  the  funding  requests,  will  be  upgraded  to  a  department  in  the  MIA.  This 
Department needs to take over the decisions currently made by the Inter-Ministerial Executive 
Board on Reintegration. The procedures applying to funding need to be further simplified. 

A case management system is envisaged to help further the authorities to process and access 
data  on  repatriated  persons  in  order  to  meet  their  needs  better.  The  contacts  between  the 
central and municipal levels need to be enhanced. The involvement of the line Ministries in 
the reintegration process remains weak, notably on employment, education and training. The 

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lack  of  access  to  employment,  education  and  training  continues  to  be  an  obstacle  to  the 
sustainable reintegration of repatriated persons, in particular from minorities.  

On visa, the administrative instructions still need to be adopted. As regard document security, 
there are concerns as to the accuracy and reliability of the civil status data available both at 
the  central  level  and  in  municipalities.  The  lack  of  document  security  may  challenge  the 
reliability  of 
the 
border/boundary protection in order to tackle frequent trafficking. 

the  new  biometric  documents.  Kosovo  also  needs 

increase 

to 

Under  an  SAA,  Kosovo  would  need  to  ensure  a  framework  for  cooperation,  including  at 
regional level, in the fields of visa, border/boundary control, asylum and (legal and irregular) 
migration.  A  central  element  of  cooperation  in  the  area  of  preventing  and  controlling 
irregular migration would be the inclusion of provisions on readmission, and focus will also 
be on statistics exchange and enhancing capacities and efficiency. 

3.6.3.  Combating money laundering 

A legislative framework on anti-money laundering is in place, but it is not yet aligned with 
European and international standards. Kosovo is currently revising the legislation to include 
the provisions of EU legislation as well as the recommendations of the Financial Action Task 
Force.  This  needs  to  be  Kosovo's  priority  in  the  short  term.  It  is  also  a  pre-condition  for 
joining  the  Egmont  group  of  Financial  Intelligence  Units  (FIUs).  The  FIU  has  initiated  the 
procedure to join this Group and has requested the Slovenian FIU to be its sponsor.  

The  relevant  institutions  have  been  set  up  and  are  functional.  The  responsibilities  of  the 
EULEX-led  Financial  Intelligence  Centre  (FIC)  have  recently  been  transferred  to  the  FIU, 
attached to the Ministry of Finance. The FIU does not conduct its own criminal investigations, 
but provides intelligence to investigative bodies. The cooperation with banks is good and an 
electronic  system  of  cash  transactions  is  working:  over  420,000  cash  transactions  above 
€ 10,000  are  reported  to  the  FIU  each  year.  This  is  a  high  number  compared  to  the  size  of 
Kosovo's population and economy. Kosovo Customs are building on progress made in money 
detections. The total amount of detected undeclared cash has increased. There has also been 
an  increase  in  the  number  of  cash  declarations  over  the  same  period.  In  the  short  term, 
Kosovo needs to revise the law on prevention of money laundering and financing of terrorism. 

To  meet  its  obligations  under  an  SAA,  Kosovo  needs  to  prepare  a  strategy  to  fight  money 
laundering. The institutional setup, involving different police units and directorates, the FIU, 
and  the  anti-corruption  task  force  of  the  Special  Prosecution,  is  complex.  It  needs  to  be 
simplified  to  tackle  money  laundering  effectively.  Police  officers,  prosecutors  and  judges 
need  specialised  training  to  run  complex  investigations.  The  FIU  needs  to  improve  its 
analytical capacity to support the investigations. Kosovo needs to improve its statistics in this 
area. Furthermore, large amounts of money continue to be invested for example in real estate 
without adequate supervision, and the FIU is not legally mandated to execute inspections in 
casinos.  

International cooperation involving Kosovo in this area is limited. Kosovo is not a member of 
the Financial Action Task Force (FATF) or any of the FATF-style regional bodies. A number 
of European FIUs therefore currently refuse to respond to either intelligence provided by the 
Kosovo FIU or to its requests for information. At the same time, Kosovo needs to implement 
the existing FATF recommendations. 

Under  an  SAA,  Kosovo  would  need  to  establish  a  framework  for  cooperation  aimed  at 
preventing the use of its financial systems for laundering the proceeds of criminal activities. 
Cooperation  in  this  area  would  include  administrative  and  technical  assistance  aimed  at 

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establishing appropriate standards to counter money laundering equivalent to those adopted 
by the EU and other international bodies on the field, in particular the FATF.  

3.6.4.  Preventing  and  combating  organised  crime  and  other  criminal  activities,  including 

terrorism 

Over  the  past  three  years,  Kosovo  has  established  the  key  elements  of  the  legal  framework 
necessary  for  the  fight  against  organised  crime.  Kosovo  also  has  legislation  for  witness 
protection and has established a relevant unit in the police. Kosovo has a strategic framework 
for the fight  against  organised crime, drugs and terrorism;  new  revised strategies have  been 
adopted recently. Kosovo has a strategy and an action plan on the fight against trafficking of 
human  beings.  Within  the  Ministry  of  Internal  Affairs  there  is  a  National  Coordinator  for 
combating  trafficking,  who  is  in  charge  of  coordinating  activities  and  implementation.  The 
coalition  of  shelters  for  victims  of  domestic  violence  and  trafficking  in  human  beings  was 
established in 2011. There is also a policy framework for an intelligence-led policing. 

The  relevant  institutions  for  the  fight  against  organised  crime,  notably  the  law  enforcement 
authorities and the judiciary, are in place and have been increasing their capacities and their 
efficiency  over  the  past  three  years.  Kosovo  has  recently  put  in  place  police  structures  for 
international  cooperation,  notably  the  International  Law  Enforcement  Cooperation  Unit.  An 
Agency for the Management of Sequestrated and Confiscated Assets was established in 2010. 
The Agency is primarily responsible to administer confiscated and sequestrated assets. In the 
short  term,  Kosovo  needs  to  demonstrate  a  clear  commitment  to  deliver  results  in  the  fight 
against  organised  crime,  including  launching  investigations,  in  close  coordination  with 
EULEX. Kosovo needs to focus on adopting new legislation on the confiscation of illegally 
obtained assets. It is important that the law follows European standards and practices in this 
area. 

To  meet  its  obligations  under  an  SAA,  Kosovo  needs  to  deliver  on  investigations  and 
prosecution of the organised crime. It also needs to improve statistics in this area. 

A  significant  network  of  Albanian-speaking  criminals,  including  Kosovans  is  heavily 
involved in smuggling drugs, including heroin and cocaine, in the region as well as the EU. 
Over the past three years, the level of seizures of drugs in Kosovo has increased. At the same 
time,  further  efforts  are  necessary  to  meet  the  challenge,  in  particular  with  regard  to  arrests 
and convictions.  

Kosovo  remains  a  place  of  origin  and  transit,  for  victims  of  trafficking.  The  trend  of  local 
women trafficked within Kosovo and onwards to European countries for the purpose of sexual 
exploitation continues. There is 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  too.  Pristina  Airport  continues  to  be  a  weak  point  in  this  regard.  The  rate  of 
convictions in these areas is low. The judiciary and prosecution lack expertise and capacity to 
prosecute  trafficking  cases  resulting  in  weak  accountability  for  trafficking  offenders. 
Appropriate government funding for shelters and reintegration of victims is necessary.  

To  date,  terrorism  has  been  a  lesser  threat  in  Kosovo  than  other  forms  of  serious  crime. 
Kosovo nonetheless needs to gradually ensure that its legislative and strategic framework is 
aligned  with  the  EU.  Kosovo  law  enforcement  authorities  need  to  continue  monitoring  the 
situation. 

International cooperation with Kosovo in the fight against organised crime is limited due to 
status considerations. Kosovo needs to be more proactive and pragmatic in this area. Above 
all, Kosovo needs to gradually build its credentials, and thus trust of international partners. 

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Witness protection in Kosovo is a particularly difficult  challenge. The secondary legislation 
on  witness  protection  remains  to  be  adopted.  The  capacity  of  the  Witness  Protection  Unit 
within  the  Kosovo  Police  needs  to  be  further  enhanced.  Further  political  support  and  in 
particular budgetary autonomy is required for the unit to become fully operational. 

to  establish  a  sound 

interception  of 
Kosovo  needs 
telecommunications.  A  clear  distinction  between  judicial  interception  and  interception  for 
intelligence  purposes  needs  to  be  made,  in  line  with  European  best  practices.  Appropriate 
control mechanisms need to be put in place to ensure that these tools are not misused.  

framework  on 

legal 

the 

The Agency for the Management of Sequestrated and Confiscated Assets has managed only a 
small number of assets, due to the low number of confiscations and sequestrations ordered by 
the  judiciary  and  executed  by  the  police.  The  judiciary  needs  to  use  the  provisions  on 
confiscation  more  proactively.  Implementing  intelligence-led  policing  remains  also  a 
challenge. 

In  general,  the  fight  against  organised  crime  is  a  major  challenge  for  Kosovo.  Concrete 
evidence of results in fighting organised crime needs to be given as a matter of priority. To 
achieve  results  in  this  area,  the  legal  framework  needs  to  be  further  strengthened  and 
implemented.  Clear  institutional  responsibilities  need  to  be  established.  Kosovo  needs  to 
further enhance the level of expertise to tackle complex criminal investigations. This needs to 
be supported by a political environment conducive to independent and efficient investigations 
and prosecution.  

Under an SAA, Kosovo would need to develop a framework for cooperation aimed at fighting 
and  preventing  criminal  activities,  notably  organised  crime.  Kosovo  would  be  required  to 
devote  particular  attention  to  issues  such  as  trafficking  in  human  beings,  illegal  economic 
activities  (such  as  corruption  and  illegal  transactions  involving  goods  such  as  counterfeit 
products,  industrial  waste  and  radioactive  material),  illicit  arms  trafficking  and  terrorism. 
Kosovo  would  also  need  to  be  able  to  cope  with  the  health  and  social  consequences  of 
different  forms  of  drug  abuse,  preventing  the  diversion  of  chemical  precursors  and 
reinforcing structures for combating illicit trafficking of drugs. 

3.7. 

Cooperation policies 

3.7.1.  Economic,  monetary,  statistical  cooperation  and  the  protection  of  EU  financial 

interests 

The Ministry of Finance has a Department for macro-economic and fiscal analysis, which is 
active  in  the  Government's  economic  strategic  planning.  The  Department  is  in  charge  of 
preparing  the  Medium-Term  Macro-Fiscal  Framework  (MTEF),  which  represents  the  basis 
for  drafting  the  expenditure  framework,  analyses  the  current  fiscal  trends  and  economic 
forecasts. The MTEF includes many of the features that are common in international practice 
as well as a promising basis for sectoral analyses. Kosovo has a legal requirement to conduct 
an  assessment  of  the  fiscal  impacts  of  all  new  policy  and  legislative  proposals.  Kosovo 
currently participates in the Fiscal Surveillance Exercise. 

Statistics  are  crucial  for  negotiating  an  SAA.  In  recent  years,  Kosovo  has  improved  its 
statistical  infrastructure.  With  the  recent  adoption  of  the  law  on  official  statistics,  the  main 
responsibility for  processing  statistical data is with the Kosovo Agency  of  Statistics  (KAS). 
The  Agency  was  also  moved  from  the  Ministry  of  Public  Administration  to  the  Prime 
Minister's  Office.  It  is  now  an  autonomous  budget  organisation.  A  Statistical  Council  was 
established in March 2012. According to the new law, the Agency is responsible for drafting a 
multi-annual  work  programme  for  the  Kosovo's  statistical  system.  The  cooperation  of  the 

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statistical  agency with other institutions has improved. The quality of statistical information 
has also been gradually improving. 

The population and housing census was carried out in April 2011, but did not cover the north 
of  Kosovo.  Figures  resulting  from  the  census  can  be  relied  on.  Preparations  for  the 
agricultural census planned for 2013 have started. 

To meet its obligations under an SAA, the MTEF needs to include a number of aspects that are 
common practice in many EU countries, including: i) comparisons with projections of other 
institutions and previous Ministry of Finance projections, ii) tax expenditure, iii) public debt 
and deficit broken down by levels of government. The MTEF also needs to be fully developed 
as a policy or reporting tool. 

Ministries need to strengthen their capacity to prepare adequate cost estimations. The practice 
of adopting a large number of laws towards the end of each year is not conducive to rigorous 
analysis of cost impacts.  

Kosovo  also  needs  to  continue  to  prepare  for  participating  in  the  economic  and  fiscal 
programme  framework  for  potential  candidate  countries.  Kosovo's  inclusion  in  this 
framework could bring benefits in streamlining, coordinating and analysing economic policy 
priorities over the medium-term. 

With  regard  to  statistics,  the  administrative  capacity  of  the  statistical  agency  remains  weak 
and  the  lack  of  qualified  staff  is  a  serious  constraint  on  the  development  of  the  Agency. 
Strengthening the management of the agency remains a key challenge for the development of 
the institution and the Kosovo's statistical system. The agency needs to improve the quality of 
statistics, in all statistical domains, but especially business and macroeconomic statistics. The 
current  discrepancy  between  the  EU  and  Kosovo's  statistical  data  constitutes  a  challenge. 
Effective  cooperation  under  an  SAA  will  require  the  KAS  to  produce  data  on  macro-
economic matters, such as trade and employment.  

Protecting the EU's financial interests and protecting the euro against counterfeiting is still at 
an early stage. 

Under an SAA, Kosovo would need to foster reform and economic integration into European 
structures by improving the formulation and enforcement of market-based economic policies. 
It would need to improve its capacity to provide information on macroeconomic performance 
and forecasts, to formulate economic policy and to develop the instruments necessary for its 
application. It would also need to take appropriate account in its policy development of the 
European Economic and Monetary Union. Kosovo would need to develop statistical systems, 
capable  of  providing  the  timely,  reliable,  objective  and  accurate  data  needed  to  plan  and 
monitor transition and reform. Special attention would be given to the fact that Kosovo uses 
the Euro as its legal tender. Kosovo's present use of the euro as a legal tender is fully distinct 
from euro area membership. With regard to the protection of EU financial interests and fight 
against counterfeiting of the euro, the cooperation would also focus on further strengthening 
the legislative framework and its enforcement. 

3.7.2. 

Investment  promotion  and  protection,  industrial  cooperation,  small  and  medium-
sized Enterprises (SMEs) and tourism 

The  area  of  investment  promotion  and  protection  is  regulated  by  the  law  on  foreign 
investment  that  focuses  inter  alia  on  the  non-discriminatory  treatment  of  foreign  investors. 
Over the past three years, several amendments, such as the elimination of starter capital and 
the reduction in the number of permits required, have been adopted. Kosovo has also adopted 
a  sector-based  investment  promotion  strategy,  which  includes  recommendations  and 
operational actions to improve the business and investment climate faced by foreign investors. 

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The strategy identifies core sectors to be targeted by promotional activities: business process 
outsourcing,  automotive  components,  electronic  contract  manufacturing  services  and 
agribusiness.  

The Investment Promotion Agency is the main institution focusing on efforts to attract foreign 
direct  investments  (FDI).  It  is  making  efforts  to  attract  FDI  by  further  liberalising  the  FDI 
inflow regime and promoting SMEs competitiveness. Net FDI inflows are estimated to have 
reached € 394.6 million (8.6% of GDP) in 2011, slightly higher than € 365.8 million in 2010. 
To date, some 2,000 companies of foreign or mixed ownership have invested in Kosovo. 

Kosovo  has  committed  itself  to  implementing  the  key  principles  of  the  EU  Small  Business 
Act.  The  SME  sector  in  Kosovo  is  very  large,  dominated  by  micro-enterprises,  with  more 
than  90%  of  the  enterprises  employing  less  than  four  people.  The  legislative  framework 
consists  mainly  of  the  law  on  support  to  small  and  medium  enterprises.  In  2011,  Kosovo 
adopted the National SME Development Strategy 2012-2016 with Vision 2020. The goals of 
the strategy are built around the principles of the Small Business Act for Europe. The SME 
agency is the main institution responsible for implementing this strategy with an allocation of 
€ 1.3 million and € 30 million from the donor community. 

To  meet  its  obligations  under  an  SAA,  Kosovo  has  still  to  establish  stable,  transparent  and 
predictable conditions for foreign investors. Attracting FDI is a major challenge for Kosovo. 
It has only attracted a small amount of foreign direct investment, which remained at around 
8.5%  of  GDP.  Foreign  investments  were  concentrated  in  the  services  and  financial  sector, 
with a few green-field investments.  

Kosovo  needs  to  complete  the  revision  and  simplification  of  the  legislation  on  enterprise 
policy. There has been no regulatory impact analysis to date. Compliance costs remain high. 
The  lack  of  comprehensive,  easily  accessible  and  regularly  updated  information  on  SME-
relevant issues is a significant constraint for SMEs operating in Kosovo. Support for start-ups 
is particularly underdeveloped. The four existing incubators are still in a pilot phase and the 
voucher  scheme  was  discontinued  in  2011.  Kosovo  needs  to  align  further  SME  support 
measures  with  the  Small  Business  Act  for  Europe  and  improve  the  classification  of 
enterprises.  A  special  SME/Entrepreneurship  Support  Fund  would  also  facilitate  SMEs' 
access to finance. 

Industry and SME development in general continue to suffer from difficulties as regards the 
legal enforcement of contracts, unreliable electricity supply and limited and expensive access 
to finance. Coordination and communication between educational institutions and SMEs have 
improved. However, coordination and cooperation need to be increased further, notably in the 
area  of  enterprise  and  industrial  policy  (public  authorities,  chambers  of  commerce,  banking 
association, courts, regional development agencies, etc.). Overall, the implementation plan for 
the  SME  and  industrial  strategies  needs  to  be  adopted,  adequate  budget  allocated  and  the 
responsible authorities need to be strengthened. 

Kosovo's informal sector large is fuelled by weaknesses in tax and expenditure policies and in 
law enforcement, including in the fight against corruption and organised crime. It reduces the 
tax base and the efficiency of economic policies.  

Tourism  has  also  a  potential  to  contribute  to the  economic  growth.  However,  investment  in 
the relevant infrastructure is required. 

Cooperation under an SAA would aim to support Kosovo in creating a favourable climate for 
private  investment,  both  domestic  and  foreign,  to  promote  economic  and  industrial 
revitalisation. In particular, Kosovo would need to continue in establishing a legal framework 
conducive  to  investment  and  promoting  investment  opportunities.  In  the  fields  of  industrial 

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cooperation, SMEs and tourism, Kosovo would need to develop policies aimed at promoting 
modernisation and restructuring, strengthening the SME sector and developing tourism. 

3.7.3.  Agriculture  

As regards agriculture and rural development policy, a number of thematic laws are in place 
or  are  in  the  process  of  being  adopted  (covering,  for  instance,  wine,  livestock,  seeds,  and 
organic  agriculture)  which  broadly  transpose  the  acquis.  Basic  legal  food  safety,  veterinary 
and phytosanitary acts are in place, notably food law, veterinary law, law on plant protection, 
administrative instructions deriving from EU's hygiene package. 

Over  the  past  three  years,  Kosovo's  agriculture  sector  has  established  the  necessary 
administrative  and  regulatory  bodies  to  implement  the  acquis  in  this  area.  The  sector  is 
governed  by  the  Ministry  of  Agriculture,  Forestry  and  Rural  Development  (MAFRD).  The 
Ministry  runs  a  limited  number  of  support  schemes  that  are  managed  by  a  payment 
department.  It  has  also begun  developing  a  Farmer  Register  and  simplified  Land  Parcel 
Identification System to contribute to overseeing the current rural grant schemes. The Kosovo 
Veterinary  and  Food  Agency  (KVFA)  implements  food  safety  requirements  and  EU  food 
safety,  animal  health  and  plant  health  standards.  Like  the  Ministry,  the  Agency  is  a 
professional and motivated body. There are also a number of laboratories and institutes in this 
area.  Most  European  standards  on  fisheries  do  not  apply  to  Kosovo,  which  has  no  marine 
fishing.  

To  meet  its  obligations  under  an  SAA,  Kosovo  needs  to  continue  efforts,  in  particular  to 
implement  EU  agricultural  and  food  safety  standards.  The  KVFA  has  carried  out  an 
assessment of Kosovo's agri-food establishments (in milk, meat, slaughterhouses, cold storage 
and dairy) to determine needs for upgrading. The process now needs to be implemented and 
upgrades are being supported by the Ministry through its grant scheme. Many establishments 
are likely to close as they lack the capacity to invest. 

The  institutions  working  in  this  sector  need  to  be  strengthened.  The  Ministry's  budget  has 
increased in recent years, albeit from a very low base and it is still insufficient to cover needs. 
The  KVFA  lacks  sufficiently  trained  staff  to  monitor  the  implementation  of  laws  and  its 
laboratory does not have adequate staff and equipment. Execution of phytosanitary controls is 
deficient. The infrastructure of the veterinary border inspection points remains weak and the 
transfer  of  samples  from  the  borders  to  laboratories  for  testing  is  not  efficiently  organised. 
Kosovo has not compiled the list of plant diseases present on its territory.  

There  are  insufficient  food  safety  and  veterinary  inspectors;  these  are  supposed  to  be 
transferred  from  municipalities  to  the  KVFA,  but  this  process  has  not  yet  been  completed. 
This transfer would help to control the continuing illegal animal trade and slaughtering and to 
strengthen controls at livestock markets. Kosovo has been working for years to establish its 
animal identification, registration and movement database. The IT system is now operational 
but  data  entry  of  events,  particularly  animal  movement,  is  not  systematic.  Kosovo  needs  to 
make  progress  in  controlling  and  eradicating  animal  diseases.  Kosovo  has  no  infrastructure 
for collecting and processing animal by-products, although a feasibility study for establishing 
a rendering plant was completed. 

Kosovo is attempting to create the statistical infrastructure to manage agricultural policy, but 
the small average size of farms in Kosovo and the large informal part of the agricultural sector 
complicate this task. The farm register and the Farm Accounts Data Network are incomplete. 
Next year, Kosovo intends to carry out an agriculture census. There are significant differences 
between the EU and Kosovo data on agricultural trade. 

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At  the  same  time,  Kosovo  has  the  capacity  to  continue  reforms  in  this  area.  Kosovo's 
agriculture  faces  serious  obstacles  to  competitiveness:  holdings  are  mostly  semi-subsistent, 
land  parcels  are  fragmented  and  animal  herds  small.  Land  management  suffers  from 
uncontrolled urbanisation and the absence of proper procedures to value and reclassify land. 
Access to finance is another major challenge.  

Cooperation  in  the  context  of  an  SAA  would  aim  at  helping  Kosovo  to  modernise  and 
restructure  its  agriculture  and  agro-industrial  sector.  In  particular,  it  would  include 
cooperation with producers and regulatory authorities to help them meet EU food safety and 
quality  standards  as  well  as  EU  standards  of  animal  and  plant  health  in  the  form  of 
assistance for training and organising controls with a view to gradual harmonisation with EU 
standards;  increased  development  of  private  farms  and  distribution  channels,  methods  of 
storage and marketing; modernisation of rural infrastructure (transport, telecommunications, 
water  supply);  better  forestry  management  to  balance  forest  preservation  with  the 
exploitation of an economic resource; improving productivity and quality using appropriate 
methods  and  products;  training  and  monitoring  in  the  use  of  anti-pollution  methods  in 
connection with inputs; development of sustainable agricultural methods (including  organic 
production; and developing and modernising processing firms and their marketing methods, 
promoting industrial cooperation in agriculture and the exchange of know-how. 

3.7.4.  Customs, taxation and financial control 

3.7.4.1.  Customs 

Kosovo's  customs  legislation  is  largely  in  line  with  the  EU  Customs  Code.  The  revenues 
collected  by  the  Customs  Service,  including  VAT,  excise  on  imported  and  domestic  goods, 
represent the largest share of Kosovo's budgetary revenues, (around 60%) and continue to rise 
every year.  

The Customs Service has carried out significant modernisation efforts. Continuous progress is 
also  visible  in  the  field  of  administrative  and  operational  capacity.  A  number  of  operations 
tackling smuggling and organised crime have been undertaken. The focus has mainly been on 
the seizure of counterfeit spirits and contraband tobacco. Some efforts have been put into the 
enforcement  of  the  intellectual  property  rights,  the  fight  against  smuggling  of  narcotics  and 
money laundering.  

Kosovo is active in international customs cooperation. It has signed nine bilateral agreements 
and further agreements are currently being negotiated. Bilateral memoranda of understanding 
on  systematic  electronic  exchange  of  pre-arrival  information  (SEED)  were  also  signed  with 
Albania,  the  former  Yugoslav  Republic  of  Macedonia  and  Montenegro.  Since  early 
September,  the  Automated  Customs  declaration  Processing  system  (ASUCYDA  World), 
which facilitates paperless clearances, has become operational. 

In  general,  the  customs  legislation  is  largely  aligned  with  EU  standards  and  the  customs 
administration has sufficient capacity.  

The  situation  in  the  north  poses  a  specific  challenge  for  Customs.  In  the  north  of  Kosovo, 
Kosovo  Customs  Service  continues  to  cooperate  with  EULEX.  Following  the  incidents  in 
July  2011  and  subsequent  agreements  on  the  customs  stamps  and  IBM  in  the  scope  of  the 
Belgrade/Pristina  dialogue,  very  limited  commercial  traffic  passes  through  the  two  gates  in 
the  north.  All  commercial  vehicles  continue  to  be  directed  to  the  Mitrovicë/Mitrovica 
Terminal  for  customs  clearance.  Revenue  is  not  collected  at  these  gates.  Goods  subject  to 
excise,  sanitary  and  phytosanitary  controls  are  not  allowed  to  enter  via  these  two  crossing 
points. Due to the lack of efficient customs surveillance at the border/boundary line between 

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the north of Kosovo and Serbia, goods frequently enter Kosovo in the north without customs 
clearance.  

Certificates of origin for goods to be exported are validated by customs for goods originating 
both in the north and in the rest of Kosovo. Currently, Kosovo Customs faces a challenge in 
terms of access to the territory of the north. This has implications for the respect of rules of 
origin  for  the  goods  originating  in  this  territory.  In  practice,  the  requests  for  certificates  of 
origin are scarce. 

To meet its obligations under an SAA, further reforms and modernisation of Kosovo Customs 
is  required.  Furthermore,  the  facilities  of  some  border  crossing  points  (BCPs)  need  to  be 
improved.  There  is  also  a  need  to  undertake  further  staff  training  and  focus  on  capacity 
building  in  trade  facilitation,  customs  cooperation,  customs  valuation  and  enforcement  of 
intellectual property rights.  

Kosovo needs to ensure that its customs authorities further enhance their effectiveness to meet 
the  demands  resulting  from  the  liberalised,  preferential  trade  under  an  SAA,  in  particular 
regarding  the  proper  certification  of  origin  and  investigation  and  enforcement  methods. 
Customs formalities should not be an obstacle to trade.  

3.7.4.2.  Taxation 

The  Tax  Administration  of  Kosovo  is  the  executive  tax  authority,  responsible  for 
implementing tax-related legislation. Kosovo relies heavily on indirect taxes collected at the 
borders:  only  about  14%  of  all  tax  revenues  stem  from  direct  taxes.  VAT  is  16%  and  only 
companies with a yearly turnover above € 50,000 are subject to it. The personal income tax 
has  four  rates  (0,  4,  8  or  10%).  The  10%  rate  applies  to  revenues  exceeding  € 5,400/year. 
There are three corporate tax rates (4, 8 or 10%), the highest one applying to revenues above 
€ 50,000/year. In 2011, direct taxes amount only to 3.2% of the GDP. This is very low. 

Tax  evasion  remains  widespread.  To  address  this  challenge,  a  taxpayer  compliance 
management  strategy  (2012-2015)  has  been  prepared.  Outstanding  tax  arrears  are  being 
addressed. A Tax Investigations Unit within the Tax Administration has been established and 
the  taxpayers'  register  is  being  upgraded.  The  number  of  electronic  tax  declarations  has 
increased significantly. Commendable progress has been made by establishing the one-stop-
shop for business and vehicle registration. 

To meet its obligations under an SAA, the tax authority needs to be able to adjust the policies 
and identify the means to improve the effectiveness of tax collection. The focus needs to be 
on enforcement. Work efficiency needs to be increased as well as the cooperation between the 
Tax Administration, the police and the courts. The core IT system (SIGTAS) is to be replaced 
by  modern  infrastructure.  The  taxation  structure  also  needs  to  be  more  compatible  with  the 
EU. 

The  Independent  Review  Board  for  appeals  by  businesses  and  taxpayers  against  the  Tax 
Administration  and  Customs  Service  decisions  needs  to  increase  its  efficiency  and 
effectiveness.  A  significant  backlog  of  around  1,900  cases  (543  in  taxation  and  1,337  in 
Customs) needs to be addressed. In addition, 119 cases were remitted by the Supreme Court 
for  procedural  reasons,  entailing  an  overall  workload  of  around  2,000  cases.  To  reduce  the 
backlog,  the  capacity  of  the  Board  needs  to  be  strengthened.  Kosovo  also  needs  to  prepare 
legislation to integrate appeals decisions into the regular court system by establishing a fiscal 
division at the administrative court. 

Cooperation  with  the  EU  under  an  SAA  would  facilitate  the  reform  of  fiscal  systems  in 
Kosovo  and  foster  further  development  of  the  tax  administration  to  ensure  effective  tax 

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collection  and  fight  against  fiscal  fraud.  Cooperation  would  aim  at  avoiding  harmful  tax 
competition. 

3.7.4.3.  Financial control  

The key regulatory provisions and institutions for the Public Internal Financial Control (PIFC) 
are in place. The law on internal audit provides a solid legal basis for setting up internal audit 
units  in  Kosovo.  These  have  been  established  in  most  budget  organisations,  including 
municipalities. The legal framework for external audit is in place. The Office of the Auditor 
General  (OAG)  is  an  independent  constitutional  audit  institution  reporting  to  the  Kosovo 
Assembly.  The  internal  rules  governing  the  audit  work  of  the  OAG  (e.g.  audit  manuals, 
guidelines,  guides  on  audit  quality  management)  are  in  place.  The  OAG  carries  out  mainly 
regulatory audits. The Committee for Oversight of Public Finances of the Assembly regularly 
discusses the audit reports prepared by the OAG.  

To  meet  its  obligations  under  an  SAA,  Kosovo  needs  to  improve  the  day-to-day  practice  of 
internal  control.  More  needs  to  be  done  to  develop  a  risk-based  control  environment,  to 
improve the efficiency, effectiveness and economy of operations, to increase the reliability of 
(financial)  reporting  and  to  do  better  planning  and  budgeting  arrangements.  There  is  also  a 
need for a greater understanding and acceptance of accountability within budget organisations 
to  establish  a  culture  of  delegation  of  responsibilities  and  authorities.  Kosovo  needs  to  pay 
particular  attention  to  the  independence  of  the  internal  audit  function,  particularly  at  local 
level.  

With regard to the OAG, it needs to improve its capacity to deliver performance audit work. 
Furthermore, as the OAG is part of the civil service, the implementing legislation of the civil 
service law is too prescriptive and limits in practise functional independence of the OAG. 

Cooperation with the EU under an SAA would focus on public internal financial control and 
external  audit.  The  objective  of  the  cooperation  would  be  to  set  up  and  implement  internal 
control and internal audit in the public sector and to strengthen the role of external audit in 
line with international frameworks and standards. 

3.7.5.  Employment,  social  policy,  public  health  policy,  education  and  training,  and 

research technology and development (RTD) 

3.7.5.1.  Employment, social policy and public health policy 

Over  the  past  three  years,  Kosovo  has  put  in  place  the  elements  of  the  legal  framework 
required for this area and provides basic social assistance. There is a legal framework on the 
rights and obligations of unemployed people and jobseekers, and on support to persons having 
difficulties accessing the labour market. Kosovo legislation also regulates the registration of 
unemployed persons and jobseekers, and includes support measures. The labour law adopted 
in 2010 brings Kosovo standards closer to those of the International Labour Organisation. The 
new law on the social assistance scheme includes measures for unemployed persons to move 
from social assistance dependency into the labour market.  

Kosovo  has  a  National  Employment  Strategy  and  sectoral  strategies.  Implementation  is 
carried out by the Public Employment Services (PES) and seven regional offices coordinated 
by  the  Ministry  of  Labour  and  Social  Welfare.  The  Labour  Inspectorate  monitors  the 
implementation of the legal provisions on labour. Kosovo has digitalised registry systems on 
unemployment and on social assistance. 

Kosovo  has  three  main  social  assistance  programmes:  cash  transfer  systems  to  households, 
war  veterans'  benefits  and  disability  pensions  for  working  age  people  who  have  disabilities 
and are unable to work. The social assistance scheme attempts to fill the gap created by the 

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absence of other types of benefits, such as child benefit, sickness benefit and unemployment 
benefit. Municipalities are increasingly responsible for the family and social services provided 
by  the  Centres  for  Social  Welfare.  The  central  pension  system  provides  a  minimal  level  of 
assistance  to  retired persons. Workers below  55 years of age  are mandated  to place 10% of 
their  wages  into  the  Kosovo  Pension  Savings  Trust.  The  Economic  and  Social  Council  is 
the  government,  employees'  and  employers' 
operational  but 
organisations  is  weak.  Kosovo  has  two  employers'  organisations,  one  trade  union 
confederation and eighteen trade unions. No exact data exists on trade union membership. 

the  dialogue  between 

Kosovo's health services infrastructure consists of a combined centrally funded and privately 
funded  three-layer  system.  The  legislative  framework  in  the  health  sector  has  improved.  A 
necessary major health reform is underway.  

To meet its obligations under an SAA, Kosovo needs to do more to promote social dialogue. 
Important legislation on tobacco, blood, tissues, cells, organ donation and transplantation and 
communicable diseases still needs to be adopted or amended. Kosovo also needs to adopt new 
health insurance and public health laws. Accessibility and affordability to all groups in society 
are  of  concern.  Good  health  services  and  human  resources  management,  accountability  and 
principles  of  commitment  need  to  be  put  in  place.  Health  information  statistics  and 
information  remain  weak.  The  necessary  financial  and  human  resources  are  missing. 
Adoption,  implementation  and  enforcement  of  EU  health  legislation  remain  weak.  Overall, 
completing and implementing the policies and legislation are likely to remain challenges for 
the years ahead, especially when it comes to economic and social reform and the development 
of a sustainable health system.  

Cooperation in this area under an SAA would aim at supporting Kosovo in the reform of its 
employment  policies.  It  would  also  promote  social  dialogue  as  a  key  driving  force  for 
economic  and  social  reform  as  well  as  legal  approximation  on  labour  law  and  health  and 
safety at work. Under an SAA, the aim will be to cooperate to adapt Kosovo's social security 
systems  to  the  evolving  economic  situation  and  the  new  social  requirements.  Kosovo  would 
also be encouraged to adopt comprehensive social inclusion and anti-discrimination policies 
and measures to improve the situation of the most vulnerable social groups. 

For  the  health  sector,  an  SAA  would  help  steer  Kosovo  towards  a  sustainable  and  good 
quality health system, based on EU standards, and accessible to all. Under an SAA, Kosovo 
would  need  i)  to  further  develop  health  protection  policies  in  accordance  with  EU  law  to 
improve health and prevent illness of its population; ii) to harmonise its legislation on health 
protection,  develop  independent  and  effective  administrative  structures  and  enforcement 
powers  to  ensure  essential  health  and  safety  requirements  and  the  safeguard  of  patients' 
rights; and iii) to protect citizens from health threats and disease, promote healthy lifestyles 
and cooperate with the EU on health issues.  

3.7.5.2.  Education, training, research and innovation 

Kosovo  has  a  comprehensive  medium-term  education  strategy,  encompassing  all  education 
sub-sectors.  The  legislation  on  higher  education  is  in  place  and  requires  higher  education 
institutions  (and  programmes)  to  undergo  external  evaluation  by  the  Kosovo  Accreditation 
Agency (KAA). A number of programmes do not meet KAA quality standards. On the basis 
of  the  law  on  pre-university  education  the  Ministry  of  Education  Science  and  Technology 
(MEST)  has  given  priority  to  teacher  professional  development  and  to  modernising  teacher 
training in line with the new Kosovo curriculum framework. The MEST and the Ministry of 
Labour and Social Welfare have put emphasis on vocational education and training (VET) as 
means to promote skills development, employability and economic development in Kosovo. 

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The National Qualification Framework (NQF) validation and accreditation procedures are in 
place.  The  National  Quality  Authority  (NQA)  carries  out  its  functions  effectively,  but  with 
limited  resources.  Kosovo  participates  in  the  Western  Balkan  Platform  on  Education. 
Kosovo's application for membership in the Education Reform Initiative in South East Europe 
is being processed by the secretariat. 

Kosovo has a law on scientific research and aims at enhancing participation in international 
research projects. Kosovo has three public universities and fourteen public research institutes. 
Kosovo  has  made  progress  in  defining  the  institutional  basis  and  strategic  orientation  to 
strengthen  its  research  and  innovation  capacity.  The  Kosovo  Research  Council  has  been 
established and it has developed a five-year programme to improve the research sector and its 
linkage to higher education. Integration into the European Research Area and contribution to 
the  Innovation  Union  have  been  set  as  a  medium-term  goal  for  Kosovo.  Kosovo  has 
participated  in  the  Seventh  EU  research  and  technology  framework  (FP7,  2007-2013)  as  a 
project partner. 

Overall,  in  the  areas  of  education,  training,  research  and  innovation,  the  policy  and  legal 
frameworks are in place, as are the relevant institutions.  

To  meet  its  obligations  under  an  SAA,  Kosovo  needs  to  strengthen  its  investment  into 
education  and  research.  This  is  important  in  the  light  of  economic  and  social  development 
needs. The educational system will also need to address gradually the needs of students with 
disabilities. Further efforts are also necessary to provide adequate conditions for education for 
persons belonging to minorities, including access to education in their languages.  

There is a need to establish a research fund to support the activities of researchers and build 
the  capacity  of  research  institutions  in  Kosovo.  The  main  challenges  are  the  lack  of 
scientifically  qualified  personnel,  the  low  number  of  PhD  students,  insufficient  laboratory 
equipment and inadequate technical know-how. The research community in Kosovo remains 
rather  isolated  vis-à-vis  the  international  scientific  community.  Kosovo  needs  to  build 
capacity  in  a  number  of  key  sectors  (energy  efficiency,  environment,  food  safety,  health 
research and social science research), which have been identified as a priority.  

Cooperation  under  an  SAA  would  build  on  the  existing  programmes  and  mechanisms  and 
continue  to  help  Kosovo  raise  the  level  of  general  education,  higher  education,  vocational 
training  and  to  promote  youth  cooperation.  It  could  also  encourage  the  development  of  an 
environment conductive to research, notably through joint research and innovation ventures 
and the transfer of technology and know-how.  

3.7.6.  Culture,  audio-visual,  telecommunications  and  postal  services  and  information 

society 

The legislative  framework for  the telecommunications sector is  covered by framework laws 
(the law on telecommunications, the law on information society services, law on prevention 
and  fight  against  cybercrime,  law  on  postal  services).  Related  by-laws  have  increased 
alignment  with  the  acquis,  covering  issues  such  as  market  analyses,  definition  of  the 
providers with significant market power, full and shared unbundling of the local loop and the 
sub-loop,  provision  of  access  and  interconnection.  In  2012,  Kosovo  adopted  a  law  on  the 
financing  of  the  public  service  broadcaster  (RTK)  and  a  law  on  the  Independent  Media 
Commission (IMC). The RTK law also foresees the creation of a TV channel in the Serbian 
language. 

Over  the  past  three  years,  Kosovo's  telecommunications,  postal  services  and  information 
society  sector  has  established  the  necessary  administrative  and  regulatory  bodies  to  start  to 
the 
implement 

this  area.  Telecommunications  are 

regulated  by 

the  acquis 

in 

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Telecommunications  Regulatory  Agency  (TRA)  and  the  audio-visual  sector  is  managed  by 
the IMC, which aims to manage the sector in accordance with EU standards.  

To meet its obligations under an SAA, Kosovo needs to continue efforts to complete the legal 
framework  to  implement  EU  standards  in  this  area.  Kosovo  needs  to  adopt  laws  on 
information  society  government  bodies  and  on  electronic  communications.  The  institutions 
working  in  this  sector  need  to  be  strengthened:  the  independence  and  capacity  of  both  the 
TRA and the IMC have been challenged by government interference, low salaries and lack of 
resources and budgets. The process to nominate a new IMC Council only began in June 2012 
after the IMC was without a board since December 2010.  

RTK's long-term sustainability is still unresolved despite the recent RTK law. The budget to 
finance  Kosovo's  cultural  institutions  is  limited.  The  capacity  of  the  Ministry  of  Economic 
Development for  information  society  policy  development  and  coordination,  including  the 
issues  covered  by  the  Digital  Agenda  for  Europe,  is  weak.  Strengthening  the  administrative 
capacity and intensifying international cultural and media cooperation is important to prepare 
Kosovo to participate in EU programmes in this area. 

As  well  as  a  lack  of  enforcement  capacity,  problems  of  status  handicap  Kosovo's  ability  to 
implement fully the acquis. Kosovo does not have its own country code and uses the Serbian 
country codes for fixed telephony, with each mobile operator using codes of other countries 
(Monaco  and  Slovenia).  This  creates  additional  costs,  reduces  Kosovo's  control  over  its 
system,  creates  problems  of  coordination  with  the  regulators  of  Monaco  and  Slovenia  and 
constitutes an obstacle to implementing EU rules on number portability. In addition, Kosovo 
does not have an internet domain name, and unlicensed (Serbian) mobile companies continue 
to operate in Kosovo. This interferes with Kosovo's spectrum management. Kosovo is not a 
member  of  ITU  and  has  therefore  an  insufficient  allocation  of  spectrum,  including  for  the 
digital switchover. 

Cooperation in telecommunications and postal services under an SAA would promote gradual 
alignment  with  the  acquis.  This  would  involve,  in  particular  i)  the  further  development  of 
legal  and  regulatory  aspects  of  telecommunications  and  postal  services,  ii)  the  progressive 
liberalisation  of  the  sector,  iii)  the  promotion  of  an  investor-friendly  environment  for 
modernising Kosovo's telecommunications networks and their integration into European and 
world networks, iv) institutional reforms suitable for a liberalised environment. 

An  SAA  would  promote  cultural  cooperation  with  the  objective  strengthening  the  cultural 
policy  capacity  of  Kosovo,  reinforcing  the  capacity  of  cultural  operators  and  of  increasing 
mutual  understanding  between  individuals,  minorities  and  peoples.  Kosovo  would  need  to 
align gradually its policies and legislation with those of the EU, including as regards cross-
border/boundary  broadcasting  and  the  acquisition  of  intellectual  property  rights  for 
programmes  and  broadcasts  by  satellite  or  cable.  Its  institutional  reforms  would  need  to 
promote cultural diversity, freedom of expression, freedom of speech and a flourishing public 
service  broadcaster,  suitable  for  a  liberalised  environment,  as  well  as  preserving  the 
independence  and  capacity  of  regulatory  bodies.  An  SAA  would  also  include  provisions 
establishing the general principles for the participation of Kosovo in EU programmes such as 
the future Creative Europe Programme. 

3.7.7.  Transport 

Kosovo has adopted a number of pieces of sectoral legislation, even if several will need to be 
completed.  The  basic  road  transport  legal  framework  has  been  established  according  to  the 
acquis.  The  2010  law  on  railways  sets  the  framework  for  the  sector's  unbundling,  which  is 
almost complete. Kosovo is advanced in adopting EU standards in aviation through an active 

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involvement in the European Common Aviation Agreement, particularly as regards economic 
regulations. 

Over the past three years, Kosovo has established the institutions necessary to implement the 
acquis  in  this  area.  Transport  is  the  responsibility  of  the  Ministry  of  Infrastructure,  with 
sectors  managed  by  the  appropriate  regulatory  authorities,  such  as  the  Civil  Aviation 
Authority  (KCAA)  or  the  Railway  Regulatory  Agency  (RRA).  An  accident  and  incident 
investigation body, covering air and rail transport, is currently being established. 

There  is  no  combined  transport  in  Kosovo.  In  the  absence  of  any  maritime  vessels,  inland 
waterways  or  inland  waterways  vessels,  neither  maritime  transport  nor  inland  waterways 
acquis apply to Kosovo.  

To meet its obligations under an SAA, Kosovo needs to continue efforts to complete the legal 
framework to implement EU transport standards. Kosovo needs to redraft three road transport 
laws  to  harmonise  them  with  the  acquis,  especially  in  the  fields  of  accession  to  the 
occupation, haulage, passenger transport and the transport of dangerous goods. The law on the 
Agency  of  Air  Navigation,  which  would  guarantee  the  professional  management  and 
independence of the Air Navigation Service Provider (ANSP), needs be adopted too. 

The  institutions  working  in  this  sector  need  to  be  strengthened:  the  railway  regulator  lacks 
staff,  capacity  and  budget.  The  ANSP  has  been  separated  from  the  National  Supervisory 
Authority (NSA), but it still needs to be certified. Aviation security, which is managed by the 
Ministry of Internal Affairs, is a concern: due to a lack of budget for training, inspectors lost 
their accreditation in 2010. 

Implementation  of  the  road  transport  acquis  is  limited.  Road  safety  is  a  concern  and  the 
accident  and  fatality  rate  on  Kosovan  roads  is  very  high.  Limited  inspection  capabilities, 
outdated  vehicles,  and  the  low  quality  of  road  infrastructure  outside  the  main  roads  hamper 
the  enforcement  of  legislation.  Rail  traffic  levels  are  low,  rolling  stock  is  outdated  and  it  is 
difficult to reconcile the financial needs of the infrastructure manager with the ability of the 
service provider to pay. 

Kosovo's  transport  infrastructure  needs  to  be  further  developed  to  promote  economic 
development.  The  current  transport  strategy  with  a  heavy  emphasis  on  building  new  roads 
only adds to the imbalance of the transport sector, crowding out investment in other transport 
modes, particularly railways. It is important to secure funding for adequate road maintenance. 

As  well  as  a  lack  of  enforcement  capacity,  problems  of  status  negatively  affect  Kosovo's 
ability to implement  fully the acquis. Kosovo (including its transport operators) cannot join 
many  of  the  international  or  European  bodies  regulating  transport  or  the  relevant  sector 
associations.  Kosovo  is  being  prevented  from  reaching  some  technically-based  solutions  in 
certain areas. This is particularly important in aviation: the KCAA is not a part of the system 
of standardisation inspection and safety assessment on foreign aircraft and has not been able 
to  enter  into  working  arrangements  with  the  EASA.  In  addition,  Kosovo's  aviation  sector 
continues  to  suffer  from  Serbia's  restrictions  for  direct  flights  to/from  Pristina  over  Serbian 
aviation  territory,  which  has  a  financial  impact  for  the  air  operators  and  an  environmental 
impact for the region.  

In  transport,  cooperation  under  an  SAA  would  contribute  to  restructuring  and  modernising 
Kosovo's  transport  systems  and  improving  related  infrastructures,  improving  the  free 
movement  of  passengers  and  goods,  achieving  standards  comparable  to  those  prevailing  in 
the  EU,  aligning  transport  legislation  to  that  of  the  EU,  and  allowing  progressive  mutual 
access to the EU and Kosovo transport markets and facilities.  

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3.7.8.  Energy, including nuclear safety 

As  a  contracting  party  to  the  Energy  Community  Treaty,  Kosovo  has  already  adopted  a 
number of key laws relating to the energy sector compatible with the acquis. Its energy sector 
is governed by a package of three laws adopted in 2010, which aim at implementing the 2nd 
EU  internal  Energy  market  package.  The  2011  law  on  energy  efficiency  is  the  basis  to 
implement  much  of  the  energy  efficiency  acquis.  Kosovo  has  adopted  a  framework  law  to 
implement EU nuclear safety and radiation protection acquis and to establish a nuclear safety 
agency. 

Over the past three years, Kosovo has established the institutions necessary to implement the 
acquis in this area. As well as the Ministries responsible in this area (Ministry for Economic 
Development for energy, Ministry for Environment and Spatial Planning for nuclear matters), 
Kosovo  has  a  regulator  (the  Energy  Regulatory  Office)  and  recently  established  its  Nuclear 
Safety Agency. Kosovo's Transmission System Operator, KOSTT, has been established and is 
carrying out its functions properly. KOSTT is also improving  the transmission network and 
therefore reducing transmission losses. 

To meet its obligations under an SAA, Kosovo needs to continue efforts to complete the legal 
framework  to  implement  EU  energy  and  nuclear  safety  standards.  Kosovo  needs  to  start 
preparing  for  the  implementation  of  the  3rd  EU  internal  energy  market  package,  a  legal 
obligation  as  of  2015  under  the  Energy  Community  Treaty.  Kosovo  also  needs  to  make 
progress  in  implementing  EU  rules  on  mandatory  oil  stocks  and  will  have  to  amend  its 
framework nuclear safety law to prepare for further transposition of the nuclear safety acquis. 
The institutions working in this sector need to be strengthened: the nuclear safety agency has 
insufficient  staff,  the  Energy  Regulatory  Office  needs  adequate  resources  to  carry  out  its 
responsibilities,  and  Kosovo  needs  to  instrumentalise  the  Energy  Efficiency  Agency  and 
create  the  energy  efficiency  fund.  Restructuring  of  the  sector,  including  tendering  for  new 
generation capacity and completing privatisation of the distribution and supply company, in 
conformity with Energy Community Rules on unbundling, needs to continue. 

Kosovo's  only  indigenous  energy  source  is  lignite:  97%  of  its  power  is  generated  in  two 
lignite-burning  plants.  Both  are  ageing,  unreliable  and  highly  polluting.  Kosovo  has  no 
nuclear  energy,  its  renewable  sources  are  limited  and  Kosovo  is  not  connected  to  gas 
networks. Kosovo has launched a tender to build a new lignite-powered plant, which would 
significantly  improve  the  sector's  environmental  impact.  This  is  also  important  as  an 
alternative  source  of  power  as  Kosovo  has  committed  under  Energy  Community  Treaty 
obligations to close Kosovo A by 2017.  

Kosovo's  management  of  its  power  system  is  hindered  by  the  Serbian  power  utility 
maintaining  an  unlicensed  branch  in  the  north  of  Kosovo.  Power  is  also  deviated  from  a 
hydropower  plant  to  supply  the  north.  In  addition,  KOSTT  still  does  not  participate  in 
regional  mechanisms  to  plan  and  remunerate  electricity  transit,  due  to  differences  over  its 
status.  As  a  result  of  the  current  situation,  Kosovo  loses  revenue  and  the  lack  of  control 
imperils the stability of Kosovo's power system. 

In the framework of an SAA, Kosovo would need to develop further its energy policies with a 
view to gradual integration with EU policies and networks. It needs to implement its current 
energy market legislation and significantly improve the level of bill collection and payment 
from the current numbers: only 71% of power produced is paid for, fuelling an unsustainable 
growth  in  demand.  Kosovo  also  needs  to  adopt  secondary  legislation  to  meet  its  own  9% 
target for efficiency improvement by 2018. The regulatory framework to develop renewable 
energies also needs to be improved, if Kosovo is to meet its planned target to produce 26% of 
its energy from renewable sources by 2020 (up from the current level of less than 3%).  

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Cooperation under an SAA between Kosovo and the EU in the field of energy would need to 
take  into  account  the  principles  of  market  economy  and  the  Energy  Community  Treaty. 
Cooperation  would  focus  in  particular  on  the  formulation  and  planning  of  energy  policies, 
improving  interconnections  and  modernising  infrastructure,  establishment  of  a  competitive 
electricity market, improving and diversifying supply, better management of energy utilities, 
strengthening  the  role  of  the  regulator,  improving  demand  management,  developing  energy 
resources  and  renewable  energy,  and  promoting  energy  saving  and  energy  efficiency, 
promoting nuclear safety and nuclear waste management. 

3.7.9.  Environment and climate change 

A  number  of  framework  laws  covering  the  main  environment  acquis  areas  are  already  in 
place.  Kosovo  has  adopted  laws  on  environmental  impact  assessments  and  strategic 
environmental  assessments  broadly  in  line  with  EU  standards.  The  legal  framework  to 
implement EU air quality standards is in place. Kosovo adopted a framework law on nature 
conservation  to  transpose  EU  nature  protection  acquis.  Other  framework  laws  are  in  the 
process of adoption. Kosovo is starting to prepare to implement the EU climate acquis. 

The key institutions are in place. The administration responsible for environment and climate 
policy  is  the  Ministry  of  Environment  and  Spatial  Planning,  supported  by  the  Kosovo 
Environment Protection Agency, which monitors the state of the environment. There is also a 
network of inspectors.  

To meet its obligations under an SAA, Kosovo needs to continue efforts to complete the legal 
framework  in  accordance  with  EU  environmental  and  climate  standards.  The  remaining 
framework laws (on waste, chemicals, water, noise and civil protection) need to be adopted 
and completed by secondary legislation. 

The  institutions  to  implement  EU  standards  are  in  place;  their  capacity  to  implement  and 
enforce legislation at central and local levels needs to be strengthened. The budget devoted to 
the sector is insufficient and environmental and climate concerns are not mainstreamed into 
other  policies.  Kosovo  lacks  sufficient  human,  administrative  and  capital  capacities  to 
implement EU environmental and climate standards. 

Preparations  are  at  an  early  stage  in  the  area  of  industrial  pollution  control  and  risk 
management. The environment in Kosovo faces severe challenges: most pollution levels are 
significantly above EU levels. The lignite power plants are the main source of air pollutants, 
with  some  (dust,  NOx  and  SO²)  levels  exceeding  several  times  EU  and  WHO  limits. 
Furthermore, Kosovo's air quality monitoring network is not yet fully operational. Kosovo has 
only  one  operational  wastewater  treatment  plant  and  a  large  part  of  the  population  is  not 
connected to drinking water supply networks. As a result of issues related to status, Kosovo is 
not  in  a  position  to  become  a  party  to  most  conventions,  protocols  or  other  international 
environmental  agreements.  Kosovo  is  not  a  party  to  the  UN  Framework  Convention  on 
Climate Change. There is no climate change strategy, action plan, economy-wide mitigation 
targets or policies and measures on climate change. 

In the context of an SAA, Kosovo would be expected to devote substantially greater resources 
to implement EU environmental standards and to address its environmental challenges, given 
the investment needs as regards water quality or waste management. To improve air quality, 
Kosovo needs to close the Kosovo A power plant in line with its Energy Community Treaty 
obligations.  Environmental  considerations  need  to  be  mainstreamed  into  other  policies, 
particularly  energy,  transport,  forestry,  agriculture  and  industry.  Urbanisation  needs  to  be 
better balanced. Kosovo needs to establish a climate strategy and a system of greenhouse gas 
monitoring and reporting and complete its greenhouse gas inventory. 

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Under  an  SAA,  Kosovo  would  strengthen  its  cooperation  with  the  EU  in  combating  the 
deterioration  of  the  environment  as  regards  air  and  water  quality,  waste  management  and 
nature  protection,  monitoring  and  reduction  of  industrial  emissions,  promoting  energy 
efficiency  and  safety  at  industrial  installations,  soil  protection,  classification  and  safe 
handling of chemicals and urban planning.  

Cooperation under an SAA would also be used to develop Kosovo's climate policy and to help 
Kosovo's involvement in global efforts to mitigate and adapt to climate change. Strengthened 
cooperation  with  the  EU  would  help  Kosovo  adopt  the  necessary  legislation,  as  well  as 
establish  an  adequate  administrative  setup.  It  would  also  assist  Kosovo  in  mainstreaming 
climate consideration in energy, transport, industry, agriculture and education policies. 

3.8. 

Financial cooperation 

The  EU  has  been  supporting  Kosovo  through several  different  funding  instruments:  the 
Community  Assistance  for  Reconstruction,  Development  and  Stabilisation  (CARDS),  the 
Instrument  for  Stability  (IfS),  and  the  Instrument  of  Pre-Accession  Assistance  (IPA). From 
1999 to 2011, the EU has provided over € 2.3 billion of financial assistance and close to € 1 
billion in support of the international presence in Kosovo. 

In  the  Financial  Framework  2007-2013,  the  EU  has  made  available  over  € 630  million  for 
Kosovo  under  IPA.  The  EU  has  provided  support  to  strengthen  the  rule  of  law,  public 
administration  reform,  minorities,  culture  and  youth,  wider  socio-economic  development 
including  trade  and  regional  development,  education  and  employment,  and  agriculture.  In 
2011,  a  total  of  € 68.7  million  was  allocated  under  the  IPA  Annual  Programme  (IPA 
component  I)  in  close  coordination  with  the  Ministry  for  European  Integration  and  other 
government  institutions.  Current  IPA  assistance  is  mainly  focused  on  the  rule  of  law,  the 
economy,  trade  and  industry,  and  the  public  administration  reform.  The  IPA  cross-border 
cooperation component (component II) was activated for Kosovo in 2010. 

To  enhance  the  involvement  of  civil  society  in  Kosovo's  policy  dialogue  and  development, 
€ 3.3 million was made available under the Civil Society Facility 2011-2013. The programme 
aims  to  enhance  the  dialogue  between  the  government  institutions  and  civil  society  in 
Kosovo, to increase the involvement of social partners in socio-economic development, and to 
strengthen 
for 
Democratisation  and  Human  Rights  has  been  providing  additional  support  for  the 
development  of  the  civil  society  development  in  Kosovo  since  2007.  In  view  of  the  next 
financial  perspectives,  the  Commission  has  adopted  a  proposal  for  the  Instrument  of  Pre-
Accession Assistance II covering the period 2014-2020. 

the  capacities  of  youth  organisations.  The  European 

Instrument 

The relevant institutions and coordination mechanisms to establish cooperation in the field of 
financial cooperation have been put in place. There is also an increased level of expertise to 
define the assistance needs. 

The Ministry of European Integration is in charge of donor coordination at the central level. 
Besides the large EU-support, there are also other sources of support to Kosovo, such as from 
Member States, other countries and international financial institutions. To meet its obligations 
under  an  SAA,  Kosovo  would  need  to  ensure  that  financial  cooperation  would  continue  to 
support  democratic,  economic  and  institutional  reforms,  in  line  with  the  Stabilisation  and 
Association Process. Kosovo would need to ensure the strengthening of donor coordination.  

An  SAA  with  Kosovo  would  foresee  continuing  EU  financial  support  to  help  Kosovo  to 
achieve the objectives of the agreement. Such assistance could further focus on different areas 
of approximation of legislation and cooperation policies covered by the SAA. 

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