Kosovo Country Strategy

2022-2027
Approved by the Board of Directors on 26 January 2022
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Table of Contents and Glossary

Table of Contents Glossary of Key Terms

Executive Summary ABI Annual Bank Investment POE Publicly-Owned Enterprises

ASB Advice for Small Business PPP Private-Public Partnership
Kosovo– EBRD Snapshot CoOs Countries of Operations PTI Portfolio Transition Impact
CSR Corporate Social Responsibility RSF Risk Sharing Facility
I. Implementation of Previous Strategy (2016- EE Energy Efficiency SOB State-Owned Bank
2020) EIB European Investment Bank SOE State-Owned Enterprise
Key Transition Results Achieved during Previous ETI Expected Transition Impact SSA Stabilisation and Association
Strategy EU European Union Agreement
Challenges to Implementation and Key Lessons E&S Environmental & Social TC Technical Cooperation
FDI Foreign Direct Investment TFP Trade Facilitation Programme
II. Economic Context FI Financial Institution VCIP Venture Capital Investment
GEFF Green Economy Financing Facility Programme
Macroeconomic Context and Outlook for
GET Green Economy Transition WB Western Balkan
Strategy Period
GHG Greenhouse Gas WBIF Western Balkans Investment
Key Transition Challenges Framework
GVC Global Value Chains
H&S Health & Safety WiB Women in Business programme
III. Government Priorities and Stakeholder yoy Year-on-year
Engagement ICA Industry, Commerce & Agribusiness
ICT Information and Communication
IV. Defining EBRD’s Kosovo Country Strategy Technology
Priorities IFI International Financial Institution
IPA Pre-Accession funding
V. Activities and Results Framework IPPF Infrastructure Project Preparation
Facility
VI. Mapping of International Partners’ LCY Local Currency
Complementarity in EBRD Business Areas MEI Municipal and Environmental
Investment
VII. Implementation Risks and Environmental and M&A Mergers and Acquisitions
Social Implications M&S Manufacturing & Services
MSME Micro, Small and Medium
VIII.Donor Co-Financing Assessment Enterprise
Annex 1 – Political Assessment NDC Nationally Determined Contribution
NPL Non-Performing Loans
PFI Partner Financial Institution

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Executive Summary

Kosovo’s commitment to and application of the political principles stated in Article 1 of the Agreement Establishing the Bank has continued since the
adoption of the previous country strategy, in line with its efforts towards EU approximation. At the same time many challenges remain. Kosovo shares many
key institutional weaknesses common to the Western Balkans countries, including weak rule of law, relatively low capacity of public administration, and an
uneven culture of political dialogue and consensus building. These are additionally aggravated by complex inter-ethnic relations within the country and by
continuing political controversy in the wider international community regarding Kosovo’s status.
As an open and youthful economy situated in the heart of the Western Balkans and at major crossroads of regional infrastructure corridors, Kosovo is well
positioned to overcome its landlocked location and small size of the economy through deeper regional integration. Pressing reforms will however be needed
to create an environment in which the private sector can thrive beyond the limited domestic market and create employment opportunities for all. Transition
gaps are particularly acute in competitiveness (with an economy characterised by informality, high unemployment particularly among youth, and significant
gender gaps), green (with extremely high coal dependency, high energy intensity, lack of municipal and environmental infrastructure, and other resource
inefficiencies), and integration (with slow implementation of key transport and energy connectivity projects as well as inadequate levels of institutional
arrangements for trade and investment at a regional level).

EBRD is well positioned to help strengthen private sector performance in the country, accelerate reform efforts to create quality employment for Kosovo’s
young and multiethnic population, encourage female participation, and to help ‘green’ Kosovo’s growth by enabling the transition away from coal and
address air pollution, through tailored policy and financial instruments. The Bank will continue pursuing its traditional forte of helping to deliver on the
country’s connectivity agenda with enhanced focus on project implementation, and step up its support for municipalities and enlisting them to carry out
climate-resilient and greener infrastructure investments. The Bank will pay particular attention to accelerating the implementation of public sector
investments and supporting the delivery under the EU’s Economic and Investment Plan.

Complementing its five-year, longer-term agenda, the Bank will equally help the country navigate the repercussions of the COVID19 pandemic through
stepped up response measures, including for publicly-owned enterprises and municipalities as well as the financial sector as the backbone for economic
activity. Throughout, regional integration will remain the lodestar to guide the Bank’s investment and policy activities, and special emphasis will be placed on
exploring synergies with the Bank’s activities in neighbouring economies. Continued strategic partnership with the EU and other IFIs, and donor support in
the form of technical assistance, investment grants, and guarantees that can be blended with EBRD’s product range will be key for the Bank to deliver on the
following strategic priorities in Kosovo in 2022-2027:

• Develop a More Competitive and Inclusive Private Sector to Foster Economic Recovery and Growth;
• Support Green Economy Transition in Kosovo through a More Sustainable Energy Mix and Greater Resource Efficiency;
• Strengthen Regional Integration, Connectivity and Foreign Investment.

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 Kosovo – EBRD Snapshot

EBRD Investment Activities in Kosovo (as of November 2021) Kosovo Context Figures

Portfolio €350m Active projects 41 Kosovo Comparators

BIH (3.3)
Equity share 3% Operating assets €159m
Population (million)3 North Macedonia
1.8
Private Sector Share1 61% Net cum. investment €545m (2020) (2.1)
Serbia (6.9)
BIH (15,231)
ABI and Operations Portfolio Composition
GDP per capita (PPP, North Macedonia
USD)3 (2020) 11,470 (16,770)
140 20 400
Serbia (19,168)
120
16 BIH (1.1)
300

Investments (€m)
100 New Business Density4
12 North Macedonia
80 (New registrations per 4.0
200 (3.6)
60 8 1,000 population, 2018) Serbia (1.9)
40 100
4 BIH (15.9)
20
North Macedonia
0 0 0 Unemployment (%)5 (2020) 26.2
(17.2)
2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021
Serbia (9)
YTD YTD
ICA Financial Institutions Sustainable Infrastructure BIH (36.6)
ABI (left axis, €m) # of projects (right axis)
Youth unemployment (%)4 North Macedonia
49.7
(2020) (37)
Portfolio Dynamics Transition Gaps 2
Serbia (26.6)

400 100 BIH (36.7)

Competitive Female labour force North Macedonia
8 17.8
participation (%)4 (2020) (41.8)
300 6
Investments (€m)

54 Serbia (46.5)
46 Integrated 4 Well-governed
200 40 37 50 2 BIH (0.4)
27 0 Energy intensity North Macedonia
21 0.4
100 (TES/GDP)6 (2019) (0.3)
Serbia (0.3)
Resilient Green
0 0 BIH (1.2)
2016 2017 2018 2019 2020 2021 Emission intensity/GDP North Macedonia
YTD Inclusive 1.3
(kgCO2/2015 $) (2020)6 (0.7)
Portfolio Operating Assets Disbursements (right axis) Kosovo SEE EBRD Serbia (1.0)

1 Cumulative Bank Investment: 5 year rolling basis on portfolio. PUBLIC 4

2 Cf. EBRD Transition Report 2021-2022. 3 IMF WEO. 4 WB Entrepreneurship Survey and database. 5 WB WDI. 6 IEA.
 1. Implementation of Previous Strategy (2016-2021)
1.1. Key Transition Results Achieved during Previous Strategy

Strategic Alignment 2016-2021 Transition Impact Performance*

Annual Business Investment (ABI) Technical Assistance and Investment Grants

Priority 2: 4% (11
Priority 1: 27% projects) Priority 1: 10%
(29 projects) (19 projects) Off-track: 22.5%
Priority 3: 40% (9 projects)
(15 projects)
€366.1m €70.2m

Priority 2: 33% Priority 3: 86% On-track: 77.5%

(11 projects) ETI: 69.1 (31 projects)
GET share: 43% (19 projects)
PTI: 68.7
Priority 1: Support competitive development of the private sector through investments, enhancing internal capacity of companies and improving
business environment
Key Quantitative Results Key Transition Results

Results Indicators 2020 Since 2016 • Facilitated access to finance for small businesses via credit lines exceeding €50m with 7 partner banks and
microfinance institutions, and signed first leasing line.
• Supported the enhancement of the competitiveness and efficiency of SMEs by providing 186 local consulting
No. of ASB clients and international advisory projects, together with coaching and skill transfer training.
reporting increased 30 144 • Supported the expansion of private sector through direct lending (€30m) to a wide range of companies enabling
productivity Santefarm (pharmaceutical), REKS (recycling), and Kujtesa (ICT) to expand and upgrade their facilities.
• Launched Women in Business (WiB) programme in Kosovo to support women led SMEs by providing dedicated
Volume of MSMEs loans €29 m €299 m credit lines and advisory services via TEB Bank.
disbursed • Supported the agribusiness industry via direct lending (e.g. Viva fresh and Meridian) and advisory services to
help over 40 businesses expand, upgrade their value chains, develop their standards, and analyse market
Volume WiB loans €1.2 €12.9 needs to accelerate exports.
disbursed [€m] • Successfully supported Central Bank of Kosovo in adopting the legal and regulatory framework for factoring and
reviewed the legal framework governing bank resolution in Kosovo, aligning with international best practice;
together with capacity building and training for stakeholders such as PFIs in each topic.

* Transition impact performance reflects how likely projects are to achieve the transition impact expected of them at signing. Calculated based on active mature
(> 2 years) portfolio. 5
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1. Implementation of Previous Strategy (2016-2021)
1.1. Key Transition Results Achieved during Previous Strategy
Priority 2: Enhance energy security and sustainability by financing investments in the sector, supporting sector reform, promoting energy efficiency
and renewable energy
90% 400 Key Transition Results
80% 350 • Spearheaded efforts to shift Kosovo’s consumption from energy intensive resources to renewables by financing
70% 300 the first two large-scale renewable projects: Bajgora wind farm, the biggest wind farm in the country (€58m),
60% and KITKA wind (€18m) reducing pollution and power disruption.
250 • Provided advisory services to the authorities to successfully develop a bankable framework, including power
50% purchase agreement, to unlock investments in renewable generation in the country.
200
40% • Improved energy efficiency and green technologies across sectors by dedicating credit lines via PFIs and two
150 MFIs to on-lend to residential sector for energy efficiency investments; as well as enabled SMEs to upgrade
30%
production facilities and improve environmental protection.
20% 100
• Trained 295 loan officers in residential and business lending across 3 banks (TEB, AFK, KRK) and 16 EE/RE
10% 50 coordinators received on the job training (under KOSEP).
• Directly financed Kosovo’s first plastic recycling facility (REKS €6m) and provided business advice to SMEs to
0% 0
improve their energy efficiency and environmental management.
2016 2017 2018 2019 2020
• Launched the Green Cities Action Plan for Pristina to support the city to take a systematic approach to
GET share of ABI (%) addressing its key urban environmental challenges, including air pollution.

CO2 Emissions Red. (Kt/year)

Priority 3: Support connectivity and regional integration

The Rail Route 10 Rehabilitation Key Transition Results
• Supported the expansion and rehabilitation of transport links by financing the rehabilitation of Kosovo’s only
international rail link (Rail Route 10) connecting Kosovo with North Macedonia and Serbia, co-financed with EU
WBIF grant and financing the construction of Kijeve-Zahaq highway (€71m).
• Provided comprehensive advisory services to strengthen the authorities’ Road Safety Management Capacity
Development as well as supporting the development of Road Safety Audit legislation/certification.
• Supported exporters and trade via EBRD Trade Facilitation Program (TFP) by signing six lines with two PFIs (NLB
Pristina, and Raiffeisen Bank Kosovo), and successfully restructuring TFP with Banka per Biznes. Through these
TFP lines, PFIS funded transactions over €8m.
• Developed the capacity of PFIs by organising trainings with Kosovo Banking Association in trade facilitation and
factoring for local banks.

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1. Implementation of Previous Strategy (2016-2021)
1.2. Challenges to Implementation and Key Lessons
Context for Implementation
Although Kosovo’s declaration of independence in 2008 marked the dawn of a new era, the participation of this new nation in international trade and co-operation is still
uneven due to unresolved issues with Serbia and divisions in the wider international community regarding its status. As a small open economy situated at major
crossroads of regional infrastructure corridors, Kosovo is uniquely poised to overcome its landlocked location. However, these unresolved issues and complex interethnic
relations have compounded key institutional weaknesses, such as a weak rule of law and low capacity of public administration. Kosovo’s most pressing issue lies in
transitioning towards a sustainable economic growth model, where the private sector can thrive and that offers quality jobs for its sizeable youth.
Kosovo became a country of operations in 2012, which enabled the Bank to significantly step up engagement in both the private sector but also for the first time to begin
addressing the significant infrastructure challenges, including the country’s transport connectivity agenda. Over the past country strategy period, and in line with its green
agenda, EBRD diversified efforts to support Kosovo’s transition towards a more sustainable energy mix and stepped up engagement with municipalities. These efforts
have been reflected in rising ABI figures, reaching a record year in 2019, complemented by rising disbursements levels.

Implementation Challenges Key Lessons & Way Forward

• Lack of bankable opportunities for direct financing in the corporate and SME • Direct lending works when mixed with technical assistance (in particular advice
sector as result of low capacity to prepare bankable projects, informality to cultivate long-term relationships and prepare clients for financing) as well as
especially in accounting practices, weak corporate governance and mobilising donor funds to cover high legal costs and support post-investment
management quality in addition to integrity issues. value creation.

• Banking sector is well-capitalised and highly liquid but characterised by a • Blended funds for FI (with TA and investment grant) coupled with advice are a
growing mismatch between assets and liabilities and a lack of innovation, good mechanism to reach underserved areas and provide competitive prices.
including limited uptake of trade finance and factoring solutions. Champion the trade facilitation programme and support introduction of new
financial products.

• Lack of experience with IFIs and weak administrative capacity to carry out key • Complement public infrastructure investments with increased institutional
public infrastructure projects. capacity-building, e.g. project preparation and implementation support at the
central and municipal level.

• Foreign investment largely limited to real estate investments (two-third of • Increased focus on improving the investment climate, though more effective
inflows) by the diaspora due to negative perception of business environment public-private dialogue, as well as creating more opportunities to attract FDI to
and lack of opportunities for investment. the productive sectors of the economy (e.g. through business parks, economic
zones).

• Kosovo has been slow and indecisive with diversifying energy sources, • Investments in renewable energy require capacity building and practical
remaining almost entirely dependent on highly polluting coal, also as a result of assistance to set up regulatory support schemes. Assist policy makers to draft a
low institutional capacity and challenges in attracting investment. compelling Energy Strategy coupled with EBRD engagement in planning for the
Just Transition.

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2. Economic Context
2.1. Macroeconomic Context and Outlook for Strategy Period

Kosovo - Main Macroeconomic Indicators Economic growth was mostly consumption-driven over the past decade.
Between 2010 and 2019, growth averaged 3.6 per cent annually and was
2017 2018 2019 2020 primarily led by domestic demand, in particular private consumption, while
investment contribution was significantly smaller. Conversely, net exports
GDP growth
4.8 3.4 4.8 -5.3 acted as a drag on growth, mostly through rising imports. On the
(% y-o-y) production side, growth was driven mostly by services, primarily trade and
tourism-related ones. Despite a fall since 2015, the unemployment rate
CPI inflation
1.5 1.1 2.7 0.2 has remained high, especially for youth.
(% avg.)
The economy is recovering strongly following a recession in 2020, helped
Government balance by the supportive external environment. Exports was among the main
-1.4 -2.8 -2.9 -7.8
(% of GDP) growth drivers in the first three quarters of 2021 due to significant
increase in diaspora visits which boosted services revenues as well as
Current account balance strong expansion of goods exports. Robust growth in household
-5.7 -7.8 -5.8 -6.7
(% of GDP) consumption was supported by continuously growing remittances inflows.
From a sector perspective, recovery is driven by strong growth of domestic
Net FDI (% of GDP) trade and manufacturing. Following near stagnation in 2020, inflation was
-3.3 -3.4 -2.7 -4.2
[minus indicates inflow] on the rise in 2021 driven by the increased energy and food prices.

External debt The fiscal stance was loosened. To ease the crisis, the government
32.9 30.5 31.2 37.2 adopted first an emergency package, followed by a recovery package. As a
(% of GDP)
result, public debt increased at end-2020. The expansionary fiscal policy
Gross reserves continued in 2021.
10.8 11.5 12.2 13.3
(% of GDP) The economy is expected to surpass its 2019 level in 2021. Economic
growth should be mainly driven by the recovery in consumption,
General government gross debt investment and travel and tourism activities related to the country’s large
16.2 17.0 17.6 24.1
(% of GDP) diaspora. Risks to the projections are balanced and mainly relate to the
potential weaknesses in the external sector and the future course of the
Unemployment rate pandemic. Further risks lie in the area of the country’s public investment
30.3 29.4 26.0 26.2
(%) management. A swifter recovery would be helped by the acceleration of
the hitherto-slow implementation of key infrastructure projects.
Nominal GDP ($bn) 7.2 7.9 8.0 7.8

Source: National authorities, World Bank, IMF PUBLIC 8

2. Economic Context
2.2. Key Transition Challenges

Competitive (5.2) Well-governed (4.7) Green (3.3)

• Economy is dominated by family-owned micro • Country scores below regional average on World • Energy system relies on lignite, a low-energy and
companies. Bank World Governance Indicators, performing highly polluting fuel. Almost all electricity is
• Widespread informal economy (estimated to reach most weakly in the areas of political stability and generated by two outdated and inefficient coal-fired
up to 40 per cent of GDP): in BEEPS VI, one quarter absence of violence, and control of corruption. power plants (Kosovo A and Kosovo B).
of firms chose competition from the informal sector • Rule of law remains weak despite significant • Uncontrolled air pollution from the energy sector
as the top obstacle for doing business. The high international efforts over the past two decades. and household heating remains a serious issue,
degree of informality creates unfair competition Judicial system is rather slow and inefficient, prone with a severe health impact.
among firms, makes their access to finance more to political interference. • Energy intensity is among highest in the region and
difficult and prevents firms from growing faster. • Insufficiently transparent, efficient and accountable almost four times higher than the EU average.
• Still unfavourable business environment on the public administration also contributes to a high
• Main renewable source of electricity are
back of regulatory and institutional weaknesses, prevalence of corruption. Kosovo ranked 104th out
hydropower plants, many of which are small ones,
despite significant improvements. of 180 countries in the 2020 Corruption
often causing environmental damage.
Perceptions Index.
• Low quality of education and skills shortages weigh • Water resources are unevenly distributed
down on the competitiveness of the economy. • Contract enforcement has been made easier
throughout the country. Climate change may
recently, but cost is still relatively high.
• Country is at an early stage of knowledge economy, aggravate the availability and quality of water, in
lagging behind regional peers. • Large informality contributes to one of the lowest particular during summer months.
government revenues in Europe.
• State intervention in the form of subsidies is • Waste management system is under-developed and
• Corporate governance framework is of medium
relatively high (1.8 per cent of GDP in 2017). inefficient, with many illegal landfills and limited
strength, but SOE corporate governance is weak.
recycling; lack of wastewater treatment plants.
Biggest obstacles to doing business Governance indicators PM2.5 premature deaths
(per cent of firms) Voice and (per 1,000 of population)
0 20 40 EU-11 3.0
Accountability
Practices of the informal sector 26.0
Electricity 15.0 WB-5 2.1
Control of Political
Tax rates 10.0 Corruption Stability 2.0 1.7
KOS
Political instability 9.5
Corruption 7.9 1.1
Tax administration 7.6 Rule of Government 1.0
Transportation 6.2 Law Effectiveness
Access to finance 6.1
Customs and trade regulation 5.2 Regulatory 0.0
Inadequately educated… 3.3 Quality EU-11 WB-5 KOS
Source: BEEPS VI Source: World Bank's Worldwide Governance Indicators 2021 Source: EEA and authors' calculations

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2. Economic Context
2.2. Key Transition Challenges

Inclusive (5.4) Resilient (5.5) Integrated (5.1)

• Labour market participation is low, especially for • Financial system is dominated by banks, majority of • At below 80 per cent of GDP in 2020, trade
women: around 80 per cent of women are which are foreign-owned (eight out of ten). openness is the second lowest in the region.
economically inactive. Microfinance institutions are present as well. • Rather negligible goods exports (around five per
• Employment rate is significantly lower for women • Banking sector is well-capitalised and liquid, with cent of GDP) comprise mostly base metals, mineral
than for men (14 per cent vs 43 per cent in 2020) lowest share of low quality assets in the region. NPL products and food.
and a large gender gap in access to finance. ratio stood at 2.2 per cent in Q3 2021. • Despite accounting for a quarter of GDP, exports of
• Informality in Kosovo is among the highest in • There is room for more financial deepening. At end- services consist primarily of travel services, linked
Europe with more than one third of employees 2020, private sector credit was below 48 per cent of to the country’s large diaspora
working informally. GDP. • Kosovo still lags significantly behind the EU in
• Persistently high unemployment rate, especially for • Capital markets remain underdeveloped. The transport infrastructure, installed capacity for power
youth, and social fragility have contributed to large country has no stock exchange and financial generation and telecommunication networks, which
emigration. At least one third of Kosovan population instruments consist of government T-bills and potentially distracts foreign investors and limits the
has emigrated. Subsequent large remittances inflow bonds. country’s integration into European supply chains.
further reduces incentives to work. • Electricity sector has gone through a process of • FDI stock per capita is lowest in the region, despite
• Kosovo has the youngest population in Europe with unbundling, but private sector participation remains Kosovo being the least restrictive country.
a median age of 29.5 years. limited. End-user electricity prices are still regulated • Power outages are relatively frequent, causing
• Education system does not respond sufficiently to and some cross-subsidies remain. severe losses to firms (almost four per cent of
private sector needs, hence skills mismatches. • There is no established gas market. annual sales, according to BEEPS VI).
Unemployment rate Non-performing loans Trade openness
(per cent) 25 (%) (per cent of GDP)
150 EU-11
75 Latest 2021
20
End-2013 125
49.1 Youth
50 15 WB-5
100
KOS
25.9 Total 10 75
25
5 50
2.2
0 25
2012

2013

2014

2015

2016

2017

2018

2019

2020

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020
MNE ALB BIH SRB MAC KOS
Source: Kosovo Agency of Statistics Source: IMF and national authorities Source: WB WDI

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3. Government Priorities and Stakeholder Engagement

3.1. Government Reform Priorities 3.2. EBRD Reform Areas Broadly Agreed with Authorities
According to the Government Programme 2021-2025, the two most urgent  Revive the economy of Kosovo from the impact of the COVID-19
priorities are first to manage the pandemic, aiming to minimize public health pandemic crisis.
consequences, and second to alleviate its economic and social impact.
Economic recovery priorities include: raising the minimum wage, redirecting  Strengthen productivity of Kosovo manufacturers, especially their export
the economy towards production and exports, youth employment, diaspora capacity, and help develop value chains to diversify the economy.
engagement, economic empowerment of women, improved management of  Enhance trade through improved standards compliance, better logistics,
strategic state assets, increased support for private sector development, as and trade finance.
well as preparing a new National Development Strategy.
 Improve the performance and governance of Publicly Owned
The 2021-2023 Economic Reform Programme published in January 2021 (in Enterprises.
line with the current NDS, SAA programme and other strategic documents)
focuses on:  Continue supporting the green economy transition and reduce Kosovo’s
energy consumption to become more climate resilient, and utilize EBRD
Energy: reducing energy consumption through energy efficiency measures, JUST transition initiative.
diversifying energy sources.
 Support the development of a national policy for foreign investments to
Agriculture, industry and services: conducting reforms in agriculture, improving increase the flow of FDIs and finance needed infrastructure.
manufacturing, tourism and hospitality competitiveness, and trade in services.
3.3. Key Messages from Civil Society to EBRD
Business environment and informality: adopting evidence-based policies,
reducing administrative burden, conducting General Inspection Reform, 1. Civil society organisations endorsed the Bank’s Kosovo strategy priority
establishing a Commercial Court, reducing informality in the real estate sector of developing a more competitive and inclusive private sector. In particular,
but also economy-wide via improving rule of law and economic governance. CSOs consider that EBRD support is needed in the area of facilitating
Research, development, innovation and digital economy: improving the access to the labour market and financing, including for minorities, youth
environment for innovation and entrepreneurship, extending ICT networks and and double marginalised groups such as women within minorities. Also,
services infrastructure to foster socioeconomic development. migration and brain drain are areas of concern for CSOs.
Trade reforms: facilitating trade through reduction of cross-border transaction 2. CSOs moreover welcomed the Bank’s support for the Green Economy
costs, developing quality infrastructure and market surveillance authorities. Transition through a more sustainable energy mix and greater resource
efficiency. They highlighted that waste management, recycling and circular
Education and skills: developing early childhood education, implementing new economy are key areas for CSOs, who want to see more action in this field.
VET curriculum framework, enhancing the quality of higher education. In addition, CSOs consider that the transition towards gasification and
Employment and labour market: improving and expanding public employment renewable energy needs to be very careful and evidence-based.
services, increasing employability of vulnerable groups, in particular of youth, 3. Civil society representatives further endorsed the Bank’s focus on
women, people in poverty and rural areas. strengthening regional integration, connectivity and foreign investment.
Social protection and inclusion: improving social and health services and According to CSOs, the EBRD should help promote more investments and
empowering excluded groups. concerted efforts to attract FDI.

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4. Defining Kosovo Country Strategy Priorities

What needs to change? Can it be changed? What can the Bank do? Strategic Priorities What We Want to see
(Country Diagnostic) (Political Economy) (Institutional Capabilities) (2022-2027) in 2027
• Growing vulnerability in the financial sector • Government efforts and revised strategy to raise • Expertise in strengthening financial
as a result of asset / liability mismatch, awareness to limit informality throughout the resilience through long-term financing and
with probability of higher NPLs post Covid. economy. NPL resolution solutions.
• Strengthen resilience and
• Low productivity and limited access to • Increasing female labour market participation is • Range of targeted instruments to increase
finance. government priority. SME competitiveness, skills and financial Develop a More competitiveness of the private
• High level of informality and regional • High entrepreneurial potential among Kosovo’s inclusion (WiB, business advice). Competitive and sector post-COVID
disparities. youth. • Tried and tested platforms to facilitate Inclusive Private • Enhanced inclusive access to
• Low labour participation rate and limited • Commitment to strengthen public-private public private dialogue on business Sector to Foster finance, skills and
business support for female and youth. dialogue to improve the business environment. environment and investment climate. Economic Recovery entrepreneurship
• High rates of unemployment, limited TVET, • Government’s signalling its interest in • Expertise in supporting SOE and Growth • Improved governance of POEs
and skills shortages. commercialization of SOEs and improving commercialisation.
and private sector
• Challenging business climate. standards. • Experience providing companies finance
• Poor performance of state-owned and advice to improve corporate
companies. governance, standards and capacity.

• High air pollution due to residential heating • Government plans to phase out subsidies on • Implementation of GET 2.1 strategy.
and vehicular emissions, reliance on coal electricity (2017-2026 Energy Strategy). • Experience in sharing and supporting
and limited renewables in energy mix. • Government’s willingness to revise energy best practices in regulatory and
• Increased renewable energy
• State dominance of major services. strategy to align with EU best practices (Green institutional framework for renewable
• Low level of investments in renewable Agenda in Sofia Summit 2020). energy across EBRD economies.
Support Green capacity and a more diversified
energy, lack of regulations, and limited PSP. • Kosovo and Serbia economic normalisation • EBRD’s expertise in spearheading Economy Transition in energy mix
• High energy usage and carbon intensity in agreements could pave way to resolve water investments in innovative green Kosovo through a • Increased energy and resource
residential and commercial buildings (four and energy supply issues. technologies. More Sustainable efficiency
times higher than the EU average). • Government efforts to build new and advanced • Specific tailored financial products to Energy Mix and • More sustainable and climate-
• Poor municipal infrastructure exacerbated power generation capacities. finance green investments (e.g. Green Greater Resource resilient municipal and urban
by low resource efficiency and water • Law on strategic investments adopted in 2017 Cities Framework, GEFF credit lines).
Efficiency transport infrastructure and
shortages. identified the energy sector as a strategic • Experience developing financially and
• End user electricity prices remain regulated sector to increase investments. environmentally sustainable MEI,
services
and some cross-subsidies remain. including waste and wastewater services.

• Poor quality and connectivity of transport • Pan-European Corridors and regional • EBRD’s strong track record in providing
infrastructure, especially roads and transport connectivity agenda, TEN-T as key funding to help narrow the infrastructure
railway. anchors. gap and support implementation of
• Weak capacity for project implementation • Strong gov’t interest as laid out in the complex infrastructure projects.
of large-scale infrastructure projects. National Transport Strategy and Action Plan • EBRD’s strong additionality and • Improved connectivity and
Strengthen Regional
• Limited exports and weak integration into (2015-2025) and commitment to accelerate experience in driving regional soft integration of critical
Integration,
GVC for SMEs. infra project implementation. connectivity agenda. infrastructure
• Low levels of FDI (lowest in Europe and • Opportunities in advancing soft connectivity in • EBRD’s expertise in facilitating trade and Connectivity and
• Enhanced cross-border trade and
Western Balkans), and heavy focus on the view of EU approximation and alignment with supporting export-oriented companies. Foreign Investment
investment
non-productive sector (2/3rd real estate). regional trade and investment agreements
(including Regional Common Market).
• Export and near-shoring potential (EU is
largest trading partner), but use of potential is
dependent on common regional market
development.

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5. Activities and Results Framework

Priority 1: Develop a More Competitive and Inclusive Private Sector to Foster Economic Recovery and
Growth
Key Objectives (Outcomes) Activities (Outputs) Tracking Indicators
(Outcomes)
• Strengthen resilience of the financial sector through a mix of financing (including provision of
medium to long-term financing) and regulatory policy support, e.g. corporate governance of banks,
bank resolution, deposit insurance, commercialisation of MFIs. • No. of clients
increasing productivity
Strengthen resilience and • Provide direct financing and advice to corporates and medium-sized enterprises to enable their
competitiveness of the private growth, improve corporate governance and value creation. • No. of
sector post-COVID legal/institutional/regul
• Support local SMEs to innovate, digitise, adopt EU standards and increase productivity through
atory improvements to
indirect financing and business advice (e.g. SME Competitiveness and Reboot, Advice for Small
target segment
Businesses).
• Explore expansion of product range, incl. mezzanine financing, guarantees, risk-sharing facilities.
• Support women and youth in business as well as regional and ethnic minorities by scaling up and
develop new financing and advisory products, such as youth guarantees, that target underserved • No. of loans disbursed
market segments. by partner financial
Enhanced inclusive access to • Support technology scale-ups through advice and financing, capacity-building for business institutions to women-
finance, skills and accelerators, and development of fintech. and youth-led (M)SMEs
entrepreneurship • Explore opportunities to support the private sector to develop on-the-job training, vocational skills • No. of individuals
and inclusion programmes, with a focus on youth and women. enhancing their skills
• Continue to expand range of available financing products, such as factoring and leasing, coupled as a result of training
with capacity-building for regulators and financial institutions.

• Policy engagement to accelerate POE reform by aligning legal framework with best practice, updating
the state ownership policy, and improving monitoring and oversight capacity. • State ownership policy
• Support commercialisation of current and former SOEs / POEs (financial, operational, corporate adopted by the
governance), through policy advice and investments. government
Improved governance of POEs • Facilitate public-private sector dialogue, through instruments such as the National Council for • No. of clients
and private sector Economy and Investment to identify and address legal and regulatory obstacles to private sector implementing
development. commercialisation/
restructuring
• Address selected critical business environment constraints, such as supporting contract enforcement
through commercial courts, enforcement services, and strengthening the insolvency legal and
regulatory framework, including capacity building for office holders (administrators and judges).
Impact Indicator: Economic Complexity Index (country ranking) (Harvard CID) PUBLIC 13
5. Activities and Results Framework

Priority 2: Support Green Economy Transition in Kosovo through a More Sustainable Energy Mix and
Greater Resource Efficiency
Key Objectives (Outcomes) Activities (Outputs) Tracking Indicators
(Outcomes)
• Combine policy engagement (e.g. enhanced legal and regulatory framework) with direct and indirect
financing to further develop and integrate new competitively procured renewable energy projects.
• Total renewable
• Promote switch to cleaner energy sources to ensure energy security and address acute air pollution
electricity installed
and carbon intensity, including support for revising Kosovo’s existing energy strategy and potentially
Increased renewable energy investments in a coal to gas transition but only where consistent with Kosovo’s decarbonisation • Legal and regulatory
capacity and a more diversified efforts and low carbon pathway. framework for
energy mix competitive auctioning
• Participation in the Just Transition Platform Initiative in support of coal regions in transition in the
of renewable supply
Western Balkans.
established
• Policy engagement to promote and create incentives for smart grid investment and investments in
electricity network infrastructure to absorb intermittent renewable energy.

• Provide direct and indirect financing and advisory for energy and resource efficiency of SMEs and
corporates (SME Competitiveness Programme, Reboot programme, green trade finance).
• Energy saved (GJ/y)
• Provide indirect financing to improve residential and public buildings energy and resource efficiency,
Increased energy and resource including through GEFF and other green products. • Total CO2
efficiency reduced/avoided
• Policy engagement to remove investment barriers in energy and resource efficiency investments.
(ton/year)
• Support development of a circular economy through investments and advice for resource efficiency
solutions.

• Enable cities to address air quality issues through finance and TA in, e.g., solar district heating, urban
transport projects, where relevant under the Green Cities Frameworks and other targeted EBRD
programmes (e.g. ReDeWB). • No. of climate
More sustainable and climate- resilience and green
• Support increased efficiency and sustainability in the water sector, including wastewater treatment
resilient municipal infrastructure action plan adopted
and water security (e.g. Iber-Lepenci canal), and explore opportunities in solid waste management.
and services • Water savings
• Support cities to develop climate resilience and green action plans and continue capacity-building to
(m3/year)
strengthen municipal project implementation and digital services.
• Promote climate-related disclosure by POEs through corporate climate governance action plans.

Impact Indicator: Carbon intensity (CO2/GDP) (IEA)

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5. Activities and Results Framework

Priority 3: Strengthen Regional Integration, Connectivity and Foreign Investment

Key Objectives (Outcomes) Activities (Outputs) Tracking Indicators

(Outcomes)
• Strengthen capacity to support project preparation and implementation and explore opportunities for
enhancing PPP frameworks.
• Continue support of railway sector reform, incl. rail infrastructure asset management & track access.
• Finance and provide advisory for key road corridors and rehabilitation of regional and local roads
• Target infrastructure
Improved connectivity and network (e.g. ‘Peace Highway’ and Pristina ring road) with enhanced focus on climate resilience.
network extended as
integration of critical • Explore and support transmission cross-border investments (electricity and potentially gas, where measured by increase
infrastructure consistent with Kosovo’s decarbonisation), with focus on interconnections to North Macedonia and / in network capacity
or Albania.
• Identify opportunities to strengthen telecommunications and digital infrastructure including through
financing fixed and mobile communication networks and service upgrades (e.g. broadband, 5G)
together with policy engagement on legal and regulatory issues (e.g. competitive licensing scheme).

• Support development of regional business platforms (Regional Business Registries) and

harmonization of business practices (Business and Financial Data Exchange), and explore further • No. of loans disbursed
opportunities to support common regional market. by partner financial
institution for TFP
• Provide business advice and finance to export-oriented businesses serving regional, European and
Enhanced cross-border trade international markets and encourage near-shoring opportunities. • Number of assisted
and investment clients/suppliers
• Scale up the Trade Facilitation Programme, including capacity-building for intermediaries, awareness
updating processes,
among local importers and exporters, and digital trade finance.
technology, standards
• Finance in-bound FDI, with a focus on value chains integration and technology transfers to local or practices as a way to
suppliers, together with creating opportunities for FDI through economic zones and business parks. increase exports
Encourage more diaspora engagement and investment in particular for women.

Impact Indicator: Trade Openness % of GDP, WB WDI PUBLIC 15

 6. Mapping of International Partners Complementarity in
EBRD Business Areas

EBRD Business Areas Areas for future cooperation

Sectors Cross-Cutting Themes Green

• Work with the World Bank,
Industry, Commerce & Agribusiness
Sustainable Financial
Strategic Initiatives
EIB, KfW and US to enable
Infrastructure Institutions investments in renewables,
and increase capacity of
Manufacturing

Infrastructure

Inclusion and

Currency and
Indicative average partner banks to finance
Agribusiness

Institutions
& Services

Resources

Property &
investments/

Non-bank
green investments.

Economy

Business
Financial

Markets
Banking
Tourism

Gender
grants Natural

Capital
Energy

Green

Small
Local
(€m, 2016-2020)
ICT

Resilient
WB 39 €P €P €P €P €P €P €P €P • Collaborate with IFIs to
support the financial sector to
EIB 27 spur COVID19 resilience and
€P €P €P €P
recovery.
USAID, MCC &
26 €P €P €P €P €P €P €P
DFC
Integrated
IFC 6 • Continue working with EIB and
€ € €P €
explore opportunities with
other IFIs to further advance
EU 17 €P €P €P €P €P €P
connectivity agenda.

GIZ & KfW 0.1 €P €P €P €P €P

Well-governed
• Work with IFIs on governance
EBRD 75 €P €P €P €P €P €P €P €P €P €P €P €P
of the financial sector, POEs,
infrastructure delivery, and
investment climate.
Area of significant Focus mostly Focus mostly on
€ Area of significant P
investments policy dialogue on private sector public sector

PUBLIC 16
7. Implementation Risks,
Environmental and Social Implications

Risks to the Strategy Implementation Probability Effect Risks to Strategy Implementation

• Political volatility and lack of consensus • Assessment and Management of E&S Impacts, Stakeholder Engagement: Ensure that
regarding Kosovo’s status in the wider direct, indirect, cumulative and transboundary E&S impacts of projects are appropriately
international community could deter assessed and mitigated, meaningful stakeholder engagement is carried out. Continue E&S
investor confidence. capacity building through targeted TCs to ensure adoption of best international practice.
• Labour and Working Conditions: Ensure that clients’ HR policies and labour practices
• Weak administrative capacity could comply with EBRD requirements, address minimum wages and labour conditions
delay reform implementation as well as requirements, potential discrimination, and promote equal opportunities.
critical large-scale infrastructure
• Resource Efficiency and Pollution Prevention and Control: Develop capacity building
projects.
initiatives in waste management and water sectors; identify and develop water resources
efficiency projects and TA initiatives as part of the GET mandate; support waste
• Insufficient donor co-financing and
management initiatives in line with the Kosovo Integrated Waste Management Strategy.
grant levels could undermine
Explore capacity building and policy dialogue on Best Available Techniques for industrial
competitiveness of key EBRD products.
pollution prevention and abatement in line with the EU Industrial Emissions Directive.
• Health and Safety: Improve occupational and community H&S with specific focus on
• Prolonged covid-19 crisis will delay activities considered a source of common accidents on the EBRD projects. TC support is
economic recovery, threaten viability of needed to continue emphasis on road safety at institutional and communities levels.
businesses, and deter long-term
investment by both private and public • Land Acquisition, Involuntary Resettlement and Economic Displacement: Ensure that any
sector project requiring acquisition of land comply with EBRD’s compensation and livelihood
restoration requirements, with special attention on informal land users and vulnerable
• Asset / liability mismatch in the groups. Continue institutional capacity raising w.r.t adoption of international practice.
banking sector could undermine • Biodiversity Conservation and Sustainable Management of Living Natural
financial sector resilience. Resources: Ensure robust biodiversity assessments of projects to minimise potential
impacts, esp. on areas rich with biodiversity which might require additional TC support
• Cultural Heritage: Work with clients to identify potential cultural heritage issues on Bank’s
projects as well as avoid and mitigate impacts on sensitive heritage by consulting with key
stakeholders in accordance with the Bank’s policy.
• Financial Intermediaries: Ensure that FI partners have adequate E&S capacity and risk
management procedures in place.
• Monitoring and supervision: Work with clients to monitor E&S performance and address
legacy issues associated with the Bank’s portfolio. TC support is needed to continue
capacity raising on contractor’s management and project monitoring among infrastructure
clients.

PUBLIC 17
High Medium Low
 8. Donor Co-Financing Assessment

8.1. Grant Needs Assessment for the New Country Strategy Period 8.2. Potential Sources of Grant Funds
• Western Balkans Investment Framework (WBIF): A joint platform of the
Donor funding will be needed to achieve the strategic objectives of the Country
EU, bilateral donors, DFIs/IFIs as well as Western Balkan countries. TC
Strategy, including for:
and co-investment grant support is available for priority investments in
• Advice and capacity building for SMEs, including to enable more inclusive transport, energy, environment, digital, social and private sector
access to economic opportunities and promote entrepreneurship. development projects. The EU’s Western Balkans Guarantee Facility
can mitigate risks in both public and private sector investments.
• State-ownership policy activities and corporate governance engagements
with selected Publicly-Owned Enterprises. • In addition to funds channelled through the WBIF, national EU
Instrument for Pre-Accession funding (IPA) may also be available.
• Grants to promote investments in energy and resource efficiency.
Priority areas for Kosovo under IPA II include infrastructure,
• Technical assistance to enable and integrate renewable energy projects. governance, legal reform, energy, employment and social policies,
competitiveness, agricultural & rural development, and regional
• Co-investment grants and TA to enable large-scale infrastructure
cooperation. IPA III will start to be deployed in 2021.
investments, improve project implementation capacity and support
investments in sustainable municipal infrastructure. • Bilateral donors such as Luxembourg, Switzerland, Sweden, and the
UK can provide funds and support as partners in select priority areas.
• Policy dialogue and reforms to improve investment climate, including
through support for the National Council for Economy and Investment. • The Bank’s Shareholder Special Fund can bridge mismatches between
unmet needs and available support from donors (particularly
infrastructure project implementation, policy reforms and governance)
Selected Affordability Indicators areas).
Donor finance during last strategy (€m) 4 Use of grants in 2018-19 5

EBRD regional
40 5% Competitive
percentile rank1 22%
Green
30
GDP per capita (PPP, current. $)2 11,839 19th Integrated
20 Well Governed
ODA Country Yes N/A 67% €1.4m 6%

10
ODA as share of Gross National
4.29 80th
Income (%)3 -
2016 2017 2018 2019
ODA per capita ($ - current TC grants (commitments/earmarks)
187.04 80th
prices)3 Co-investment grants (signings)
1. Simple percentile rank reported as the share of EBRD economies that are represented below Kosovo. 2. Source: WDI (2019 or most recent year)
3. 2016-2019 TC data is based on earmarks at the project level. Co-investment grant amounts are based on client PUBLIC
signings. 18
4. Based on the primary Transition Quality of grants earmarked (for TC grants) or signed with clients (for co-investment grants) in 2018 and 2019.
Annexes

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Annex 1 – Political Assessment in the Context of Article 1

Kosovo’s commitment to and application of the political principles stated in these areas has been slow.
Article 1 of the Agreement Establishing the Bank has continued since the Efforts towards EU approximation remain the main external anchor for
adoption of the previous country strategy, in line with its efforts towards comprehensive reforms. The EU has repeatedly stressed that Kosovo
implementation of the comprehensive EU reform agenda. At the same time shares the European perspective of the rest of the Western Balkans.
many challenges remain. Kosovo shares many key institutional weaknesses Kosovo signed the Stabilisation and Association Agreement with the EU in
common to the Western Balkans countries. They are additionally aggravated October 2015. It was approved by the European Parliament on 21 January
by complex inter-ethnic relations within the country and by continuing political 2016 and formally entered into force on 1 April 2016.
controversy in the wider international community regarding Kosovo’s status.
Kosovo and Serbia have engaged in an EU-facilitated Dialogue aimed at
Kosovo proclaimed independence in 2008. The question of legality of this act normalising their relations, which remains important in order for both to
was considered by the International Court of Justice (ICJ), to which it had been move forward on their respective European paths. Despite a number of
referred by the United Nations General Assembly (UNGA). The ICJ issued its agreements concluded as part of this dialogue, there has so far been little
decision on 22 July 2010, ruling that the Declaration of Independence “did not progress in the practical implementation. For most part of the previous
violate any applicable rule of international law”.1 Although this decision strategy period there was, for various reasons, a stalemate in the high-level
constituted an Advisory Opinion, which, as such, is not binding for any country, part of the Dialogue.
it was reinforced in September 2010 by the Resolution of the UNGA, which
“acknowledged the contents of the decision of the ICJ”. While many countries
do not recognise Kosovo, and this will remain a political matter for each Free Elections and Representative Government
member of the international community to decide upon, the number of Free, fair and competitive elections
bilateral recognitions as of 2021 exceeds 100. Continuing political The existing legal framework, which is largely based on two pieces of
controversy, stemming from different positions in the wider international legislation (Constitution of 2008 and the Law on General Elections adopted
community regarding Kosovo’s status, affects assessments of the situation in the same year), enables democratic elections, provided the authorities and
Kosovo produced by different international actors. political parties exercise sufficient will to implement it. Since 2010, there
The constitutional and legislative framework for a pluralistic parliamentary have been several unsuccessful attempts to change the electoral system,
democracy, the separation of powers and checks and balances in the political which failed due to lack of consensus among the key stakeholders.
system, the guarantees for fundamental rights and protection of minorities, Elections in Kosovo generally allow for competition between different
and for the meaningful role of civil society are in place in Kosovo and are political parties and free choice for voters. The candidates are able to
largely in line with international and European standards. campaign freely. The Central Election Commission (CEC) is an independent
Kosovo’s key weaknesses, which are common to the Western Balkans permanent body, appointed by the parliament for a four-year mandate, and
countries, include weak rule of law, the relatively low capacity of public operates in an efficient and transparent manner. The Electoral Code
administration, especially at the local level, and uneven culture of political provides for domestic and international election observation at all levels of
dialogue and consensus building. The progress in election administration.
The last general elections, which took place in February 2021, were the

1. Accordance with International Law of the Unilateral Declaration of Independence in Respect of Kosovo. Advisory Opinion, I.C.J. Reports 2010.
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Annex 1 – Political Assessment in the Context of Article 1

fifth since the declaration of independence and the fourth held throughout the 20 seats reserved for political entities representing ethnic minorities. The
country, including in the majority Serb-populated northern Kosovo. All of these scope of powers of the legislature to hold the government to account and to
elections were held early. The pandemic did not make it possible to organise a exercise parliamentary oversight is largely in line with international
full-fledged election observation mission (EOM) by EU as in the past, but the standards, although in practice the oversight of the executive branch of
shared view of expert election teams deployed on the ground was that the power remains weak. There is space for improvement in strengthening
elections, particularly the election day, were orderly and peaceful, although supervision of independent institutions, regulatory authorities and
some long-standing issues remain. Previous reports by EOM assessed the agencies, with suitable reporting and accountability mechanism. The overall
elections as generally well organised and administered, transparent, and with efficiency of the work of the parliament needs improvement as it is
no major incidents or violations, with vibrant and competitive campaign, undermined by frequent lack of quorum and by lack of constructive political
except for Kosovo Serb majority areas, where there is lack of competition. dialogue.
While voting unfolds reasonably well, the credibility of the post-election The main remaining challenges include a relatively weak professional
process is often negatively affected by a lack of timely decisions by CEC and by expertise at the local level, budgetary constraints and overall absorption
the inefficient handling of complaints and delayed certification. capacity.
Among other long-standing problems of Kosovan elections is the credibility of
the voter list, which includes more voters than the country’s estimated
Effective power to govern of elected officials
resident population. Another long-standing issue is procedures for out-of-
country voting. Previous reports by EOM noted also the tendency to call early Kosovo has established institutional, legal, and financial arrangements for
elections at extremely short notice and shorten the official electoral campaign. elected officials to exercise effective power to govern and they are not
The reports by the EOM recommended as priority improving the accuracy of constrained by any non-democratic veto powers or other undue influences.
the voter list, providing a minimum of two months’ notice for elections, and Kosovo stands out in the region due to significant international presence,
include clear provisions on challenging results at all levels. 2 although this presence nowadays plays a limited role. The UN Security
Council Resolution 1244 (UNSCR 1244), which in 1999 established the
United Nations Interim Administration Mission in Kosovo (UNMIK), is still
Separation of powers and effective checks and balances
formally in force and serves as the basis for the status-neutral international
The constitutional and legislative framework for a parliamentary democracy, presence both of the UNMIK and the European Union Rule of Law Mission
underpinned by the separation of powers and checks and balances in the (EULEX).
political system, independent legislature and procedures of legislative
EULEX, established in 2008, was the largest civilian mission ever launched
oversight in prescribed domains of decision-making, is in place in Kosovo and
under the European Security and Defence Policy. Its aim is to assist the
largely in line with international and European standards. The Constitutional
Kosovan authorities in the area of the rule of law, specifically in the police,
Court is independent and is playing an increasingly important role. Over the
judiciary and customs. EULEX’ responsibilities have been gradually reduced,
last years, it has issued a number of decisions with strong political impact.
as well as its staff (from more than 3,000 in 2008 to less than 500 in
The single-chamber parliament, which is the primary legislative institution 2020). Its current mandate expires in June 2023. Kosovo has also NATO-
directly elected for a four-year mandate, is composed of 120 seats, including led foreign military presence - Kosovo Force (KFOR) - which, in accordance
with UNSCR 1244, has been leading a peace support operation in Kosovo
2. EU Election Observation Mission. Early legislative elections in Kosovo 6 October 2019. Final Report.
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Annex 1 – Political Assessment in the Context of Article 1

since June 1999. Today, a significantly reduced KFOR (about 5,000 troops) regulatory body, the Independent Media Commission. The Press Council of
continues to contribute towards maintaining a safe and secure environment Kosovo, which is a self-regulatory body for the print media, helps to
and freedom of movement for all citizens. promote freedom of speech, the right of citizens to be duly informed and
the respect for the Press Code of Kosovo. At the same time, more needs to
be done to ensure that freedom of expression and media, which are
Civil Society, Media and Participation
guaranteed by the Constitution, are respected in practice, since there is a
Scale and independence of civil society widespread perception among Kosovan citizens that media is over-
There is a satisfactory legal framework for civil society organisations (CSOs). As politicised and are under pressure from political parties. Media ownership
elsewhere in the Western Balkans, CSOs remain heavily dependent on foreign structures remain unclear. Although media are obliged to submit ownership
funding and problems with funding are the greatest obstacle for their reports on an annual basis, if they are not registered as companies and do
functioning. Many CSOs are project-based, and relatively narrowly specialised. not pay taxes, they are not compelled to disclose their ownership to
However, in contrast to many other Western Balkan countries, CSOs in general anyone.
are spread evenly throughout the country, including the rural areas. In April The main sources of information are television, online media, and social
2019, the Assembly adopted a new Law on Freedom of Association in Non- networks, especially for Kosovo’s significant young population. The public
Governmental Organisations, which improved the legal protection of CSOs by broadcaster (RTK) has four channels and two radio stations. There are five
aligning it to the best international standards. The Government Strategy for private TV channels, which attract a considerable audience. Recent years
Cooperation with Civil Society for 2019-2023 was adopted through a broadly witnessed explosive growth in internet access, making the internet
participatory process, with a focus on improving participation in community- penetration rate in Kosovo comparable to EU countries. Social media is
based CSOs and securing the financial sustainability of the sector. The playing an increasingly important role with Facebook being the main
assessment of the implementation of the previous country strategy platform used by Kosovans (roughly half of the population).
demonstrated some progress achieved in the area of public consultations and
transparency in public funding.
Multiple channels of civic and political participation
In 2018, an annual report on the government’s consultations was released for
the first time. Public consultations by the governments are improving, including Multiple channels of civic and political participation are in place. The
through an increased use of online consultations. While many public bodies government reports annually on implementation of its key strategic
have for the first time conducted open calls and consultations in accordance documents. The right to access public information is regulated by law. The
with legal requirements, capacity remains uneven. parliament has improved its outreach activities in the last few years,
including public hearings. The Government has put in place a mechanism
for consultations with civil society for the new draft bills.
Independence and pluralism of media operating without censorship
Pluralism in the media, which operates broadly freely and without censorship,
Freedom to form political parties and existence of organised opposition
and access to public information have increased in recent years. The legal
framework is largely in place and in line with international standards. The freedom to form political parties is both guaranteed by the Constitution
Broadcast media are regulated through by-laws issued by the audio-visual and implemented in practical terms, as highlighted by the existence of a

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Annex 1 – Political Assessment in the Context of Article 1

significant opposition able to campaign freely and oppose government Government and citizens equally subject to the law
initiatives. 25 political entities participated in the last general elections, and The right to access public information is provided by law, with the number
14 different political parties are represented in the national parliament. of unanswered or refused requests being relatively low. The laws on the
declaration of assets and on preventing conflicts of interest were adopted
Rule of Law and Access to Justice by the parliament. The initial reforms in public administration create
conditions for the gradual establishing of a stable and professional civil
Supremacy of the law
service, which should be an important avenue to prevent abuse of authority
Necessary legislative and institutional safeguards for the supremacy of the law and ensure that government and citizens are equal to the law. The reforms
are in place. Over the past few years, Kosovo has adopted legislation for major included the adoption of a law on civil service, establishment of the
judicial reform, and the core legal and institutional framework to ensure that Ombudsperson (Ombudsperson Institution of Kosovo), and adoption of the
the rule of law is in place. Citizens have the right to a free and fair trial and are new law on Ombudsperson.
free from arbitrary arrest or detention. Kosovan authorities have committed to
cooperate with EULEX, including its Special Investigative Task Force, which
investigated the war crimes allegations raised by Resolution 1782 of PACE Effective policies and institutions to prevent corruption
adopted in January 2011, and later on with the newly established Kosovo The legal framework for the fight against corruption is in place and is largely
Specialist Chambers and Specialist Prosecutor’s Office (KSC/SPO). In 2020, in line with international standards. Although Kosovo, due to the status
the serving President of Kosovo, ex-Speaker of the parliament and the leader issues explained in the Preamble to the Annex 1, is not a party to
of one of the largest political parties voluntarily surrendered to KSC/SPO international anti-corruption conventions, it has made efforts to align its
following the confirmed indictment against them. Both have resigned from legislation with these conventions. The new Criminal Code, which entered
their state and political functions. Previously, in 2019, a serving Prime Minister into force in 2019, harmonised its provisions with EU’s best practices.
answered the call of KSC/SPO for questioning and resigned consequently. As regards organisation, there are currently almost twenty different anti-
corruption institutions in Kosovo. Coordination between them is weak and
Independence of the judiciary their responsibilities overlap. However, the decision of the government, in
October 2020, to abolish one of such institutions, the special anti-
The independence of the judiciary is guaranteed by the Constitution and key
corruption task force within the police, has been criticised by the EU as
safeguards are in place to ensure its impartiality, although enforcement is
undermining the authorities’ commitment to fighting high- level corruption.
uneven. Strengthening the independence and efficiency of the judiciary has
been, according to the EU, which provides significant assistance to Kosovo in According to the 2020 Transparency International Corruption Perception
this area, one of the main objectives of the on-going comprehensive reforms. Index (CPI), Kosovo’s ranking has been deteriorating in the last few years,
The EU has assessed that some progress has been achieved to this end, and it is currently placed as 104th out of 180 countries, on par with
mainly in the area of legislative reforms in the rule of law area. However, the Albania. The latest progress Report on Kosovo by the EC notes that limited
judiciary remains vulnerable to undue political influence. 3 progress has been achieved in the fight against corruption, particularly high-
level corruption. Since it has been established, the Anti-Corruption Agency
sent more than 1,000 cases to the prosecution.

3. Kosovo 2020 Report, European Commission, 6 October 2020. 23

4. ibid PUBLIC
Annex 1 – Political Assessment in the Context of Article 1

Since the adoption of the previous country strategy, more than 60 cases mechanisms and frameworks by the relevant Kosovo institutions, including
pertaining to high-level corruption and organised crime have been subject to in reviewing the draft of Kosovo Human Rights Strategy (2016-2020). 6
monitoring by the newly established track record mechanism, but only eight While fundamental rights are broadly enforced by the state institutions and
ended with guilty verdicts. The situation in the north of Kosovo with respect to respected, the latest EU reports pointed to remaining deficiencies, including
organised crime continues to pose challenge to law enforcement agencies. 4 a lack of coordinating mechanisms for the efficient implementation of
The Council of the EU stressed in its Conclusions of 18 June 2019 the need to strategies for the promotion and enforcement of human rights. The
“resolutely address” corruption and organised crime. 5 weaknesses in the consistent enforcement of the guaranteed rights include
also the unresolved fate of persons missing after the conflicts of the
Civil and Political Rights 1990s, and the integration of persons with disabilities.
Freedom of speech, information, religion, conscience, movement, association,
assembly and private property Political inclusiveness for women, ethnic and other minorities
Kosovo has a solid legal basis for the protection of fundamental rights and As a result of its history of inter-ethnic conflict, as well as continuing
freedoms, which are enshrined in the new Constitution adopted in 2008. The differences of opinion in the wider international community regarding the
Constitution lists the main international instruments, including the Universal status of Kosovo, the issues related to the rights of ethnic minorities in
Declaration of Human Rights, the European Convention for the Protection of Kosovo are particularly sensitive. Six ethnic communities are specifically
Human Rights and Fundamental Freedoms and its Protocols, which are all mentioned in Kosovo’s Constitution. According to the last (2011) Census,
directly applicable in Kosovo and, in case of conflict, take precedence over ethnic Albanians are 93 per cent of the population; ethnic Serbs 1.5 per
national laws. This is an important mechanism, especially given that Kosovo is cent; ethnic Turks 1 per cent; Roma, Ashkali, and Egyptians (RAE) 2 per
not a member of the UN or of the Council of Europe with their monitoring cent; Gorans 0.6 per cent; Bosniaks 1.5 per cent. It should be noted,
instruments and is not a signatory party to any international instrument on however, that ethnic Serbs boycotted the 2011 Census in northern Kosovo
human rights. and their participation in the Census elsewhere was uneven. Unofficial
The Constitution provides citizens with the right to refer violations of their estimates derived from the data used for practical purposes by the
rights and freedoms guaranteed by the Constitution to the Constitutional international presence in Kosovo put an estimated share of ethnic Serbs in
Court. This can also be done by the Ombudsperson. Over the last few years, the total population of Kosovo at 5-7 per cent. During the general elections
various additional structures were set up both at the central and local level to in Serbia, Serbian electoral administration uses the number of about
assist with the protection and enforcement of fundamental rights. The 100,000 of Kosovo residents registered to vote in these elections, but not
international community continues to be involved in the capacity building in all of them are necessarily ethnic Serbs.
this area. The legislative framework for the protection of ethnic minorities is in place
Since Kosovo is not a member of the UN, it is not subject to assessment in the in Kosovo. Their rights are guaranteed by the Constitution and by the Law
framework of the Universal Periodic Review (a process through which the on the Protection of the Rights of Minorities. The Council of Europe
human rights record of the UN Member States is periodically reviewed). The Framework Convention for the Protection of National Minorities is directly
International Human Rights Working Group, established by UNMIK in applicable in Kosovo and takes precedence over Kosovo legislation.
September 2015, assisted in the implementation of human rights
5. Council Conclusions, Enlargement and Stabilisation and Association Process, Council of the European Union, 18 June 2019.
6. Report of the Secretary-General on the United Nations Interim Administration Mission in Kosovo, 1 February 2016. 24
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Annex 1 – Political Assessment in the Context of Article 1

The interests of minority ethnic communities are protected by a complex address the issue of persons without documents and to integrate internally
mechanism in place at the central level. displaced persons (IDPs) and Roma refugees from Kosovo. Education
By regional standards, minorities are well represented in the national projects have continued to lead to a certain increase in the enrolment rates
Parliament and in the government. In the parliament, there are 20 seats set of Roma children in secondary education. However, high unemployment
aside for minorities out of the 120 MPs, of which 10 seats are specifically set rates persist, while access to unemployment benefits remains problematic.
aside for ethnic Serbs. The 20 “guaranteed” seats are enshrined in the Stereotyping against RAE persists, including in the media.
Constitution. The 2014 elections were the first when the system of The key legislative elements for gender equality, including constitutional
“guaranteed” seats replaced the provisional system of “reserved” seats, which provisions and a specific law on gender equality, are in place in Kosovo. By
in practical terms allowed minorities in the past to have 25 MPs rather than 20 regional standards, women have an impressive representation in the
as in the current Parliament. Two of the five Deputy Speakers of the national parliament, exceeding 30 per cent. Since the adoption of the
Parliament represent non-majority communities. previous country strategy two Presidents of Kosovo (counting the current
The current governing coalition includes overwhelming majority of the political President) have been women.
parties representing ethnic minorities, including ethnic Serbs. Serbian is one of On the local level, however, women remain underrepresented at the
the two official languages in Kosovo, alongside Albanian. Efforts have been decision-making level. There is not a single woman among mayors in
made to improve the situation at the local level, including through the Kosovo. There are also very few ethnic minority women that have senior
establishment of municipalities specifically to accommodate the interests of political positions. Discriminatory customs and stereotypes are still present
ethnic minorities, including better access to basic services. Out of the total of in the rural areas, undermining women’s basic rights. A remarkable 14 per
38 municipalities, ten have either a majority or considerable ethnic Serbian cent of rural women, according to UN data, are illiterate, compared to four
population. One of the key elements of the 2013 EU-brokered agreement per cent of rural men.
between Pristina and Belgrade on the principles for normalisation of their
relations envisaged the establishment of the Association/Community of
Freedom from harassment, intimidation and torture
Serbian majority municipalities, which remains subject of heated debates,
including as regards the Dialogue between Belgrade and Pristina. The EC Constitutional guarantees against harassment, intimidation, and torture are
recommended, among specific measures related to human rights, establishing in place and are upheld in practice. Through amending the law on the
a special body enabling direct consultation on the promotion and protection of Ombudsperson, Kosovo has aligned with the requirements of the Optional
religious and cultural heritage with minority communities. Protocol to the Convention Against Torture. A delegation of the Council of
Europe’s Committee for the Prevention of Torture and Inhuman or
The lack of trust between the Kosovan Albanian and some of the Kosovan
Degrading Treatment or Punishment (CPT) last visited Kosovo in 2015.
minority communities persists. Various agencies report occasional incidents
Particular attention was paid to the treatment and conditions of detention
motivated by ethnic and religious hatred and cases of discrimination, as well
of persons in police custody and the situation in penitentiary
as physical attacks against ethnic minorities. The authorities will have to do
establishments (including the regime for juvenile offenders, remand
more to ensure the genuine integration of ethnic minorities. More also remains
prisoners and inmates held in a new high-security prison and the provision
to be done to protect smaller ethnic minorities, particularly the most
of health). According to EC’s latest progress report on Kosovo, the situation
vulnerable RAE community. Several measures have been taken, notably to
remains “satisfactory”. 7
7.Kosovo 2020 Report, European Commission, 6 October 2020.
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