US Agency for International Development

Mission for Kosovo

Kosovo Collective Reform Initiative

ADVOCACY MECHANISM

Final Report

By

SEGURA/IP3 Partners LLC

Contract No. AFP-I-00-03-00035 Task Order No. 801

August 16, 2004

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TABLE of CONTENTS

I. Executive Summary……………………………………………….. p. 1 II. Advocacy Mechanism………………………………………………p. 4 III. Steering Committee………………………………………………... p. 6 IV. Working Groups…………………………………………………… p. 8 V. Administrative Support …………………………………………...p. 12

VI. Advocacy Campaign Plan………………………………………….p. 13 VII. Concluding Observations…………………………………………..p. 16 Appendices

A. Members of PISG, UNMIK, NGO/Donor and Business Community B. Challenges or Barriers Cited

C. What is Positive? Underexploited Aspects in Kosovo

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I. EXECUTIVE SUMMARY

The Kosovo business community needs to improve its business environment by minimizing the many challenges and barriers that presently hinder its success. The consultants met over sixty people from the Albanian and Serb business community, PISG, Pillar IV, and internationals donors. Based on these interviews, the consultants determined that in order to stimulate economic development and job creation in Kosovo, a mechanism to minimize business challenges for the Kosovo business community is essential. The mechanism is to help organize the business community to take ownership of the problems that it can solve on its own and to help it advocate before PISG and Pillar IV when necessary. Need for Solution is Acute The timing to create and launch a mechanism is fortuitous, because frustration in the business community is very high. While some challenges and barriers may require business to lobby to Pillar IV or PISG to implement, enforce, or remove laws, the business community itself can resolve many issues. In fact, one of the major problems in Kosovo is that the business community and relevant decision makers at UNMIK, PISG and the NGO/donor community need to engage in constructive dialogue significantly more often than at present. A major purpose of the mechanism is to create mutual understanding between relevant players. Mechanism Composition The mechanism needs to consist of a Steering Committee, Working Groups, and business associations and relevant entities that want to participate in making their voices heard. The Steering Committee should consist of the Prime Minister, President of the Parliament, the Head of the Municipal Associations, Pillar IV, and have inclusive representation of the business community. In order for the advocacy mechanism to be successful, the Prime Minister should chair the Steering Committee and relevant experts should be involved in the Steering Committee and Working Groups. Most people, to whom the consultants spoke, believe that if the mechanism is housed at the Prime Minister’s Office and if it has visible support from USAID, it will be successful. It is very important that the business community commit well-qualified professionals who will become the mechanism’s forceful engine. These professionals will be critical in helping Working Groups write resolutions for the Steering Committee, organizing and responding to businesses queries, working with the media and administering other important aspects such as calling meetings, writing minutes, etc. Advocacy Campaign Plan At the initial stages of the mechanism implementation, international support is essential to enable the business community to take ownership of this initiative. It is important that USAID and

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EAR facilitate a few meetings between key business chambers and associations and then between business and UNMIK, PISG, and NGO/donors. These meetings will be very useful for relevant players to become used to working with each other constructively and will help a media launch of the mechanism to be successful. After these meetings and with election results, the first Steering Committee should meet to discuss the priorities and the calendar for the next twelve months. A launch with the media should follow shortly. Other Options Issue Driven If in the initial meetings of the business community and the Steering Committee, the participants felt that there are too many working groups, one option could be that they choose 3-5 major issues that they can begin analyzing and solving. The most oft repeated pressing issues were: • Trade reciprocity • Customs are too high • Interest rates are too high and grace periods are short • People do not know how and where to start a business • Training co-ordinated However, due to the Consultants’ experience, the process of getting the various factions of the business community to meet and start working constructively has to take place, before they can decide whether the recommended mechanism or some variation thereof would be acceptable. Sequential Working Groups Another option worthy of consideration would be that if the business community is comfortable with the number of recommended working groups, but feels that beginning all at once, is too demanding, they could vote on the top two groups and add one new working group every quarter. This would give the business community time to learn to work together and with the mechanism. This would also provide the business community with a useful opportunity to constantly have press announcements to keep the public informed about its activities.

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Steering CommitteeSteering

Committee

TradeTrade Infra-structure

Infra-structure TrainingTraining Access to

FinanceAccess to Finance

One StopShop

One StopShop InvestmentInvestment IntegrationIntegration

trade to filterissues

trade to filterissues

poor or lack of infrastructure

poor or lack of infrastructure

lack oftraininglack oftraining

access to finance

access to finance

barriers to entrepreneur

ship

barriers to entrepreneur

ship

lack of investment promotion

lack of investment promotion

integration to region & Europe

integration to region & Europe

Business associations & entities affected byBusiness associations & entities affected by

Steering CommitteeSteering

Committee

TradeTrade Infra-structure

Infra-structure TrainingTraining Access to

FinanceAccess to Finance

One StopShop

One StopShop InvestmentInvestment IntegrationIntegration

trade to filterissues

trade to filterissues

poor or lack of infrastructure

poor or lack of infrastructure

lack oftraininglack oftraining

access to finance

access to finance

barriers to entrepreneur

ship

barriers to entrepreneur

ship

lack of investment promotion

lack of investment promotion

integration to region & Europe

integration to region & Europe

Business associations & entities affected byBusiness associations & entities affected by

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II. ADVOCACY MECHANISM

An advocacy mechanism is essential for the Kosovo business community in order to help it turns its significant frustration into positive energy and results. The mechanism should help to train the business community to unite itself in order to resolve problems within and by itself, and when necessary, to lobby UNMIK or PSIG constructively and with positive results. Important features of the mechanism are that it:

• Shows a united business community that o knows its challenges and is well informed o can communicate challenges to government and UNMIK and offer solutions, o is realistic and talking about one or two issues, not a huge litany of complaints

• Requires the business community to be committed to this initiative o the business community needs commitment from its members to dedicate

well-qualified personnel, resources and time to the initiative o the mechanism needs to have co-coordinators for administrative support

• Be well positioned

o Housed in the right place to have credibility and has Prime Minister as the Chair

• Be focused

o otherwise too broad o and could turn into just another “talk show” o could raise unrealistic expectations o confuse the issues

• Produce immediate results

o go after “low hanging fruit,” otherwise business community will quickly become disillusioned

o business community must learn to tackle issues that it can solve on its own and which do not require advocating before Pillar IV or PISG

• Have enforcement

o Announce initiatives and results every quarter publicly1 through • internal newsletter to business members • radio/ television/ newspapers to inform all of Kosovo community

• Albanian • Foreign media

1 Serves as a “name and shame’ if people do not co-operate and raises profile of mechanism and of business community

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• Have a facilitator/mediator in the Steering Committee and Working Groups

o Facilitator needs to have experience in the subject area o Each task force/subcommittee needs someone who can be a mediator o Mediator needs to keep group focused on key issues o Mediator needs to help group keep from descending into “finger pointing”

The advocacy mechanism will consist of a Steering Committee and Working Groups. Business associations and other relevant entities such as universities will be key in bringing issues to the attention of working groups.

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III. STEERING COMMITTEE

Composition The Steering Committee should be composed of senior level individuals in the business community, PISG, UNMIK, and NGO/donor community. The Steering Committee should have voting members and non-voting expert observers. The Prime Minister should chair the committee to enhance the mechanism’s credibility and influence. The proposed voting members, on whom major business organizations have agreed, are:

PISG (Prime Minister, Parliament President, and Head of Municipalities), UNMIK (Pillar IV), and from the Business Community AKB/KCC/American Chamber of Commerce and two other businesses

Other suggested businesses are an organization that represents women, Agriculture Association, or a senior professional in media. The proposed non-voting members of the committee are to be known as the Expert Observers:

RIINVEST, World Bank, Lawyer (Arbiter)EAR, USAID, individuals who understand Standards (one from UNMIK and one from PISG), and at least one person from the business community

Purpose The two main purposes of the Steering Committee are to:

• Link and co-ordinate the Business Community, PISG, UNMIK, & NGOs/Donors so that communication improves, and

• To vote on the initiatives brought forth by the working groups. The Steering Committee should meet quarterly or on a needs basis to vote on issues brought forth by Working Groups. The voting outcome will be based on a majority basis. If the issues chosen by the Steering Committee require the creation, removal or implementation of a law, the Steering Committee will be responsible to lobby those requirements before the relevant body, i.e. UNMIK or PISG, until resolved. In the event that the Steering Committee rules that a resolution by a Working Group is without merit, it must give the Working Group an opportunity to analyze the resolution again and to re-submit it, should the Working Group desire. If a conflict remains, the non-voting experts should assist in adjudicating the dispute.

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The Steering Committee should evaluate on a quarterly basis whether new working groups are needed and bi-annually it should evaluate whether existing groups are still necessary. The non-voting expert observers should provide their expert opinion when needed. They can also facilitate discussion if it starts to go of course. If too many issues come forth to the Steering Committees simultaneously, the expert observers should help prioritize the issues before the Steering Committee. The Committee should also hold quarterly press conferences to announce the mechanism’s initiatives, results, and remaining issues to be solved and should disseminate press releases at least quarterly and on a needs basis. RIINVEST RIINVEST’s strong reputation as a think tank with high quality professionals will be invaluable for the mechanism. Due to RIINVEST’s connection to USAID and to AKB, its neutrality has been and will be called to question if it is a voting member. So that RIINVEST’s reputation is not negatively affected and so that its usefulness does not decrease, the Consultants recommend that it be a non-voting member in the Steering Committee. The Consultants have heard from all potential business members of the Steering Committee that they believe RIINVEST would be very useful to the mechanism. Additionally, the Consultants believe that RIINVEST, especially Professor Mustafa, will be invaluable to the mechanism’s aim of reducing business challenges, if it is in the role of Secretariat. This would mean that RIINVEST would be the mechanism’s engine. RIINVEST would be responsible for making sure that the working groups and steering committee have clear agendas and are following them, organizing meetings, writing press releases, and undertaking other important administrative task. In order to be a successful Secretariat, RIINVEST will need resources. The Consultants believe that those members of the business community that are chosen to be in the Steering Committee should each commit at least one person to work on the mechanism. Administrative support is also needed to read and categorize suggestions and complaints from businesses before they go to the Working Groups.

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IV. WORKING GROUPS

Composition Working Groups must consist of key people from the business community, PISG, UNMIK, and NGOs/donors. Every effort should be made so that participants from these four areas are qualified professionals in the relevant field of the working group. Each working group will have a chair; the chair can be on a rotating basis. A major responsibility of the Chair will be to maintain groups focused on the issues selected and to keep discussions constructive. The NGO or donor in each working group can help facilitate meetings. Given that there will be foreigners in each working group, it is important that each working group have at least two professional interpreters that can interpret during working sessions. One media person should be in each working group, preferably a media person with expertise in the field of the working group. Business community leaders feel that the presence of media will make the mechanism transparent to the public. Responsibilities The working groups should meet each month and choose the issues that it will analyze and bring forth to the Steering Committee. After debating the issues given to them by business associations or other relevant entities, the Working Group should choose two issues that it will be further analyzing and presenting to the Steering Committee. One could be a longer-term issue that will be worked on every month until ready to be presented to the Steering Committee. It is important to pick an easily resolvable problem. An immediate result in each working group would help build confidence in and credibility about the advocacy mechanism. While some working groups may feel that all their problems are very long-term in nature, it is essential that each group produce at least two positive results every six months. The announcement of positive results would raise the profile of the business community. This is very important, since many members of the business community are frustrated not only with government entities but also with existing business associations and chambers. If a problem requires legislative action or lobbying to PISG or UNMIK, the Working Group will prepare a resolution for the Steering Committee with the analysis, recommendation, and specific steps needed to resolve the problem. Not all problems, however, may require any legislative or lobbying action. If the Working Group finds a solution to the presented problem, it should resolve it on its own. There is no need for resolved issues to be taken up to the Steering Committee. Also, once a problem is resolved, the Working Group should consult with its media member to see if it is worth it to send out a press release.

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Working Group Priorities The business committee should vote on initial working groups and the priorities within each group. Based on the interviews with members from business, PISG, UNMIK, and NGO/Donors, the consultants heard these principal challenges and barriers most often. The full list of individuals met is in Appendix A and interview results are in Appendices B and C. The main problem categories with summary issues are2: – Trade Issues

o Trade reciprocity, customs, delayed VAT

– Access to Finance o High interest rates, short or no grace period, untrained loan officers

– One Stop Shop for Businesses o Lack of information on how to create a business, conduct research, or gather contacts;

business registration problems (having to go to Pristine)-this is especially a problem for Serbs who do not feel safe coming to the Ministry of Trade

– Investment Promotion

o Lack of office to promote trade opportunities to foreigners or locals, no marketing on Kosovo

– Training Co-ordination

o Not enough qualified professionals train business people, people do not know where to get good training, no co-ordination amongst donors to provide training

– Infrastructure

o Lack of power, lack of transparency in local and international management of KEK o Bad roads and railroads o Expensive mobile

– Integration to the Region and Europe o License plates o Travel documents

Other problem areas mentioned were fiscal policy (high taxes or double taxation) and corruption.

2 These categories have been discussed several times with AKB, Kosovo Chamber of Commerce and American Chamber of Commerce.

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Business Associations and Relevant Parties Business Associations, individual businesses and relevant parties such as universities, and members of government entities should address business challenges or obstacles to the appropriate working groups. In case a Working Group does not exist for a particular issue or query, Administrative Support should catalog what type of issue is being addressed. Every quarter Administrative Support should report to the voting and non-voting members of the Steering Committee whether there is an increase or decrease in any type of issue/query brought forth. Trends may be indicative that new working groups need to be created or that existing ones are no longer needed. The business or other entity should describe problem and action desired succinctly. Those descriptions should be submitted electronically. A form for such a description could be the following:

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Kosovo Advocacy Mechanism

Form for presenting a business barrier/challenge to a Working Group Date: _______________________________________________ Submitted by Name of the Person: _______________________________ Representing Company: ____________________________

Company’s Location: ____________________________ Company’s Business: ____________________________ Company’s Size (number of employees): _____________

Representing Association: ___________________________ Submitted to Working Group: __________________________________________________ Briefly describe the business barrier or problem: ____________________________________ Why the change is necessary: ___________________________________________________ What result would you like to see with the change: __________________________________ ___________________________________________________________________________

It is essential Working Groups and Admin Support respond to every issue/query. The response should say that the issue/query has been received, that it is being considered, and that if it is not sent to a Working Group, that it should be re-submitted in 2 months time. While this process may require more effort from the Working Groups and Admin Support, responses will help people feel more inclined to be active at the grassroots level. Also, responses will help build credibility.

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V. ADMINISTRATIVE SUPPORT

It is important that the business community commit well-qualified personnel, resources, and time to this mechanism. Administrative support will be needed for such tasks as:

• organizing and responding to complaints/ queries from the public • helping working groups write resolutions to be sent to the Steering Committee • issuing invitations to meetings • calling people to remind them of meetings • writing minutes from the meetings • writing position papers • writing press releases before and after meetings • organizing press conferences when needed etc.

An office with at least three personnel will be needed to provide these administrative services. Initially, it would be very useful for international personnel to train local personnel to run this mechanism. KBS, for example, described an initiative in Poland in 1992-93 where the EU providing funding and training for personnel in the secretariat of that initiative.

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VI. ADVOCACY CAMPAIGN PLAN

Ownership The consultants will have presented their final draft of the Advocacy Mechanism to the business community, represented by Alliance of Kosovor Businesses, Kosovo Chamber of Commerce, and American Chamber of Commerce, by August 6, 2004. The business community needs to meet as soon as possible to start getting used to working together. Thereafter, key business leaders need to decide what other organizations should be included in leading this mechanism. Once all business leaders who will be in the Steering Committee are selected, they need to name the mechanism. So far, only the local marketing firm, City Group, has suggested some names in order of preference: Eureka, Horizont, and Keops. Who should be in the Steering Committee needs to be agreed upon. The number of participants, however, should be manageable because there is risk of trying to “satisfy too many”. A team of key business leaders with representatives from RIINVEST, EAR and USAID needs to make a round of visits with individuals, who were initially contacted by the consultants, and other important officials, who have not yet been contacted. These individuals include

• Prime Minister • President of Parliament • Head of UNMIK’s Pillar IV • Head of Municipal Association • Head of the local office of the World Bank

These visits should ensure their interest, commitment, and participation in the Steering Committee. In addition to these individuals the team needs to start making rounds of visits with different participants in working groups. These will include:

• Ministry of Trade and Industry • Ministry of Finance • Ministry of Transportation and Telecom • Ministry of Public Services • UNMIK’s experts on customs and trade • Trade Unions • Local banks and KEP • BPK • Bankers’ Association • KTA • REA • KEK and other utility companies

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Process The business community needs to gain the commitments of various participants in the Steering Committee and the working groups. It is essential that RIINVEST, EAR and USAID facilitate all of these meetings. Moreover, the business community needs to be analyzing and strategizing its priorities. This should be done through the business associations as they know best the relevant issues and can advocate them on behalf of the businesses. The preparation for the first Steering Committee meeting should be carefully planned. It is probably a good idea not to have media involved in the first meeting so that the Steering Committee Participants have an opportunity to determine their working dynamic. The agenda for the meeting should be, amongst other things, introduction of participants, understanding of their roles, frequency of the meetings, professional interpreters, taking minutes, voting procedures, and implementation of recommended changes and decisions. The agenda should also include approving the working groups and their focus.

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Timetable The following is a detailed schedule for the Advocacy Campaign Plan showing the dates and activities that should happen within that time.

Dates Activities

Aug 9-13 AmCham and AKB have initial meeting to get to know each other’s activities; AmCham and KCC have initial meeting to get to know each other’s activities

Aug 16-20 RIINVEST calls meeting with AKB, Kosovo Chamber, and AmCham, to discuss mechanism and to discuss what other business organizations should represent business community; USAID and EAR should be present

Aug 23-27 RIINVEST/USAID meets other potential members of the business community to present the mechanism to them; new business members should be chosen

Aug 30-Sept 3 Business leaders who will be in Steering Committee meet to name the initiative

Sep 6-10 Leaders of business associations/chambers appointed to represent the business community will meet with key municipal leaders, including Head of Municipalities to explain initiative

Sep 13-17 A team of key business leaders with RIINVEST, EAR and USAID canvas the Initiative to appropriate parties of PISG and Pillar IV to ensure their participation in the Steering Committee

Sept 20-24 Business community with RIINVEST, EAR and USAID finalizes the Steering Committee voting and non-voting members (only PM and Head of Parliament have to be waited on until after election)

Sept 27-Oct 1 Business community with RIINVEST, EAR and USAID meet to discuss working groups. This task may require several meetings

Oct 4-8 A team of key business leaders with RIINVEST, EAR and USAID canvas the Initiative to appropriate parties of PISG, international community and businesses to ensure their participation in the Working Groups

Oct 11-15 Canvassing for Working Groups continues

Oct 18-22 Business representatives work on prioritizing business issues through business associations and commit administrative support and resources

Oct 23 Elections

Oct 25-29 Business representatives meet with UNMIK and relevant NGOs/international donors

Post-Elections, November

Business community with RIINVEST, EAR and USAID canvas the Initiative to newly-elected Prime Minister and Head of Parliament

Post-Elections, November

First Steering Committee meeting takes place, approving the roles of participants, procedures, voting, and establishment of working groups

Post-Elections, November

First Working Group meeting takes place, approving its agenda and priority issues.

Post-Elections, November Media launch

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VI CONCLUDING OBSERVATIONS

In discussions with various parties, both international and local, it became clear that the Kosovo Business Initiative as designed and presented is quite a new concept for the business community. Kosovo business community is fragmented and not ready to work together. However, with the initial lead, guidance, and mediation of a significant international party, the business community is ready to work together on the same issues that hinder their business. There are many challenges and barriers to conducting business in Kosovo, many related to Kosovo status, but many can be solved by businesses themselves. The Kosovo Business Initiative will definitely help businesses to approach business problems in an innovative way. Initial meetings showed that the new Initiative has been well received and that it can serve as a good foundation for business cooperation. The resources that are needed to carry this new Initiative must include well-qualified personnel that will become the engine of this undertaking. The business community must be inclusive and speak with a united voice.

A P P E N D I C E S

A. Members of PISG, UNMIK, NGO/Donor and Business Community

B. Challenges or Barriers Cited C. What is Positive? Underexploited Aspects in Kosovo:

A-1

A. Members of PISG, UNMIK, NGO/Donor and Business Community3

Government/Regulatory UNMIK NGOs/ Donors Business

Office of Prime Minister GovernLiason World Bank Chambers Stability Pact Representative Head of Legal & Political USAID Kosovo Chamber of Commerce Economic Advisor KBS Am Chamber of Commerce Ministry of Trade KTA Business Assoc Private Sector Development Privatization EAR AKB REA Women's Business Assoc Municipalities Kosovo Women's Bus Network Head Munic Association UNDP RIINVEST Exporters Association, AKB Agricultural Association, AKB

Kosovo Employers Assoc & Women’s Assoc Serb run

Financial Institutions Banks Pro Credit Raifeissen Micro KEP Private Companies Sector Nerakond Food iPKO NET Tech Bonita Beverages Koni Poultry Jaha Construction Thai Restaurant R21 Media City Group Marketing Serb owned DTS Kondi Food Minel-Enim Power Equip Piramida Engineering SOEs Vreshtaria e Venës Wine POEs KEK Power

3 These are the players with whom we met. With some, we met several times.

B-1

B. Challenges or Barriers Cited4

ISSUES Who says prob? Who says no? Trade Trade agreements BusCom Trademark protection BusCom High Customs UNMIK,iPKO, Wine Agents not trained BusCom VAT BusCom Not reimbursed/delay Red tape Access to Finance Loan officers are too risk averse Banks, BusCom Loan officers lack training Banks, BusCom Rates are too high BusCom Short or no grace period BusCom, Donors Power shortages Everyone KTA KEK Generators&Imported fuel BusCom Non-payment KEK Socio economic groups Serb enclaves Training not enough Gov/BusCom/UNMIK not demand driven MinTrad no defined standards: MinTrad wrong people are training no strategy BusCom/MinTrad no donor co-ordination BusCom/MinTradDonors UNMIK Not prepared, came as SWAT Corrupt BusCom Employees abuse privileges BusCom Capacity Building

4 By people we interviewed listed on Appendix A

B-2

Government

No coherent Kosovo strategy UNMIK/BusCom/Donors

Between ministries UNMIK/BusCom/Donors

Lacking Competitive Analysis

Capacity UNMIK/BusCom/Donors

Low salaries UNMIK/BusCom/Donors

Red tape BusCom Corrupt BusCom KTA Slow Not answering municipalities or answering late Hindering industrial park development Municipalities Implementing laws without debate Capacity issues Intl, PSIG Laws Implementation Intl/Don Enforcement KEK/Intl Taxes double UNMIK,IPKO, NBI(wine)no enforcement to collect Intl Business Registrations UNMIK Not enough registration inspectors World Bank Intl

Municipalities want registration locally Head of Municipalities World Bank

Corruption All levels BusCom Wine Lack of Co-ordination Between Gov, UNMIK Everyone donors, and business

C-1

C. What is Positive? Underexploited Aspects in Kosovo

Security Low crime Women/children are safe International Focus on Kosovo Political level Untapped foreign residents' money Size Small Easy to see several things in Kosovo in a day Close to other interesting countries in the area People Entrepreneurial Optimistic Friendly(esp. to Americans) Provide good service at shops & restaurants Increasingly multilingual Do not want extremism Natural Resources Good water Lignite Wood Great Produce Restaurants Great coffee Good food Variety of restaurants is beginning Weather Sunny Snow for skiing Tourism Potential Lakes, parks, hiking, agric Wine/beer Culture(churches, mosques, museums) Picturesque Shops Clothes Crafts Shoes Book shop Jewelry shops

C-2

Transport Lots of cabs Buses Communications Phones work Lots of internet cafes