Kosovo | Growth and Fiscal Stability Initiative Quarterly Report 31 December 2010

The initiative is funded by the United States Agency for International Development and is implemented by Deloitte Consulting LLP. The project's main objective is to strengthen the ability and capacity of central and local institutions to identify, develop, and implement Public-Private-Partnerships (PPPs) as an important private sector funding mechanism for meeting Kosovo's public infrastructure investment priorities. During the second quarter of 2010, the project made significant progress in strengthening the legal, institutional, and policy framework for PPPs. GFSI advisors continued drafting priority implementing regulations and secondary legislation for the PPP law in accordance with the PPP framework strategy and work plan. These guidelines aim to create greater procedural and legislative clarity for PPPs. Institutionally, GFSI advisors finalized the institutional assessment of the central PPP Unit, specifying key personnel, drafting job descriptions, and identifying key performance indicators for individuals and for the PPP program as a whole. The project also made progress in supporting the development of municipal PPP projects. PPP advisors organized a series of meetings with pre-selected municipal authorities to undertake a thorough needs assessment and to identify priority PPP projects. Initial training was provided to specified municipal officials, and discussions were held to prioritize potential PPP initiatives. Next steps will include creating a comprehensive work plan to assist municipalities with the development of the appropriate institutional structure for PPPs and transaction implementation. In addition to PPP development, the project continued to cooperate closely with the Auditor General in the quarter. Project advisors began to work as a conduit between Treasury, the Auditor General, and the municipalities to improve their financial statements, reconciliation, and management practices. Several visits were made to the municipalities during the quarter, and following these visits, a paper on common actions to improve financial reporting was drafted for comment by the Auditor General prior to dissemination. The project also supported Treasury in its training and certification for financial officers associated with the ongoing decentralization of payment controls. Preliminary property tax collection suggests an approximately 20% increase in revenue in 2010. As of end-November, 11.7 million euros were collected, which represents about 2 million euros more than the same period in 2009. The Airport PPP remains on-track for February hand-over, although the tender for the engineer and the establishment of the Project Management Unit (PMU) are yet to be finalized. On the macroeconomic side, a comprehensive economic analysis paper was produced on the Kosovo economy. The paper highlights two significant weaknesses: insufficiency of domestic savings (linked to weak export performance) and poor efficiency of the investments made in Kosovo. The concept paper advocates a development agenda to augment the reform agenda pursued by the Kosovo and international community. The project continued to take steps to improve the quality of financial statements to enhance accountability. Active training and hands-on support were provided to selected municipalities who had problems in financial statement production or were new municipalities going through the process for the first time. The project also supports Treasury in its training and certification for financial officers associated with the ongoing decentralization of payment controls. The national government suffered a no-confidence motion and early elections were held in December. It is expected that a new government will be formed in early March. During this time, the project focused its attention on the municipal governments and made substantive progress in the areas dealing with PEFA, PPP, and municipal financial management.