Kosovo has undergone major changes over the past 20 months. This is to the credit of the entrepreneurial spirit and hard work of the Kosovars as well as to the generous assistance of the international community. The work of UNMIK has been impressive in many areas, and the emergency is over now. Key achievements have been in the field of housing reconstruction, in rehabilitating basic infrastructure including roads, the airport, in stabilizing energy production, improving water distribution and waste collection, and in repairing and equipping schools, hospitals and clinics. All public basic services have been restarted, small businesses flourish, and the quality of life for the majority of Kosovars has visibly improved.

Yet, much remains to be done. Many people's lives continue to be extremely difficult and the foundations for sustainable growth of the economy have not yet been laid. More than one-third of homes destroyed or damaged during the conflict have not yet been rebuilt, leaving many vulnerable families unhorsed. Energy and water supplies are more reliable, but still inadequate and prone to random failures. Many roads remain sub-standard. Health and education provision are basic. Unemployment is extremely high, and the private sector continues to operate without the benefit of a modern regulatory framework or access to essential credit. Minorities face all these hardships and more

The 2001 Budget and the Public Reconstruction and Investment Program for 2001-2003 prepared by UNMIK are comprehensive and address major issues in all relevant economic and social sectors. These documents also illustrate the immense tasks that Kosovo still faces. As discussed yesterday, a vibrant private sector, institutional capacity building and human development are the three key factors for the future of Kosovo. Progress in these areas will have to be made along with increased local participation. And it will need to be complemented by a sound fiscal policy, knowing that donors cannot continue to support Kosovo indefinitely. There are at least five key sectors that require particular donors' attention over the next few years. Those are

Private sector development; Housing; Public Utilities; l lie Social Sector; Agriculture

First, private sector development UNMIK's highest priority must be to stimulate growth in private sector activities. UNMIK can and must make a contribution in creating an environment that enables the market place to operate effectively and to grow.

Tile economic and business background inherited by UNMIK has not been conducive to the efficient operation of business. As recognised in the PRIP, UNMIK is acutely aware of the need to establish a transparent and enforceable regulatory framework. And in recent months much effort has focused on the creation of a regulatory framework that is supportive of the private sector; four key commercial regulations have been enacted. An urgent priority now is to put in place the next set of enabling environment laws, including a law on bankruptcy and a competition law. However, drafting laws is not enough. Capacity building efforts need to continue to ensure tile implementation of the legal framework as well as the rule of law more generally. There is a particular need to provide advisory and training services al the local level to support business creation

The revival of the private sector will also require further work on property laws. Unlocking the potential for strategic investment in selected state enterprises will require a clarification and settlement of property ownership questions.

Second, housing of 120,000 war-damaged houses, more than 60,000 have been rebuilt. A significant proportion of these have been reconstructed by the Kosovars themselves. As laid out in the PRIP, UNMIK's objective is not to rebuild every house, but to ensure that a further 35,000 vulnerable families are rehoused.

Third, the public utilities The rehabilitation of the public utilities has been a key priority for UNMIK. Nevertheless, the energy, water and waste disposal sectors continue to suffer from years of neglect in management, maintenance and investment. Furthermore, the institutional structure is inadequate to support the operation, management and financing of the services.

As UNMIK's proposals rightly emphasize, there is a need to reduce the subsidy to the electricity sector through a controlled program of reducing staff and increasing cost recovery by improved metering and billing procedures. In order to meet this objective, sustained implementation of appropriate measures will be required and adequate resources will have to be mobilized, including funding for meters. However, this is easier said than done. The specific measures needed to achieve a reduction in subsidies to the energy sector have to be carefully planned, adequately funded, and rapidly implemented. Slower than anticipated progress in increasing cost recovery is likely to fuel higher demand, thereby contributing to a further erosion of the efforts to reduce the subsidy to the sector.

Fourth, the social sector Developing and implementing an institutional framework for the delivery of social services is critical for Kosovo, where there continues to be a great need to streamline the informal education and health services which developed in the nineties.

With its famously young population, the education sector is crucial for the socio-economic development of Kosovo. l he key objectives outlined in the PRIP will help to support the integration of all Kosovar children into compulsory education, and to improve the quality thereof Nevertheless, there continues to be surplus personnel in the education system, and sustainability of recurrent and investment funding will come under pressure if this is issue not addressed. A centerpiece of the Department of Education policy is die new per student formula funding model which is currently being developed, and which will provide a strong efficiency incentive for municipalities.

One of the most notable achievements of the Department of Health and Social Welfare over the past year has been the lead it has taken in integrating UNMIK staff with Kosovars. An emphasis has been placed on setting up institutional structures that are transparent and sustainable. The attention paid to institutional issues has been paralleled with an emphasis on training. The 2001-03 program flows logically from the achievements above. It continues with training programs, with a stronger emphasis placed on management. There will also be a need for further training activities as a new health care financing system is introduced, especially since part of the system will be decentralized.

Fifth, agriculture. This accounts for one-third of GDP in Kosovo. The medium-term program of the Department of Agriculture recognizes the potential of the sector in promoting growth and employment. It will be important to build a modern legal framework that can ensure adequate access to markets, credit and production inputs for everyone. A discussion of land markets will be critical.