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Kosovo Economy Stagnant as Election Approaches - 2004-10-13

Five years after NATO forced Serbian troops out of the disputed territory of Kosovo, the absence of significant economic growth and exceedingly high unemployment is a concern to local politicians and U.N. administrators.

In 1999 donor nations rushed to provide assistance to the nearly two million Kosovars, many of whom were destitute after a decade of conflict. Nearly $2 billion flowed into the territory in 2000.

But as attention shifted to new conflict zones like Afghanistan and Iraq, aid to Kosovo has diminished to an expected $250 million this year.

The International Monetary Fund estimates that from 35 to 55 percent of Kosovo's inhabitants are jobless. The population is the youngest in Europe with thousands entering the work force yearly.

Economic growth that reached 10 percent in 2000 has now fallen back to four percent. Most of that comes from money spent by NATO-led peacekeepers, remittances from abroad, and foreign aid.

Kosovo's economic distress is related to its ill-defined political status. Technically it is still part of Serbia even though more than 80 percent of its population is thought to favor independence.

Because it is not an independent state, the IMF and the World Bank cannot lend to Kosovo. Foreign investors are deterred by instability and the unclear status.

Lack of status has also held back the privatization of state assets with disputes over ownership with Serbia, rival financial claims, and differing views among key European nations. The U.N. administration is determined to end the stand off and speed up privatization.

"We do have some serious challenges before us and it is important not to minimize the challenges we do face, including on complicated issues like privatization," said Lawrence Rossin, a former U.S. ambassador, and the newly arrived number two U.N. official in Kosovo. "Indeed the entire UNMIK [United Nations Mission in Kosovo] team are determined to do everything we can to overcome the difficult issues-and they are difficult because of Kosovo's peculiar status or lack of defined status, but to overcome that and move privatization forward."

Mr. Rossin tells VOA that after the election the United Nations is determined to cede more powers to Kosovo's elected government. Kosovo's elected government does not control the police and judiciary and its finance ministry shares budgetary authority with the U.N. administration.

Determined to free itself from Serbian economic control, Kosovo discarded the Serbian currency and uses the euro. Its trade has been redirected south and west towards Macedonia, Albania, Italy, and Greece. Albania has begun building a new road across the mountains to connect with its Albanian speaking brethren in Kosovo.

Economists say even though Kosovo has a solid banking system and financial stability, real growth awaits the determination of the territory's final status, a decision that will made by the Security Council. The United Nations and the major powers say they hope to reach a decision as early as mid-2005.