Kosovo: Reconstruction and Development Assistance

CRS Report for Congress
Kosovo: Reconstruction and
Development Assistance
Updated June 7, 2001
Curt Tarnoff
Specialist in Foreign Affairs
Foreign Affairs, Defense, and Trade Division

Congressional Research Service The Library of Congress

Kosovo: Reconstruction and Development Assistance
Efforts to reconstruct and develop Kosovo following the devastation and
disruption caused by the war will require billions of dollars and support from multiple
donors. In P.L. 106-429, the FY2001 foreign aid bill, Congress limited Kosovo aid
to 15% of donor assistance. The Bush Administration has requested $120 million for
Kosovo activities under the SEED account in FY2002.
Assessments conducted by the World Bank and the European Community in
1999 estimated external financing needs for Kosovo reconstruction at $2.3 billion
over four to five years. UNMIK, the U.N. Interim Administration Mission in Kosovo,
is the chief governing body in Kosovo, supported by the OSCE (Organization for
Security and Cooperation in Europe) and the European Union.
At the two 1999 Kosovo donor conferences, $1.5 billion was pledged for
reconstruction-related efforts. In 2001, more than $593 million has been pledged.
Reconstruction programs include a wide variety of activities. Support for the UN
administrative budget, economic policy reform, establishment of rule of law, and
efforts to stimulate a nascent private sector and civil society are being undertaken by
the United States and other donors.
One issue for Congress is the level of aid to be provided and the proportionality
of U.S. assistance vis a vis European donors. Both the FY2000 and FY2001
appropriations limited U.S. contributions to 15% of the total. Some are also
concerned that Europeans are not matching pledges with actual disbursements and
necessary dispatch.
Whether aid pledged will go to meet actual needs is another issue of possible
concern to Congress. Both external financing for the UNMIK administrative budget
and numbers of international civilian police have not met targets in the past.
Some observers have been critical of the way the program has been implemented
thus far and others are concerned regarding the possibility of corruption in the aid
program as well as in the new Kosovo government. Steps are being taken by donors
to address these issues.
The relationship of Serbia to Kosovo will affect future reconstruction. At
present, efforts to remake Kosovo are creating a de facto independence, although the
U.N. continues to recognize the sovereignty of Serbia over Kosovo. The October

2000 change of government in Serbia may facilitate a resolution to this issue.

Introduction ................................................ 1
Congressional Action in 2001..................................1
Congressional Action in 2000..................................1
Background ................................................ 3
Reconstruction and Development Costs.......................3
Institutional Mechanisms..................................3
U.S. and Other Donor Contributions.........................4
1999-2000 Winterization Activities..........................5
Reconstruction and Development Programs....................6
Status of Reconstruction as of June 2001......................6
Issues for Congress..........................................7
U.S. Reconstruction Aid Levels.............................7
Burden-Sharing ......................................... 8
Adequacy of Funding....................................10
Implementation and Corruption............................11
Serbia and Kosovo......................................11
List of Tables
Table 1. SEED Appropriations for Kosovo Reconstruction................2
Table 2. Kosovo Reconstruction-Related Pledges.......................5
Table 3. Donor Contributions and Disbursements to UNMIK.............10
Table 4. Donor Pledged/Contracted Reconstruction Aid.................10
Table 5. Donor Contributions to International Police Force...............10

Kosovo: Reconstruction and
Development Assistance
The war in Kosovo in 1998 and 1999 and the NATO air campaign in 1999
caused immense physical destruction — of housing and electric, water, sewage,
transport and other infrastructure — and eliminated social, public safety, and other
government services. In mid-1999, a U.N. mission assumed administration of the1
province while NATO began to deploy a peacekeeping force there.
In the first six months following the war, humanitarian assistance facilitated the
return of refugees, and provided food and other immediate assistance to help people
survive the winter. Reconstruction and development efforts — to restore services,
establish democratic government, and foster economic growth — is expected to take
many years, cost billions of dollars, and require support from multiple donors.
This report describes U.S. and international steps to rehabilitate Kosovo
including cost assessments, institutional mechanisms, and assistance programs. Since
many believe that a solution to Kosovo’s problems must include the economic and
political development of its neighbors, the report also discusses aid to the region.
Congressional Action in 2001
On April 2, 2001, the Bush Administration requested $120 million under the
SEED (Support for East European Democracy) Act account for FY2002 activities
intended to facilitate the reconstruction and development of Kosovo. Congress was
expected to take up the foreign operations appropriations under which Kosovo
programs are funded in late June or July.
Congressional Action in 2000
On February 7, 2000, the Clinton Administration proposed an FY2000
supplemental appropriation as well as its FY2001 budget request. Both included
specific amounts under the SEED Act account for Kosovo reconstruction. Other
accounts may indirectly assist reconstruction by supporting peacekeeping and related

1 For information on political developments in Kosovo, see CRS Issue Brief IB98041, Kosovo
and U.S. Policy.

Table 1. SEED Appropriations for Kosovo Reconstruction
(in $ millions)
FY1999FY2000FY2000 Supp.FY2001 FY2002(req)
$76.5 $150.0 $12.4 $149.7 $120.0
The Clinton Administration’s $624.5 million supplemental request for Kosovo-
related activities would have supported a number of accounts normally funded under
both the Foreign Operations and the Commerce, Justice, State appropriations, and
included funding for several countries in the region. The request included funds for
military training, construction of secure diplomatic facilities, educational exchanges,
military financing to improve security cooperation, and international peacekeeping
contributions. While the House approved a supplemental bill (H.R. 3908) that
provided only 40% of the request, the Senate did not act on the measure, preferring
to take up parts of the supplemental request within the FY2001 appropriations bills.
The only Kosovo-related parts of the Administration request to have been adopted
in supplemental language were in the FY2001 Military Construction appropriations
bill, H.R. 4425, signed into law as P.L. 106-246 on July 13. It provided $50 million
for the SEED account, of which up to $12.4 million could be used for police activities
in Kosovo, the remainder to be spent on Montenegro and Croatia.
For FY2001, the Clinton Administration requested $175 million for Kosovo
under the SEED account. It would be split between funding for government reform
and for private sector development. An additional $176.9 million was requested for
Kosovo programs from other accounts. Most was for peacekeeping activities,
including support for the UN international police and the Organization for Security
and Cooperation in Europe (OSCE) mission in Kosovo, and the rest was $9.9 million
from the Economic Support Fund (ESF) to cover part of the $15 million U.S. share
of budget support for UN Mission in Kosovo (UNMIK) operations.
After the Senate (S. 2522) and House (H.R. 4811) addressed the Kosovo issue
in their separate versions of the FY2001 foreign operations bill, Congress agreed on
a conference report on H.R. 4811 on October 25 that was signed into law as P.L.
106-429 on November 6. The enacted bill did not earmark a specific level of aid for
Kosovo. However, it limited the amount of aid from the SEED, ESF, and
International Narcotics and Law Enforcement accounts to no more than 15% of total
pledges made by all donors for 2001 as of March 31, 2001. It also prohibited use of
funds for large scale physical infrastructure reconstruction. Of Kosovo funds, the bill
provided $1.3 million to the National Albanian American Council’s training program
for Kosovar women.
In an attached FY2001 emergency supplemental (Title VI), Congress addressed
those items in the Administration’s FY2000 supplemental request that come under the
foreign operations legislation. It provided the full $2.87 million request for the
International Military Education and Training program (IMET) to increase the
professionalism of regional country militaries, and $31 million in Foreign Military
Financing to help regional countries make defense reforms and improve security
cooperation. It also provided $13 million (of $22 originally requested) in USAID
Operations and Expenses for administering SEED programs. The SEED program
received an additional $75.8 million for Montenegro, Croatia, and Serbia, which

brought the FY2000 and 2001 SEED supplemental totals to $126 million, $69 million
less than the Clinton Administration request of $195 million. As noted above,
however, Kosovo was eligible for $12.4 million of that total, well under the $92.8
million originally requested for it.
Reconstruction and Development Costs. Although a number of
estimates of post-war reconstruction needs were put forth even while the war was still
raging, all were conjecture; none were based on a comprehensive on-the-ground
survey. In July 1999, several international task forces began making the assessments
that would lead to a more realistic estimate of needs and costs.
The first major assessment (July 28, 1999), conducted by a European
Commission Task Force, focused on housing and local village infrastructure. It
estimated that 58 percent of the houses in 1,300 villages had been damaged, most of
them severely. The estimated cost to repair this housing is $1.2 billion, and for other
village facilities — schools, clinics, local electricity, clean water, etc. — $43.9 million.
A second, more far-reaching, round of assessments, covering energy,
telecommunications, transport, commercial, and social infrastructure, was conducted2
prior to the second donor conference held in mid-November 1999. It was prepared
by the European Commission (EC) and the World Bank, with the support and
assistance of numerous donor organizations, including groups specializing in specific
sectors – for example, the U.N. Food and Agriculture Organization (FAO) focusing
on damage to the agriculture sector and the European Bank (EBRD) reviewing the
state of business enterprises.
Laying out reconstruction and development objectives in Kosovo over the next
four to five years, the EC-World Bank report estimates the cost of reaching those
objectives at $2.3 billion in external financing, on highly concessional terms.
According to the European Task Force, nearly half of the funds would be needed
before early 2001. In addition, government operations during this period, taking into
account probable local revenues, are expected to suffer a deficit that would have to
be made up by external financing – estimated at $107 million in 2000 (as of March
2000). At the November 1999 donor conference, donors were asked to contribute
to the operational budget as well as to undertake programs outlined in the
reconstruction strategy.
Institutional Mechanisms. The U.N. Security Council established (under
resolution 1244) a U.N. Interim Administration Mission in Kosovo (UNMIK) to
oversee the reconstruction, to create democratic institutions and legal, regulatory, and
administrative bodies, and to develop the framework of an economic system,
including banking, currency, and trade and fiscal policy. Until January 15, 2001,
Bernard Kouchner was the head of UNMIK; Hans Haekkerup, a former Danish
Defense Minister has replaced him. A Kosovo-UNMIK Joint Interim Administrative

2 Toward Stability and Prosperity: A Program for Reconstruction and Recovery in Kosovo,
November 3, 1999.

Structure, established with the agreement and participation of three Kosovo Albanian
leaders on December 13, 1999, is expected to act as a new government, supplanting
old structures. The Organization for Security and Cooperation in Europe (OSCE),
working under UNMIK, has responsibility for police training and democratization
activities, including human rights, election supervision, and rule of law. The
European Union, also under UNMIK, oversees reconstruction.
The European Commission and the World Bank have taken the lead in
organizing international economic assistance efforts, through their joint chairing of a
High-Level Steering Group, that includes the United States and other major donors.
A first donor conference was held in Brussels on July 28, 1999, and concentrated on
short-term, mainly humanitarian, needs arising from the return of refugees. A
reconstruction-oriented donor conference was held on November 17, 1999.
On December 15, 1999, the European Union formally established a European
Agency for Reconstruction of Kosovo to administer its reconstruction program. It
is working with the U.N. administration in Kosovo; its seat is in Thessaloniki, Greece,
and its “operations center” is in Pristina. The U.S. Agency for International
Development established a mission in Pristina to implement the U.S. program of
U.S. and Other Donor Contributions. Although the chief focus of the July
28, 1999 donor meeting was provision of short-term, mostly humanitarian, aid – $1.4
billion of which was pledged at the conference – significant amounts ($757 million)
were promised as well for support of the UN civil administration and “other urgent”
assistance related to a more long-term reconstruction and development effort.3
The November 17 conference, almost entirely focusing on reconstruction and
development concerns, evoked slightly more than $1 billion in pledges (only $36.2
million was pledged for humanitarian programs). This amount closely matches the
$1.1 billion estimated to be needed until the end of 2000. However, funds pledged
for the different categories of required assistance – civil administration budget,
peacekeeping, and reconstruction – may not meet the specific monetary needs in each
category. The U.S. pledge of $157 million represented 15% of the total pledged at
the November conference. EU and member states pledged $759 million, 74% of the
total. Table 2 shows the cumulative reconstruction-related pledges from the July and
November 1999 conferences.
For 2001, further pledges were made at a February 26, 2001 conference.
Although the total derived by the World Bank/EC is roughly $593 million, a State
Department survey of donors puts the total at $648 million. The U.S. share is $94.3
million, just under the 15% allowed by the FY2001 appropriations act. In order to
meet the 15% requirement, the State Department separated out funding for the

3 “Other urgent” assistance was defined by the conference organizers to include “peace
promotion, media, civil security, democracy, as well as reconstruction and development.” All
of these non-humanitarian programs, including civil administration, are considered
“reconstruction” and/or “development” in this report. However, the line dividing humanitarian
and reconstruction aid is a thin one. Many countries, including the United States, have
counted as humanitarian aid activities that others would call reconstruction.

civilian police, figuring that police costs vary widely between countries. The United
States, therefore, intends to provide under 15% of the police force at a cost of
roughly $55 million. The total FY2001 U.S. contribution in Kosovo for
reconstruction and police is $149.7 million.
Table 2. Kosovo Reconstruction-Related Pledges
($ millions)
Countries 1999-2000* 2001**
Switzerland 92.6 54.4
The Netherlands61.510.2
United Kingdom103.121.0
United States221.694.3
Institutions 1999-2000* 2001**
European Community668.7169.2
World Bank60.02.0
Total EC + 15 Member979.1371.0
States (total from above)
Grand Total1,543.8592.8
*Cumulative amounts from July 28 and November 17, 1999, donor conferences.
** As of March 2001. State Department calculates the total pledge at $648 million.
Source: World Bank and EC. Includes UNMIK budget and reconstruction project aid.
1999-2000 Winterization Activities. Although more likely categorized as
humanitarian in nature, efforts to insure that returning Kosovars survive the winter of
1999-2000 were viewed by some as an early indication of the ability of the UN and
participating donors to cope with the challenges in Kosovo. With the objective of
providing shelter for 350,000 people, nearly 60,000 emergency repair kits designed
to allow residents to have one warm, dry room were provided, more than 10,000
roofing kits distributed, thousands of tents supplied, and accommodation centers for
those with no other alternative made available. Targeted food distributions were
made to more than 900,000 people. Wood stoves and firewood were distributed, and
conventional heating systems repaired. Although operation of power plants and
district heating was not always reliable, it appears that winterization efforts were
largely successful.

Reconstruction and Development Programs. Donors are funding and
participating in a wide range of reconstruction and development programs. These
include, in the early stages, payment of salaries of school teachers and civil servants
in the new administration. UNMIK, with the technical assistance of the donors, is
also moving to establish the legal and other structures necessary for basic governance
and a market economy, including regulations for a banking system, licensing for small
business and construction, civil registration, tax collection, and the like.
As is the case with its foreign aid programs in other locales, the United States
is providing mostly technical assistance and small grants. Among other actions, the
United States has pledged and deployed 605 civilian police to assume police functions
under UNMIK and to train the new police force at a school established in Vucitrn by
the OSCE.
USAID is implementing a number of projects, including economic policy reform
assistance in the areas of fiscal and tax affairs, commercial law, and private sector
development. It has also established micro-lending programs to foster small business
growth. In the democracy sector, USAID has undertaken efforts to create a voter
registry, train existing and new political parties, encourage women’s leadership,
promote independent media, and foster the work of NGOs. Efforts to help Kosovo
establish a rule of law, including training of new judges, development of a law school
curriculum, and legal analysis and legislative drafting support, are also underway.
The EU has pledged roughly $838 million to date for Kosovo reconstruction
projects. The first EU-financed programs were providing material supplies for local
housing repair, assisting basic power and water infrastructure rehabilitation, helping
re-establish the customs service, supporting village job creation, creating a land mine
clearance coordination center, and financing the rehabilitation of the Mitrovica
Hospital. The EU has also provided support for the local administration (seconding
Member State experts to local Kosovo government) and helped to repair roads and
bridges prior to winter use. Additional projects included provision of identity cards
for the population, support for micro-credit, and equipment and training for the
Kosovo Protection Corps.
Although Kosovo is not a state eligible for lending, the World Bank has provided
$2 million from a Post-Conflict Facility for a Community Development Fund for
infrastructure and services projects and for budget support for the civil administration
of the province. It is also providing $60 million in grant assistance through a Trust
Fund for Kosovo over an 18 month period. This assistance is supporting efforts to
improve agricultural production, reform the education, health, and banking systems,
and improve the energy sector.
Status of Reconstruction as of June 2001. By most accounts, Kosovo
has made much progress since the end of the war, although it may have a long way
to go before it is a self-sustaining, self-governing entity. Basic infrastructure – roads,
airport, communications, schools, housing – has been repaired. Basic services –
health, education, electricity, and water – are being provided. A framework of
government is in place – with Kosovar nationals matched with international personnel
in all departments of the UN administrative structure, and a judicial system, with
police and courts, established. Elections at the local level were successfully held in

October 2000, and Municipal Assemblies have begun to take responsibility for basic
government functions. A constitutional framework is being developed, and province-
wide elections for an assembly are scheduled for November. Small business and signs
of civil society, including independent media, are growing.
While the barest elements of government are in place, they function at minimal
levels. Standards need to be improved across-the-board. Public utility infrastructure
is antiquated and needs replacement. Teachers, police, and civil servants need
training. Violence between ethnic Albanians and minority Serbs continues. While the
UN estimates that donor support for the operating budget may end by 2003, it
anticipates a need for donor activity in multiple sectors of Kosovar life for years to4
Issues for Congress
U.S. Reconstruction Aid Levels. The extent of the U.S. role in Kosovo
reconstruction is a still unsettled issue. By virtue of its leadership in NATO and its
donor status, the United States has a significant role at this time, but constraints on
the amount of assistance it provides may affect its role in the future.
At the July 1999 donor conference, the United States pledged $277.6 million in
non-humanitarian “urgent” aid, coming from FY1999 emergency supplemental
appropriations (P.L. 106-31), originally approved for refugee and related relief during
the war. Including its humanitarian assistance pledge, the United States accounted
for 25% of all donor pledges at the July conference. At the November conference,
the United States pledged an additional $157 million. The latter pledge reflected the
limitations placed on U.S. assistance by Congress under the FY2000 Foreign
Operations Appropriations Act. H.R. 3422, enacted by reference in P.L. 106-113,
appropriated at least $150 million for Kosovo, but limited the total U.S. contribution
to 15% of all other donor pledges made at the November 1999 conference. In fact,
the $157 million was 15% of the total pledged.
The Clinton Administration position, reinforced by Congress, was that, because
the United States bore the brunt of the burden for prosecuting the war, the EU and
its member states would be the principal contributors for reconstruction in Kosovo5
and for most of the development assistance for Southeast Europe. The 15% share
of reconstruction activity imposed by Congress in the FY2000 appropriations,
however, did not coincide with the Clinton Administration’s view of the appropriate
U.S. role. The FY2000 supplemental request for $93 million in economic assistance,
not counting other sums for Kosovo-related activities, would have boosted the U.S.
share to about 22% of year 2000 pledges. The Clinton Administration argued that
these additional funds were needed to meet U.S. objectives in the region, regardless
of what other donors did, especially in view of the financial demands posed by the
increasingly evident need for an expanded and well-trained police force. In the end,

4 Kosovo 2001-2003: from Reconstruction to Growth, Department of Reconstruction, United
Nations Mission in Kosovo, December 2000.
5 For a discussion of U.S. and other NATO country roles, see CRS Report RL30398, NATO
Burdensharing and Kosovo: A Preliminary Report, January 3, 2000.

Congress approved (in P.L. 106-246) only $12.4 million in supplemental funds,
designated solely for police activities.
The FY2001 appropriations language continues to limit the U.S. contribution
from SEED, ESF, and Narcotics accounts – to 15% of total donor pledges as of
March 31, 2001. The Clinton, and later Bush, Administrations planned a Kosovo $94
million economic aid program, and State Department estimates of total donor
contributions, at $648 million, would permit this amount under the 15% formula.
However, these donor totals would be insufficient to cover an additional $55 million
requested for civilian police. Because police costs vary considerably between
countries – while many countries assign police from their national forces, the United
States must contract, usually former police, for the positions – the State Department
is figuring the U.S. police contribution by number of police rather than expense. As
of March 2001, the United States had pledged 605 police out of a total pledge of

4,585 (13.2%).

Burden-Sharing. As noted above, the debate on whether aid is sufficient to
meet U.S. objectives in the region has been dominated by the question of aid
proportionality in relation to other donors. Early in the year 2000, the slowness of
European donors in turning their pledges into actual cash exacerbated this concern.
In a January 26, 2000 speech, Secretary of State Albright took note of this problem,
saying “It is vital that our partners join us not only in pledging generously, but also
in disbursing promptly.”6 The EU, with a reported history of bureaucratic delay in
dispensing aid, was, apparently, the target of these remarks. It was particularly slow
in providing a promised $35 million in budgetary assistance, which was urgently
needed to pay salaries of teachers and government staff.
In a February 2, 2000, hearing of the Senate Armed Services Committee,
Senator John Warner criticized the EU on the $35 million and hammered it for not
doing enough to meet the UNMIK request for a 6,000 person UN civilian police
force. He threatened to use the Kosovo supplemental as a vehicle to tie U.S.
assistance to the disbursement of funds by other nations. The proposed Warner
amendment would withhold 50% of U.S. funds for military operations in Kosovo until
the President certified that, among other things, the EU and member states had
provided at least 33% of amounts committed by them for reconstruction, 75% of
amounts committed for the UNMIK budget, and at least 75% of the international
police force.
In response to criticism such as that offered by Secretary Albright and Senator
Warner, a statement issued by leading EU officials pointed out that the EU nations
provide 80% of the KFOR troops, and the EU provides the majority of reconstruction
assistance.7 With regard to the $35 million mentioned at the Senate hearing, the EU
officials said that they were considering offering an additional $10 million, to be
provided before the end of February, bringing the total EU contribution to more than

6 “Albright Irked by Kosovo Funds Delay”, Financial Times, January 28, 2000.
7 According to the State Department, EU nations represent 64% of KFOR troops, all
European nations represent 70%, and all Europe with Russia and Ukraine represent 80%.

half of the then-existing $80 million Kosovo budget requirement in 2000.8 On
February 9, France announced an emergency grant of $2.3 million for the Kosovo
2000 budget. By mid-March, according to UNMIK, sufficient funds had been paid
to assure UNMIK’s solvency.
Although the UNMIK budget issue was resolved, the episode continued to have
ramifications in Congress. On March 22, 2000, Representative Gilman and 19 co-
sponsors introduced H.R. 4053, the “United States-Southeastern Europe
Democratization and Burdensharing Act of 2000,” which, in part, limited total U.S.
assistance to southeastern Europe for FY2001 through 2005 to 15% of total donor
assistance. At an April 11 House International Relations Committee hearing,
Chairman Gilman and Representative Bereuter offered to amend the legislation to
raise the limit to 18%.
On March 30, 2000, during House debate on the FY2000 supplemental, a Kasich
amendment was offered with language identical to the proposed Warner amendment.
It was defeated on a 200-219 vote. However, on May 17, the House approved (264-
153) a Kasich amendment to the Defense Authorization (H.R. 4205) that would end
funding for the U.S. military presence in Kosovo if by April 1, 2001, the President had
not certified that EU, EU member nations, and European NATO members “obligated
or contracted” at least 50% of their 1999 and 2000 commitments for reconstruction
aid, 85% of humanitarian commitments, 85% for the Kosovo budget, and 90% for
police. The language was removed from the enacted bill.
On May 18, 2000, the Senate rejected (53-47) language in the FY2001 Military
Construction Appropriations, S. 2521, which would withhold 25% of FY2000
military funds for Kosovo, pending certification that the Europeans have obligated or
contracted 33% of their 1999 and 2000 reconstruction commitments and 75% of their
humanitarian assistance commitments, provided 75% of their UNMIK budget
commitment, and deployed 75% of the number of international civilian police pledged.
If that certification was not made by July 15, 2000, those funds could be used only for
withdrawal of U.S. troops. During Appropriations Committee mark-up of the bill on
May 9, the condition had been approved by a vote of 23-3.
While the Clinton Administration would probably have been able to make the
required certifications regarding humanitarian, reconstruction, police, and budget aid
proposed in the various amendments offered during the 2000 debate (see Tables 3,
4, and 5 for status as of end of 2000), perhaps a key question when considering
proportionality of aid in relation to other donors is what impact the U.S. proportion
would have on its role in multilateral decisionmaking. The presumption is that the
United States would be happy to see Europe lead on this issue. But the consequence
of a smaller U.S. financial role may be that it relinquishes desired influence over
events in Kosovo.

8 The $80 million projected deficit does not count funding for the police force. Joint Statement
by the High Representative of the EU, Javier Solana, and Commissioner for External
Relations, Chris Patten. February 7, 2000.

Table 3. Donor Contributions and Disbursements to UNMIK
PledgePercent of TotalPercent of Pledge
($ millions)Donor PledgeDisbursed
United States14.913.7%100%
EC + Bilateral Europe85.4278.6%100%
Note: Both the U.S. and EC/Europe disbursed more than originally pledged.
Source: World Bank/EC as of 12/31/00.
Table 4. Donor Pledged/Contracted Reconstruction Aid
PledgePercent of Pledge
($ millions)Contracted
United States206.780%
EC + Bilateral Europe989.568%
Source: World Bank/EC as of 12/31/00.
Table 5. Donor Contributions to International Police Force
Pledge% of TotalNumber % ofPledge
(# of forces)Donor PledgeDeployedDeployed
United States60513.2%605100%
EU/NATO 1,34229.3%1,28195%
Source: Dept of State/UN as of 3/27/01.
Adequacy of Funding. While the November donor conference produced
sufficient pledges to meet broad spending goals for the year 2000, it is unclear
whether donors will provide funds to the specific sectors where and when they are
needed. The housing and health sectors, in particular, have been consistently
underfunded by donors.
The most stark and serious example of inadequate funding to date was the deficit
in the 1999 administrative budget of UNMIK, which pays salaries for civil servants,
teachers, and policemen, and provides basic government services. Possibly because
donors prefer to provide aid in the form of technical expertise using their own
nationals rather than providing funds for things like salaries, insufficient funds were
pledged for this purpose. And, of funds pledged, countries were slow in disbursing
the money. In mid-December 1999, Bernard Kouchner, the UNMIK head, made a

special plea for 1999 funds to the international community, a plea repeated in early
February with regard to the 2000 budget. “Today I have no deutschmarks in the
Kosovo budget for the year 2000, so I cannot pay for the few, vital public servants,9
the hospitals, education, the judicial system and electricity.” As noted above,
sufficient payments have now been made to keep UNMIK operating. As tax revenues
increase, the donor role in the administrative budget is expected to decline.
A related issue has been the lack of sufficient international civilian police. To
date, the United Nations has authorized a 4,718 level UN international police force,
although Kouchner had requested a 6,000 level force and many believe even more are
needed. As of March, 4,585 had been pledged by donors, and 4,314 had actually been
deployed. Although a police training center was established in autumn 1999, training
new Kosovo local police is a slow process, and recruiting experienced civilian police
from donor nations has not been easy.
Implementation and Corruption. As reconstruction and development
programs go forward, there have been concerns regarding the competency of
implementation and, based on the example of Bosnia, the possibility of corrupt use of
funds. During the 1999-2000 winter, some commentators raised questions about the
ability of UNMIK to provide adequate housing for the tens of thousands of returned
Kosovars and complained about the slow progress in restoring services. Despite
congestion at the Macedonia border that slowed import of building materials and
other problems, the UN did achieve its housing objectives. In the first year, critics
also noted that hundreds of criminal suspects had been released without an indictment
or trial, because there was still no criminal justice system in place. In response,
UNMIK imported international judges and prosecutors in order to jump-start a
judicial process. Some observers have also criticized international donors for
distorting the local economy by paying higher wages for agency drivers than for
teachers, and stifling local initiative by providing large grants to civic organizations
whose management skills are weak and liable to become dependent on external
donors. All these criticisms must be weighed against the feasible alternatives as well
as the inherent difficulties of the Kosovo situation, including the early failure of
donors to meet budget requirements.
One reason for the presence of so many donor organizations is concern regarding
possible corrupt use of their resources if funds were provided directly to local groups
or individuals. There were early allegations of missing USAID funds from one
humanitarian organization. With limited rule of law in place and corrupt petty
bureaucrats at the local level, the growth of corrupt practices in government is a
danger. Donor caution in releasing funds, however, means a slower process when
many demand speed. Efforts by USAID and others to create a rule of law are
necessary first steps to stifle an environment that breeds corruption.
Serbia and Kosovo. The extent to which policymakers recognize Serbian
sovereignty over Kosovo has been a persistent factor in Kosovo reconstruction and

9 “France Pledges 15m francs in Emergency Aid for Kosovo,” BBC Monitoring, February 9,

2000. “Civilian Chief Pleads for More Kosovo Aid,” Associated Press, December 17, 1999.

is certain to affect future reconstruction efforts.10 While U.N. resolution 1244
technically refers to an autonomous Kosovo within a sovereign Serbia, the de facto
result of reconstruction aid appears to have been the creation of a viable self-
functioning entity. Early on, this was the subject of some controversy between
Bernard Kouchner and Kofi Annan, the UN Secretary General, who reportedly
disputed Kouchner’s decision to recognize the German mark as the legal currency and
other decisions that infringed on the sovereignty of Yugoslavia.11 Later, Annan
pushed the Security Council for some clear determination of Kosovo’s status,
whatever the outcome, but the allies remained reluctant to be seen endorsing
separatism in Europe.12
The uncertainty regarding Kosovo’s status keeps unresolved property issues that
constrain administrators from selling off government-owned utilities and establishing
property rights. It also discourages the foreign investment necessary to stimulate
economic growth in the province. While the October 2000 change of government in
Serbia has not altered the fact of UN administration of Kosovo, it does raise the
possibility of limits to continued UN activity and Kosovo independence and it may
also be diverting potential donor funds from Kosovo to the reform effort in Serbia.

10 For detailed discussion of the aid program for Serbia, see The Federal Republic of
Yugoslavia: U.S. Economic Assistance, CRS Report RS20737, updated regularly.
11 “Annan Comes to Serbs’ Defense”, Washington Post, October 15, 1999.
12 “Annan Seeks U.N. Debate on Kosovo”, Washington Post, March 8, 2000.