Saturday, October 9, 1999Building Institutions for Kosovo, U.N. Focuses on a Banking System
Yugoslavia: Days of underground finance draw to an end as administrators plan a new legal and economic structure for the war-torn province.
By DAVID HOLLEY, Times Staff Writer
PRISTINA, Yugoslavia--Through much of the 1990s, travel agencies in Kosovo ran a lucrative but risky underground banking system, transferring money from ethnic Albanian workers abroad back to their relatives here in Kosovo.
The back-channel system was a product of distrust of Serb-controlled Yugoslav banks, tight controls on the export of foreign currency and big risks involved in carrying large sums of money into Kosovo--with the omnipresent threat that police or customs officials would confiscate the cash.
"It was a very dangerous job, and we had to be very careful," said Blerim Ceku, Kosovo director of the Kosova Reisen travel agency. Officials confiscated a total of 462,000 German marks (about $250,000) from couriers for his firm in two incidents last fall, Ceku said. The police charged--despite evidence to the contrary--that the money was going to the guerrilla Kosovo Liberation Army, he said.
Ten years after Serbian authorities revoked Kosovo's autonomy and put Serbs in control of the province's institutions, the days of underground banking are ending. An 11-week NATO bombardment forced Serbian troops from the separatist province, and the U.N. mission here plans a new legal and economic structure for Kosovo.
The U.N. mission aims to quickly clarify property rights, set up banking rules and get public finances in order, all key building blocks for a market economy.
"There's a lot of economic activity, but it's totally lawless economic activity, and as such it's probably unsustainable," said Joly Dixon, the U.N. official in charge of reconstruction efforts. "I would like it to be possible to have legal banks here by November."
As part of the institution-building effort, a committee of local experts is helping draw up banking laws for U.N. mission chief Bernard Kouchner to sign. That body includes people associated with a KLA-dominated "provisional government" and others linked to an older, unofficial "government" led by moderate ethnic Albanian leader Ibrahim Rugova.
"There are at least two people around the table who call themselves 'finance minister' . . . [and] one person who calls himself the central bank governor," Dixon said.
While the U.N. mission does not recognize the legality of either government, or view them as holding any power, it has worked to incorporate figures from both into the decision-making process as a new U.N.-run administration is established.
One of the first banks to open probably will be the Dardania Bank, which was set up in 1994 in Tirana, the Albanian capital, by ethnic Albanians from Kosovo, said Jahir Krasniqi, director of finance and customer services. He said they used funds provided by donors close to the government associated with Rugova, which is headed by "Prime Minister" Bujar Bukoshi.
Dardania Bank has already set up a shiny new branch, with three teller windows in deep crimson and gold decor. "God willing," it will start serving customers in November, Krasniqi said.
Old patterns, such as the travel agency-dominated system, are already breaking because the U.N. mission is not enforcing currency controls for people entering or leaving Kosovo, and because many people who have been working abroad have come back this summer, at least for visits, and have simply brought large sums of cash back with them.
Once banks get started, the main ones are likely to be newly established institutions backed by international donor organizations, Dixon said.
Dixon said the planned banking laws will set up a supervisory body under "a degree" of U.N. control, which would perform some of the functions of a central bank.
Early last month, Kouchner signed a regulation making foreign currencies legal tender. The German mark is the dominant currency in the province.
"We'll collect our customs duty in deutsche marks, we'll pay the teachers in deutsche marks, we'll pay pensions in deutsche marks," Dixon said.
Some ethnic Albanians here want the National Bank of Kosovo--which they now call the "National Bank of Kosova," using the spelling for the province preferred by most supporters of independence--to become a new central bank.
The old National Bank of Kosovo was part of Yugoslavia's central bank system. The building that housed it was severely damaged this spring when NATO bombed the adjacent main post office and telecommunications facility of Pristina, the provincial capital.
Ethnic Albanian workers at the National Bank of Kosovo were dismissed in 1991. After NATO troops entered Kosovo in mid-June, those former ethnic Albanian bank workers met and elected Ajri Begu, a top official of the bank during the 1980s, as its new governor.
That appointment was later confirmed by the KLA-dominated provisional government. It has no legal weight with the U.N. mission, but by virtue of his expertise and his backing, Begu is one of the key players in planning the new system.
Most of the bank's 135 returned employees simply hang out every day in remaining rooms of the bombed-out bank building, awaiting brief work assignments, while alternative office space has been found for about 25 employees, Begu said.
The decision to temporarily make the German mark the main currency of Kosovo, rather than the Yugoslav dinar, was an important step in freeing the province from Yugoslavia's political and economic control, Begu said.
"Yugoslav soldiers left Kosovo," Begu said. "The dinar must also leave."
While the dinar is still legal tender, its practical role in Kosovo has already been reduced to a convenient form of small change for payments calculated in marks, because there are not enough German coins and small bills in circulation.
Once a banking system trusted by the international community is up and running here, there will be no problem in getting the people of Kosovo to use it, predicted Ceku, the travel agency director.
"All our money is already in Swiss banks," he said. "We lost trust in the banking and government system of Yugoslavia, but we have trust in the banking system of foreign countries. It's the only way of doing things."Copyright 1999 Los Angeles Times
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