Recent Progress in PRSP Implementation (Albania, Bosnia and Herzegovina, Kosovo, FYR Macedonia, Montenegro and Serbia)

Albania:

Albania has population of 3.2 million. Most of the younger population migrated abroad, resulting in a population pyramid gap for population age 20 – 40. Recently, the women unemployment increased, while sectors traditionally employing male labor force have not been affected. However, there are serious debates about the real level of unemployment. Nevertheless, gender equity represents major challenge.

Principles of the PRSP include: harmonization of poverty reduction agenda along a unique vision and focusing at vulnerable groups, and prioritization of actions and their costing to ensure adequate financing and Albania’s ownership. Priority areas for future actions include health, education and social services, closely followed by infrastructure.

Institutions to implement the strategy have been established. Strategy implementation requires macroeconomic stability and social support, to be monitored through qualitative development indicators such as poverty, growth and living standard. Indicators show improvement, Albania’s ultimate goal is to bring them in line with European standards.

The key challenge ahead of Albania is streamlining existing strategies (EU, regional, national), and identify indicators to monitor their implementation. The “Integrated planning system” has recently been established, serving as a key instrument to harmonize and coordinate all sector policies, while maintaining focus on poverty reduction and economic growth.

Bosnia and Herzegovina:

BH has recorded 5% real GDP growth, more than projected. Inflation is the lowest in the region, less than 1% over the last two years, with a currency board arrangement in place, the local currency being pegged to Euro. Fiscal deficit has been significantly reduced; public sector wage-bill has also been reduced, partly due to cuts in overall defense expenditures. Current Account Deficit remains major macroeconomic threat. However, it is expected to decline, partly due to reduction in international aid inflows, as well as due to projected increases in export supported by expected increase in FDI.

BH’s Medium-Term Development Strategy has been approved by the BH Government and Parliament in March 2004, following comprehensive consultation process with key stakeholders (Governments, NGO’s general public, academia, media etc.). Main objective of the strategy is to achieve sustainable and balanced economic development and speed up European integration. Targets include decreasing unemployment by 30% and decreasing poverty by 20% by 2007. Implementation of the strategy is closely monitored by Economic Policy and Planning Unit’s PRSP monitoring and implementation department, using the PRSP Action Plan as the main monitoring tool.

Implementation of the strategy already resulted in increased living standards. Although the employment rate is growing, unemployment rate is recording the same trend, indicating that formerly inactive population is moving into the labor market. Wages are increasing in continuity; the wage gap is narrowing between the BH’s Entities. Disparities between Entities in pension levels are also narrowing. Overall, poverty declined from 19.5 to 17.8 in 2004, and 69000 people went out of poverty.

Main challenge facing BH in the near future is certainly the VAT introduction that will lead to price increases. PRSP team is tasked to ensure that budget planning takes these developments into account and prevent people from falling into poverty. Young people will be able to influence the MTDS implementation during the strategy update process this year, and they can already do so through commenting on the progress reports.

UNMIK/Kosovo:

The last 5 years Kosovo has been completing reconstruction of the country and started transition process that is still ongoing. Kosovo population of about 2 million grows at high rates and is younger than average. About 25% of Kosovo’s population migrated to Western Europe, resulting in current inflow of some 500 million Eur remittances.

The vision of long-term economic development has to be based on the economic growth. Strategic priorities will be outlined in the strategy document (PRSP). Its preparation includes Government as well as local experts and international organizations.

Kosovo Government is also preparing Medium-Term expenditure framework, based on identified sectoral priorities. Objectives outlined in both papers include increasing GDP from 3% a year to 6% a year. Employment should grow 5%. FDI is important factor, as well as external credits. Privatization, as tool of growth and modernization, will be included as a priority. Poverty reduction is also identified as a strategic objective, and not narrowed to income poverty only. To achieve these objectives, increase in industrial production is required, as well as increased level of activity in agriculture and services sectors.

FYR Macedonia:

In FYR Macedonia, poverty increased from 23.3% to 30.2% since 1999. Main issues identified regarding the PRSP include lack of measures, unclear assignment of responsibilities and no financial resources for implementation. Labor market reforms are perceived to be key instrument for poverty reduction in the future.

Government’s policy priorities are focused around fighting unemployment. Consequently, national action plan for employment has been developed in 2004. Ministry of Labor and Social Policy is a primary implementing agency for the NAPE, which is prepared in line with Lisbon 2004 employment guidelines.

The same inter-ministerial technical working group that prepared NAPE will monitor its implementation, while inter-ministerial coordination group will provide political guidelines and supervise implementation of the NAPE. Implementation would be policy-oriented. The implementation plan includes both short and medium term measures, as well as clear institutional arrangements.

Montenegro:

Unemployment is a major issue in Montenegro with a rate of 22.3 %. Out of the total unemployed 39.9% are women. Montenegro is also faced with regional unemployment discrepancies and hidden unemployment (as about 900 people lost their jobs due to bankruptcy).

PRSP has been adopted in 2003 and covers the period 2004 – 2006. The document links development and poverty reduction. Further to this document, few more strategic documents have been developed, including the Agenda of Economic reforms and EU accession. Current activities include implementation of a number of projects in different areas: labor market and employment, social protection, environment, infrastructure etc.

As a result of PRSP-identified measures, unemployment decreased to 22.3 from 24%. A program has been developed to legalize existing jobs in informal sector and to create new jobs. To that end, the Government passed a Tax reduction decree and decree on labor engagement of foreign residents.

Priority activities are focused on finalizing prioritization through participatory processes. Such processes have already been pursued during drafting stage. Activities on the strategy implementation front include costing, as well as establishment of better linkages of envisaged activities with the budget. Monitoring and evaluation of projects and definition of monitoring indicators will follow as well.

Serbia:

In Serbia, 10.5% of population lives below poverty line; there has been no change in poverty in 2002-2003, the period before the strategy implementation. However, although the poverty levels are similar to those of Romania, the structure of the poor changed significantly. GDP growth in 2004 was 8%, fiscal deficit of 1.5% of GDP. VAT has been introduced in January 2005, and corporate income tax has been reduced to 10%, the lowest in the region. All these measures aimed at attracting FDI and reduction of foreign debt. GDP per capita has risen from 1000 $ in 2000 to 2900 $ in 2004.

PRS has been adopted in October 2003, after a wide participatory process; however, elections were held in December, new Government was put in place in March the following year – all this caused significant implementation delays. New institutional arrangements have subsequently been put in place with an establishment of a unit centrally located in the deputy Prime Minister’s office. The unit has two main set of activities – poverty analysis and making recommendations. The main objectives outlined in the strategy are prevention of new poverty (as result of job loss through restructuring process) and maintaining/improving social safety net for the traditionally poor and vulnerable groups in Serbia. The unit will reconstitute working groups created in the strategy preparation process and work with them during the implementation.

The future plan is to link EU priorities with PRSP implementation at all levels – conceptual and technical, in order to make PRSP focused towards European integration and accession. Then it will be worked out to the level of projects and programs. Main challenge will be to establish mechanisms for evaluation and monitoring, and to promote national ownership, while linking PRSP and EU integration priorities. This will require improvements to government planning and prioritization processes, as well as closer linkages of the programs to budget and available development funds.