1. The European Bank is actively developing projects in Kosovo that promote private sector investment and trade and commercially sustainable local businesses. Firstly, economic recovery and integration of Kosovo into a secure and stable regional environment will require investment by private sector strategic investors from outside the territory. Secondly, programmes to support commercially viable local businesses at the micro and SME level are essential to support local economic activity and growth. EBRD’s projects are designed to meet these two objectives.

2. Kosovo is likely to be the beneficiary of considerable grant-financed humanitarian and budgetary support. However, an economy cannot survive indefinitely on aid. Indeed, one lesson from the experience in Bosnia-Herzegovina may be that economic activity can actually be discouraged due to "aid dependency". It is therefore important that economic activity in Kosovo be initiated right from the beginning of the recovery process on a commercially sustainable basis. The EBRD would like to sincerely congratulate UNMiK on all the progress that has been made over the past four months. In particular, the Banking Law is a very important step for the private-sector driven development of that sector.

3. Active projects under development by EBRD include:

• Establishment of a joint venture micro-finance bank for Kosovo with investment and expertise contributed by EBRD’s partners in Bosnia-Herzegovina and Albania.

• Extension and additional funding for investment in Kosovo through an existing equity fund already operating in Albania.

• Direct investment into Kosovo by a foreign strategic investor interested in acquiring productive assets in the steel sector.

Because Kosovo is not currently a member of the Bank, EBRD needs grant funds from donors to support its operations. The total amount of resources potentially mobilised for investment in Kosovo by EBRD, donors and sponsors under these projects may reach up to EUR 70 million. Significantly, it is hoped that the micro-finance bank can be operational by year-end providing the first source of investment capital to local businesses. EBRD is actively represented in the field. The Bank is opening a small office in Pristina and the Bank’s sixth mission will go to Kosovo next week.

4. In addition, the Bank has provided technical inputs for the assessment of the telecommunications sector and possible solutions to the complex issue of ownership and connection rights. Finally, the EBRD is sponsoring local enterprise surveys in Kosovo order to understand the conditions faced by local SMEs as well as larger socially owned enterprises.

5. EBRD hopes through its operations to address the many hurdles to investment faced by strategic investors and local entrepreneurs alike and by solving them to encourage others to invest. The most important of these is the issue of property rights and, more generally, political risk. It is not yet clear whether UNMIK will be able to establish clear ownership rights, and more importantly, enforce those rights in the future. Urgent concerted action is required to establish "who owns what" so that the sale of property is legally binding and enforceable. Without clarity on this point, investment will not be forthcoming and economic recovery will be severely hampered. EBRD supports the re-orientation of UNMIK’s priorities towards solving this issue.

6. Given the above, it might be useful to consider the establishment of a donor-financed Political Risk Guarantee Fund for Kosovo. The Fund structure would be based on existing models established, for example, in Bosnia Herzegovina. Its objective would be to promote commercially sound foreign direct investment into Kosovo.

7. EBRD is committed to work with all its partners in the international community, including UNMIK, the World Bank, European Commission, EIB and bilateral donors.