REBUILDING KOSOVO TAKES IMPORTANT STEP FORWARD

BRUSSELS, July 13, 1999 — Rebuilding Kosovo and restoring peace and stability to the wider Southeast Europe region took a concrete step forward today when international policy makers at the inaugural meeting of the High Level Steering Group - a special European Commission–World Bank chaired partnership for coordinating the international donor response to the Kosovo crisis - confirmed the first Kosovo donors meeting to be held on July 28 in Brussels.

Under the joint chairmanship of European Commissioner for Economic, Monetary, and Financial Affairs, Yves-Thibault de Silguy and World Bank Group President, James D. Wolfensohn, the High Level Steering Group agreed on priorities for an action plan to rebuild Kosovo, and repair the economies of neighbouring countries which also suffered economic losses as a result of the recent hostilities.

Four weeks after the end of the fighting in Kosovo, the Group¾ comprising finance ministers of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, Finland (representing the European Union) and leading representatives from the Stability Pact for Southeast Europe, the United Nations, the World Bank, the IMF, the European Investment Bank, and the European Bank for Reconstruction and Development¾ welcomed the rapid return of refugees and others to their homes in the battered province. It also encouraged donors, ahead of the July 28 conference, to contribute emergency assistance to the people of Kosovo for humanitarian help and urgent reconstruction needs. Donors, on July 28, will be given an interim damage assessment report on Kosovo.

The High-Level Steering Group also called on the international community to help Kosovars build a strong economy, one that delivered economic security, jobs, rising incomes and a social safety net for the poor and other vulnerable groups. This, it said, would require construction of a sound economic policy, regulatory, legal and institutional framework, essential to fulfill the economic dimensions of UN Security Council Resolution 1244, which calls for substantial autonomy and meaningful self-administration.

Commissioner de Silguy stressed that "the creation of the High Level Steering Group is a concrete response to the need to provide Kosovo and its' neighbours in the Western Balkans with financial assistance that is generous, transparent, effective, and tailored to meet their specific needs. This High Level Group must encourage a substantial response from donors throughout the world".

Welcoming the outcome of today's meeting, and the coalition of partnerships mobilised under the High Level Steering Group, Mr. Wolfensohn also warned that rebuilding Kosovo should not be funded at the expense of development assistance for the poor in Asia, Africa, and other parts of the world.

He went on to say that the reconstruction process in the beleaguered province had to take place within a wider strategy of supporting Albania and the former Yugoslav Republic of Macedonia, both of which have incurred significant economic costs in sheltering thousands of Kosovar refugees. In addition, he said that Bosnia and Herzegovina, Bulgaria, Croatia, and Romania, also needed assistance for Kosovo-related losses, arising from trade and transport disruption, and falling tourism earnings.

"I would like to urge you all here today to redouble your efforts to help these countries in Southeast Europe fill their immediate balance of payments gaps in 1999," Mr. Wolfensohn said. "Unless we meet these financing requirements we may risk hurting the most vulnerable people, because it will be necessary to make cuts in health and education spending, and pensioners would have to survive on less money. All people in these countries will be affected – not just the refugees who have been driven from their homes".
 

PLEASE FIND ATTACHED THE STATEMENT FROM THE HIGH LEVEL STEERING GROUP

Statement of the High Level Steering Group Meeting

Prospects for peace and stability in Kosovo and in South-East Europe depend heavily on economic growth and rising living standards. Historically, weak economies, economic instability, and poverty have contributed to strife in this region, as have ethnic and political divisions.

The economic challenges facing this region are formidable and multi-faceted: reconstruction, growth, reform, private-sector development, and integration with Europe and the global economy. We are committed to supporting the people of the region as they face these challenges to safeguard and strengthen the peace that has been established by building healthy, prosperous economies. Achieving this goal will require sustained resolve and co-operation, both by the people of the region and by the international donor community. External assistance alone will not create prosperity. It must support the creation of policy, legal, and institutional environments that foster private investment and job creation. Such environments can only be created if the people in the region believe these are important and forge the political consensus needed to put them in place.

At the Cologne Summit, the Heads of State and Government of Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, and the United States, directed that the donor co-ordination process, chaired by the World Bank and the European Commission, be guided by the High-Level Steering Group. Our first meeting took place in Brussels today, 13 July 1999, under the joint chairmanship of Messrs Yves-Thibault de Silguy, Member of the European Commission, and James D. Wolfensohn, President of the World Bank. The meeting was attended by Finance Ministers of Canada, France, Germany, Italy, Japan, the United Kingdom, the United States, and Finland (representing the Presidency of the European Union), as well as the Managing Director of the IMF, the President of the EIB and the President of the EBRD, the Special Co-ordinator of the Stability Pact for South Eastern-Europe, and the Deputy Secretary-General of the United Nations. The Special Representative of the UN Secretary-General was also invited to participate on this occasion. This composition will ensure close co-ordination with the United Nations and with the South-Eastern Europe Regional Table. At this meeting, we:

• accepted our mandate;
• discussed the immediate priorities for the reconstruction of Kosovo and set out a timetable for evaluating needs and mobilizing international assistance for its reconstruction and economic recovery;
• reviewed the short-term impact of the Kosovo crisis on neighbouring countries, the international community's response, and the remaining external financing needs in 1999;
• discussed the longer-term aspects of development of the region, particularly in the light of the Stability Pact, and the stabilization and association process initiated by the European Union;
• discussed the provision of humanitarian assistance to the population of the FRY.

1. Mandate and Working Methods of the High Level Steering Group (HLSG)

We agreed that our mandate would focus on the following main tasks:

• Ensuring a strategic direction to the process of economic reconstruction, stabilization, reform and development in the region, including social and institutional dimensions, both at country and at regional level. This will encompass the creation of an environment in which private-sector activity can flourish;
• Ensuring effective implementation of this strategy;
• Overseeing resource implications for the international community and the donor mobilization process;
• Assisting in co-ordination and overseeing the appropriate conditions for support, ensuring consistency of criteria on which donor funding is committed

The European Commission and the World Bank will provide the secretariat for the HLSG. The website operated by their joint office in Brussels will serve as a tool for disseminating information on assessment of needs and international assistance provided to the countries of the region.

To assist the European Commission and the World Bank in their ongoing work of co-ordinating economic assistance to the region, we have decided to establish a Working Level Steering Group (WLSG), comprising senior officials representing the members of the HLSG. The WLSG will work together on an ongoing basis and will meet as necessary.

2. Kosovo

We welcomed the rapid return of refugees and displaced persons and noted the significant support already being provided to meet emergency needs. We encouraged donors to ensure timely and sufficient emergency assistance to the returnees to help normalize the humanitarian situation in Kosovo and for urgent reconstruction needs.

As the people of Kosovo return to their homes, the international community must help them build a strong economy that delivers economic security, productive private-sector jobs, rising incomes, and adequate social protection. This will require the construction of a viable economic policy, regulatory, legal, and institutional framework. This framework is essential to fulfil the economic dimensions of the UN Security Council Resolution 1244, which calls for substantial autonomy and meaningful self-administration.

We considered the following to be immediate priorities:

• Emergency assistance to support the return of refugees and displaced persons, including urgent reconstruction;
• Establishment of the civil administration;
• Assessment of damage and organization of reconstruction;
• Creation of the institutional basis for a successful economic recovery
• Efficient and streamlined channelling of donor assistance and IFI support

We welcomed the appointment of Mr Bernard Kouchner as the Special Representative of the UN Secretary-General. We look to the UNMIK to develop the capacity to: (a) decide on, and implement, public spending objectives; (b) finance its public sector; and (c) establish a healthy, predictable environment for private investment and other economic and financial transactions. We and our experts will work closely with the UNMIK to help it construct the economic components of the interim administration for Kosovo, including arrangements for fiscal policy, currency use, the banking and payments system, the external trade regime, and private-sector development. We expressed the expectation that the internal organization of the UNMIK would provide for coherent management of core economic policy matters and effective dialogue with donors and IFIs.

We welcomed the efforts under way to assess damage and called for an urgent evaluation of the financing needs. We endorsed the proposed phased action plan for co-ordination of reconstruction and economic support for Kosovo:

• A donors' meeting at senior official level will take place in Brussels on 28 July 1999 to mobilize immediate emergency assistance, review progress on the establishment of the UNMIK and the assessment of damage, and define the next steps. Donors who are in the position to do so will be encouraged to make pledges for emergency needs.
• The HLSG will conduct a review of the results of the damage assessment, economic implementation and emerging assessment of needs when we meet in September;
• A pledging conference will be called in mid-autumn to mobilize priority reconstruction funding on the basis of the findings of the damage assessment and a first economic and financial needs assessment, which are currently under way.
• The full assessment of reconstruction needs and economic priorities will provide the basis for further donor conferences in 2000.

3. Most-affected Neighbouring Countries

We reviewed progress in alleviating the short-term negative economic consequences of the crisis for Albania, Bosnia and Herzegovina, Bulgaria, Croatia, FYROM, and Romania. Rapid return of refugees will mean that for host countries (mainly Albania and FYROM) the economic impact of refugees should subside rapidly. Other disruptions, notably in trade, transit and tourism, are, however, likely to remain significant for longer. Before the Kosovo conflict, a number of the countries of the region were on the verge, or at the beginning, of significant progress in economic reform and market transformation. Such progress remains essential. While support pledged at donor meetings for Albania, Bosnia and Herzegovina, Bulgaria and FYROM has been generous and has led to a narrowing of balance-of-payments gaps, some gaps remain for 1999. In order to support economic stability and determined implementation of reforms, it is necessary to fill the remaining financing gaps. We called on donors to do their utmost to help meet these external financing requirements, and recommended to the European Commission and the World Bank to call further G24/CG donor co-ordination meetings to fill the gaps, if it proves to be necessary.

We also called on the International Financial Institutions (IFIs) present and the European Commission to develop as soon as possible a sound assessment of the longer-term external financing needs of the most affected neighbouring countries. On this basis, we may recommend in due course further donor co-ordination meetings.

4. Regional Dimension

We welcomed the Stability Pact as a broad political framework for regional integration, co-operation and development. Economic progress for South-East Europe cannot occur in isolation. A powerful engine of growth will be the process of integration with the rest of the European and the global economy. Intensified intra-regional co-operation can play an important role in creating the basis for future sustainable growth, and the potential for such co-operation should be explored thoroughly under the auspices of the Stability Pact. We expressed our intention to work with the South-Eastern Europe Regional Table, in particular through the participation in the HLSG of Mr Bodo Hombach, the Special Coordinator of the Stability Pact. We explored ways to strengthen the economic links among the countries of the region and invited the IFIs to develop trade facilitation initiatives, as well as cross-border and multi-country proposals in consultation with the Working Table on Reconstruction Development and Co-operation of the Stability Pact. It was also agreed that consideration should be given to each IFI , in accordance with its comparative advantage, being accorded a leading role for mobilising financing for specific sectors, such as infrastructure development, agriculture, promotion of the private sector, including SMEs, and financial sector development. Where appropriate, additional financing for regional projects could be sought from donors. Italy has offered to host a conference for this purpose.

5. Federal Republic of Yugoslavia

The people of the FRY deserve a responsible, peaceful, democratic government. We stand ready to include the FRY in the economic assistance effort once it implements fundamental democratic reform, puts in place a democratically elected government that abides by internationally accepted norms and principles, and pursues appropriate economic policies. Until these conditions are met, ministers are resolved that no assistance will be provided to the FRY other than humanitarian aid which addresses the most urgent, essential human needs. Ministers will explore urgently ways of mobilizing support for Montenegro..

6. Next meeting

The next meeting of the HLSG will take place at the time of the Annual Meetings of the IMF and the World Bank Group.