[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]





                      DEVELOPMENTS IN THE BALKANS

=======================================================================

                                HEARINGS

                               BEFORE THE

                              COMMITTEE ON
                        INTERNATIONAL RELATIONS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                       APRIL 11 AND JULY 19, 2000

                               __________

                           Serial No. 106-169

                               __________

    Printed for the use of the Committee on International Relations


        Available via the World Wide Web: http://www.house.gov/
                  international--relations


                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
68-286                     WASHINGTON : 2000

                                 ______


                  COMMITTEE ON INTERNATIONAL RELATIONS

                 BENJAMIN A. GILMAN, New York, Chairman
WILLIAM F. GOODLING, Pennsylvania    SAM GEJDENSON, Connecticut
JAMES A. LEACH, Iowa                 TOM LANTOS, California
HENRY J. HYDE, Illinois              HOWARD L. BERMAN, California
DOUG BEREUTER, Nebraska              GARY L. ACKERMAN, New York
CHRISTOPHER H. SMITH, New Jersey     ENI F.H. FALEOMAVAEGA, American 
DAN BURTON, Indiana                      Samoa
ELTON GALLEGLY, California           MATTHEW G. MARTINEZ, California
ILEANA ROS-LEHTINEN, Florida         DONALD M. PAYNE, New Jersey
CASS BALLENGER, North Carolina       ROBERT MENENDEZ, New Jersey
DANA ROHRABACHER, California         SHERROD BROWN, Ohio
DONALD A. MANZULLO, Illinois         CYNTHIA A. McKINNEY, Georgia
EDWARD R. ROYCE, California          ALCEE L. HASTINGS, Florida
PETER T. KING, New York              PAT DANNER, Missouri
STEVE CHABOT, Ohio                   EARL F. HILLIARD, Alabama
MARSHALL ``MARK'' SANFORD, South     BRAD SHERMAN, California
    Carolina                         ROBERT WEXLER, Florida
MATT SALMON, Arizona                 STEVEN R. ROTHMAN, New Jersey
AMO HOUGHTON, New York               JIM DAVIS, Florida
TOM CAMPBELL, California             EARL POMEROY, North Dakota
JOHN M. McHUGH, New York             WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas                   GREGORY W. MEEKS, New York
RICHARD BURR, North Carolina         BARBARA LEE, California
PAUL E. GILLMOR, Ohio                JOSEPH CROWLEY, New York
GEORGE RADANOVICH, California        JOSEPH M. HOEFFEL, Pennsylvania
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
                    Richard J. Garon, Chief of Staff
          Kathleen Bertelsen Moazed, Democratic Chief of Staff
          John Herzberg, Professional Staff Member and Counsel
                     Jill N. Quinn, Staff Associate
                  Nicolle A. Sestric, Staff Associate


                            C O N T E N T S

                              ----------                              

                               WITNESSES

                                                                   Page

                        TUESDAY, APRIL 11, 2000

Kosovo:

The Honorable James W. Pardew, Principal Deputy Special Advisor 
  to the President and Secretary of State for Kosovo and Dayton 
  Implementation, U.S. Department of State.......................     3
James W. Swigert, Deputy Assistant Secretary for European Affairs 
  and Deputy Special Advisor to the President and Secretary of 
  State for Dayton and Kosovo Implementation, U.S. Department of 
  State..........................................................     6
The Honorable Joseph J. DioGuardi, Volunteer President, The 
  Albanian American Civic League.................................    25
Linda Dana, Institutional Contractor in Kosovo, International 
  Organization for Migration.....................................    29
Bajram Rexhepi, M.D. Chairman of the Commune Mitrovice...........    31
Muhamet Mustafa, President, Reinvest Institute for Development 
  Research.......................................................    33
Ilir Zherka, Executive Director, National Albanian American 
  Council........................................................    35

                        WEDNESDAY, JULY 19, 2000

Crime and Corruption in Bosnia:

Harold J. Johnson, Associate Director, International Relations 
  and Trade Issues, National Security and International Affairs 
  Division, U.S. General Accounting Office accompanied by James 
  Shafer, Assistant Director, International Relations and Trade 
  Issues, National Security and International Affairs Division, 
  U.S. General Accounting Office.................................    45
David Bruno, Evaluator in Charge, U.S. General Accounting Office.    51
The Honorable James W. Pardew, Principal Deputy Special Advisor 
  to the President and Secretary of State for Democracy in the 
  Balkans, U.S. Department of State..............................    58

                                APPENDIX
                        TUESDAY, APRIL 11, 2000

Prepared statements:

The Honorable Benjamin A. Gilman, a Representative in Congress 
  from New York and Chairman, Committee on International 
  Relations......................................................    68
Ambassador James W. Pardew.......................................    71
James W. Swigert.................................................    74
The Honorable Joseph J. DioGuardi................................    77
Linda Dana.......................................................    92
Dr. Barjam Rexhepi...............................................    95
Muhamet Mustafa..................................................   100
Ilir Zherka......................................................   105

                        WEDNESDAY, JULY 19, 2000

Prepared statements:

The Honorable Benjamin A. Gilman, a Representative in Congress 
  from New York and Chairman, Committee on International 
  Relations......................................................   107
Harold J. Johnson................................................   110
Ambassador James W. Pardew.......................................   130

Additional material for the record:

Statement of Esad Stavileci, Ph.D., Professor of Law, University 
  of Prishtina, Kosovo, and University of Tetova, Macedonia......   139
Chart from Dr. Rexhepi on the structural nature of the population 
  before the war.................................................   143
Letter from Paul R. Williams, Washington College of Law, American 
  University, commenting on the U.S. General Accounting Office 
  report entitled ``Bosnia Peace Operation: Crime and Corruption 
  Impedes the Success of the Dayton Peace Agreement''............   146
Report on USAID Anti-Corruption Efforts in Bosnia-Herzegovina....   151

 
                  DEVELOPMENTS IN THE BALKANS: KOSOVO

                              ----------                              


                        TUESDAY, APRIL 11, 2000

                          House of Representatives,
                      Committee on International Relations,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 3:05 p.m. in room 
2172, Rayburn House Office Building, Hon. Benjamin A. Gilman 
(Chairman of the Committee) presiding.
    Chairman Gilman. The Committee will come to order. We will 
be joined by our Members shortly, as many of them can get away 
from their other committees.
    Today's hearing is the first opportunity this year for 
Members of our International Relations Committee to review the 
differences and the effectiveness of our policy in Kosovo with 
Administration officials. In view of last year's NATO strikes 
against Serbia, the current commitment of some 7,000 United 
States troops and the expenditure of approximately $2 billion 
of U.S. taxpayers' funds since last June to aid Kosovo, I can 
think of few areas of greater importance to our Nation's 
foreign policy.
    Nevertheless, reports indicate that things are not 
progressing smoothly in Kosovo. The perception is we have won 
the war but we are losing the peace. Recent visits by Members 
of the House and our staff have revealed that achieving 
enduring peace and stability will be much more difficult and 
costly than we did in winning the air war over Serbia. Although 
we can and should be rightfully proud of that achievement and 
other significant contributions of our own men and women of our 
Armed Forces, we need also to be realistic with regard to the 
nature of the commitment that our own Nation has now entered 
into in yet another part of the Balkans.
    Continuing ethnic violence plagues Kosovo. Reprisal attacks 
against the Serbs and other minorities have received much 
attention in the press, as has the situation in the divided 
town of Mitrovice where thousands of Albanian residents have 
not been able to return to their homes in the Serb-controlled 
part of that town. Difficulties in reestablishing public 
services such as water, sanitation, electricity and medical 
care have undermined the morale of the long-suffering Kosovar 
people. These difficulties are attributable to the failure of 
international donors in Europe to fulfill their pledges in a 
timely fashion.
    The economy of Kosovo is also stagnant, prolonging 
unemployment among the large numbers of young people who, with 
no real hope for a better future, could turn to crime and 
violence.
    The recent outbreak of violence and instability in Serbia, 
the heavily Albanian populated region just over the Kosovo 
boundary and near our own forces, has also given rise to 
concern for the safety of our own troops. Will the conflict 
between Albanians and Serbs resume? Could our troops be brought 
into an armed confrontation with Serb forces in the next few 
weeks? These are serious questions that I hope we can try to 
answer this afternoon.
    We will hear from several witnesses, including some from 
Kosovo who I hope will enlighten us about the challenges to 
bringing about a lasting peace in Kosovo.
    Before turning to our first panel of witnesses, I would 
like to emphasize that although our hearing today is focused on 
Kosovo, we are also looking closely at Montenegro, where the 
administration or democratically elected President Djukanovic 
is being undermined by forces loyal to Serbian dictator 
Slobodan Milosevic. The crisis in Montenegro has the potential 
of threatening everything we are trying to accomplish in 
Montenegro.
    The possibility of overthrow of President Djukanovic and 
the threat of serious violence instigated by Milosevic in 
Montenegro are matters of particular concern. I invite our 
witnesses to address that problem as well as the events in 
Kosovo itself.
    Our first panel will be Ambassador James Pardew and Mr. 
James Swigert for the Department of State.
    Ambassador Pardew has appeared before this Committee both 
in open public sessions and for private briefings on a number 
of occasions, for which we are grateful. He served in both of 
our Departments of Defense and State and brings a long-term 
expertise in Balkan affairs to our hearing this afternoon.
    Mr. Swigert has also been involved in Yugoslav affairs for 
a number of years. He served in several capacities in the 
Bureau of European Affairs, actually wearing two hats, one as 
Deputy Adviser to the President and Secretary of State and one 
as Deputy Assistant of State for European Affairs.
    Let me note that it is regrettable that our request for an 
Administration witness on this important issue took so long to 
fulfill, given this Committee's responsibility for oversight of 
our Nation's foreign policy.
    And I now ask if our Ranking Committee Member, Mr. 
Gejdenson from Connecticut, has an opening statement.
    Mr. Gejdenson. Thank you, Mr. Chairman. I will be very 
brief.
    I just want to say that I think you know we are in a very 
critical stage here obviously in the sense that, unlike during 
the Cold War when we undertook an engagement, the competitive 
nature and our fear of Soviet expansion kept the United States 
focused and engaged, and so for over half a century we could 
keep and continue to keep troops in Germany. For decades we 
could keep them in South Korea, and there was generally a 
bipartisan consensus in that manner.
    Today, it is going to be much more difficult. The United 
States and its citizens feel no great threat from any single 
power. As individuals who are presenting America's policies, it 
is particularly important that you lay out for the Congress and 
the American people the facts that indicate constantly why we 
are there, the benefits of being there, the dangers of being 
there, the cost of being there and also the cost of not being 
there.
    So what you do here is terribly important because it is 
much harder today than in the time of the Soviet empire to keep 
Americans focused and to keep Congress from giving you more 
headaches than you are getting in the field.
    Thank you very much.
    Chairman Gilman. Thank you, Mr. Gejdenson.
    Mr. Bereuter.
    Mr. Bereuter. Thank you, Mr. Chairman, for holding these 
hearings.
    In the middle of February, I took a delegation of about 12 
Members into Kosovo. These were Members who participate in the 
NATO Parliamentary Assembly, and who have been following with 
considerable interest what happens in the former Yugoslavia. We 
came away uniformly depressed by what we saw in Kosovo. Things 
are not going well. They are going very badly there in many 
respects.
    The commitments of international police are not being met 
by the Europeans and others. Soldiers are doing things they are 
not supposed to do in order to fill that gap. The violence 
against Serbian ethnics in Kosovo continues unabated. If we 
aren't protecting the Serbian ethnics 24 hours a day, they are 
killed. We were trying to give the one Serbian Kosovar woman, 
left in the community of some 3,000 or 4,000, 24-hour 
protection, but somebody got through and slit her throat.
    Across the border in Serbia, the reverse is happening--
ethnic violence. It would appear, in fact, the KLA is condoning 
it in Kosovo. Whether or not the KLA changes its name and its 
uniforms, it is still not, of course, satisfied with autonomy. 
It never has been. There is no rule of law.
    Things are very bad and getting worse in Kosovo. We are in 
a situation where it appears that, despite the best efforts of 
the men and women we have serving in the armed services and 
many very excellent military units from other NATO and non-NATO 
countries side by side with us, we are simply in an 
unattainable, unachievable kind of task in Kosovo. I think the 
situation is a very, very serious problem that the American 
people need to be made aware of. They need to know that things 
are going from bad to worse.
    Thank you, Mr. Chairman.
    Chairman Gilman. Thank you, Mr. Bereuter.
    Any other Members seeking recognition? If not, we will now 
proceed with our witnesses.
    Ambassador Pardew, please proceed.

 STATEMENT OF THE HONORABLE JAMES W. PARDEW, PRINCIPAL DEPUTY 
  SPECIAL ADVISOR TO THE PRESIDENT AND SECRETARY OF STATE FOR 
   KOSOVO AND DAYTON IMPLEMENTATION, U.S. DEPARTMENT OF STATE

    Mr. Pardew. Thank you, Mr. Chairman. Thanks again for this 
opportunity to update the Committee on the situation in Kosovo.
    I wish to submit a formal statement for the record which 
reviews our interests and objectives in Kosovo, areas of 
progress in civil administration and reconstruction, current 
challenges and what we are doing to overcome those challenges 
and the burden sharing of the international effort.
    With your permission, I will submit a longer briefing for 
the record.
    Chairman Gilman. Without objection, your full statement 
will be made part of the record.
    Mr. Pardew. I would like to briefly summarize the formal 
statement, after which I will be followed by Deputy Assistant 
Secretary Swigert, who will update the Committee on Montenegro.
    Our continuing engagement in Kosovo relates directly to our 
national security interests. We know from history that a stable 
Europe is vital to American security and that Europe is not 
stable if its southeastern corner is in turmoil. In the past 4 
years, the United States and our allies have successfully 
contained, then subdued, conflicts in Croatia, Bosnia and 
Kosovo as the former Yugoslavia broke apart. But the area's 
stability remains at risk from the Milosevic regime and the 
fragility of States recovering from conflict. International 
military forces create a secure environment in Kosovo. However, 
long-term peace and stability in the region requires robust 
civilian, political, economic and reconstruction programs 
backed by sufficient resources to make a difference.
    Our immediate civil implementation objectives are two. The 
first is to complete the establishment of an interim 
administration under which the people of Kosovo can enjoy 
substantial autonomy. The second is to develop local 
provisional democratic, self-governing institutions to ensure 
conditions for a peaceful and normal life for all inhabitants 
of Kosovo.
    One year ago, the North Atlantic Treaty Organization was 
engaged in an intensive air campaign against the security 
forces of Slobodan Milosevic. Their purpose was to halt the 
brutal repression of the Serbian regime against the people of 
Kosovo and restore order in the region. In 78 days, the air 
campaign, supplemented by aggressive diplomacy, succeeded in 
driving Milosevic's forces from Kosovo. The military victory 
set the stage for the deployment to Kosovo of allied security 
forces and an international civilian administration. The NATO-
led Kosovo force, or KFOR, and the U.N. Mission in Kosovo, 
UNMIK, remain the heart of the international effort in Kosovo 
today.
    All of us would welcome faster progress for civil 
implementation in Kosovo--but remember the situation less than 
1 year ago. The conditions encountered by UNMIK as it deployed 
and began to organize in Kosovo were desperate. Over 1 million 
people were dislocated and traumatized by war. There was no 
economy; there was no government; there was major destruction, 
including 120,000 homes damaged or destroyed. The civil 
infrastructure was either destroyed or neglected, and all of 
this was overlaid by a Communist legacy.
    Today, the situation on the ground in Kosovo is 
dramatically better and continues to improve gradually day by 
day. More than a million refugees and internally displaced 
persons have returned to their homes. The KLA has 
demilitarized, a growing international police presence has been 
established, and training for local police is well under way. 
Humanitarian agencies have met basic shelter, food and medical 
requirements and pulled the population through the winter.
    Recently, we have made progress in restoring order in 
Mitrovice, increasing civilian police deployments, increasing 
Kosovo Police Service training, preparing the groundwork for 
municipal elections later this year, and securing Serb 
participation in UNMIK governing structures. Further, public 
and independent media are regaining their voices.
    UNMIK and KFOR continue to face tough challenges, but they 
are not insurmountable. I would like to quickly run through 
programs that address these issues.
    First, the strategic area of northern Kosovo around the 
city of Mitrovice. KFOR and UNMIK have developed a 
comprehensive strategy and have begun to implement that 
strategy. The United Nations has appointed a strong civil 
administrator for the region in American William Nash. The 
number of international civilian police is still short, but the 
United Nations has made progress in CIVPOL deployments recently 
with 2,757 regular police in-country--513 of those are 
Americans--out of an authorized 3,593. The United Nations has 
also begun to fill the 1,100 positions for special police units 
to help with crowd control.
    In the area of local police, there are currently 451 Kosovo 
police in classroom training and 341 in the field. The police 
school will expand its capacity to 700 Kosovar students, up 
from 500 today, to reach the goal of graduating 3,600 police 
officers by February of next year.
    The Kosovo Protection Corps [KPC], now has a total of 4,500 
KPC candidates who have been selected for membership. And the 
International Organization for Migration has begun training for 
KPC field members in each of the six regional task 
organizations.
    KFOR and UNMIK have established conditions with the KPC for 
disciplining those who violate the law or deviate from 
established norms for that organization.
    Last, in the area of local government, last week moderate 
Kosovo Serb leaders announced they would participate in UNMIK-
sponsored governing structures, particularly the Interim 
Administrative Council and Kosovo Transition Council.
    We plan for local municipal elections later this year. 
Civil registration is to begin in April and to be completed by 
July in time for these elections to be held this fall.
    The judicial system is also moving forward. UNMIK has sworn 
in 289 Kosovar judges and 42 prosecutors. Criminal trials have 
been recently completed in district courts in Prishtina, 
Prizren, Pec and Gnjilane; and to supplement these local judges 
UNMIK is assembling international judges for particularly 
sensitive areas such as Mitrovice.
    With some of our key allies, we are developing a strategy 
to support the UNMIK international police effort to counter 
organized crime and to take effective action in that area.
    And, finally, in the media sector, a variety of newspapers 
and magazines have appeared in kiosks all over the major towns, 
and public television and a number of radio stations are on the 
air, beginning to return the Albanian voice to the area.
    On burden sharing, Mr. Chairman, the Europeans must lead 
the international effort in Kosovo and bear the lion's share of 
the assistance burden. Europe accepts this responsibility. Out 
of 45,000 KFOR troops in Kosovo, European Nations and Canada 
provide 72 percent of the forces. The U.S. contribution of 
troops comprises about 13 percent of the total.
    In terms of civil implementation, the current total for all 
donors in 2000 is just over $1.2 billion. The U.S. share of 
$168 million is about 13.9 percent of the fiscal year 2000 
spending on Kosovo revitalization. Our share of humanitarian 
assistance has been about 20 percent. Our cost for U.N. 
peacekeeping through UNMIK has been at the 25 percent level 
mandated by U.S. law; and costs for the U.S. share of peace 
activities through the Organization of Security and Cooperation 
in Europe [OSCE] have ranged from 10 to 16 percent.
    Mr. Chairman, the Administration does not support 
initiatives in the Congress to place an arbitrary limit on U.S. 
spending for international efforts in Kosovo and the rest of 
southeast Europe. We believe that such legislation would be 
counterproductive. As Secretary Albright wrote in a recent New 
York Times op-ed piece, the day may come when a Kosovo-scale 
operation may be managed without the help of the United States, 
but it has not come yet. Proposals in the Congress to place a 
legal cap on U.S. expenditures would decrease our flexibility 
and harm, not help, our partnership with Europe in responding 
to future events.
    Such limits do not take into account the European 
contributions in our hemisphere. For example, the Europeans 
provided more than 60 percent of the bilateral aid pledged in 
the wake of Hurricane Mitch, assumed 33 percent of the cost of 
establishing peace in El Salvador, and 34 percent in Guatemala.
    I have just returned from Kosovo, and I can tell you that 
the people there have emerged from a difficult winter and are 
preparing to build a new future. Prishtina and the countryside 
are alive with activity. These are tough and enduring people 
and they are grateful for our help, but they are not sitting 
back and waiting for us to rebuild their homes and lives. They 
need some tools and they need guidance from us to get started, 
but they are eager to get on with the job.
    I hope this gives you a clear idea of where we stand in 
Kosovo right now, and I will be happy to go into more detail in 
the question and answer session.
    [The prepared statement of Ambassador Pardew appears in the 
appendix.]
    Chairman Gilman. Thank you.
    We now turn to Deputy Assistant Secretary Jim Swigert.

 STATEMENT OF JAMES W. SWIGERT, DEPUTY ASSISTANT SECRETARY FOR 
 EUROPEAN AFFAIRS AND DEPUTY SPECIAL ADVISOR TO THE PRESIDENT 
 AND SECRETARY OF STATE FOR DAYTON AND KOSOVO IMPLEMENTATION, 
                    U.S. DEPARTMENT OF STATE

    Mr. Swigert. Thank you, Mr. Chairman, for the opportunity 
to update the Committee on Montenegro. I would like to briefly 
describe the current situation, outline our strategy for 
advancing U.S. interests and update you on our assistance 
efforts. I have prepared a written statement for the record 
which, with your permission, I would submit and then just give 
a brief oral summary.
    Chairman Gilman. Thank you. Without objection, your full 
statement is made a part of record. Please proceed.
    Mr. Swigert. The prudent and forward-looking policies of 
the democratically elected government of President Djukanovic 
have made Montenegro a positive factor in the southeast 
European region. Montenegro opposed ethnic cleansing and 
supported a peaceful settlement in Kosovo. Montenegro pledged 
support for the International Criminal Tribunal for the former 
Yugoslavia and has provided shelter and assistance to refugees 
and internally displaced persons, no matter what their ethnic 
origin. The Djukanovic government has also increased efforts to 
counter smuggling and organized crime in the region and 
recently improved its police cooperation with Italy.
    The Administration shares the concern of many Members of 
Congress about Milosevic regime's efforts to pressure the 
democratic reform government of President Djukanovic. The 
potential for aggression or serious violence provoked by 
Belgrade is real. An outbreak of violence in Montenegro could 
set back reform efforts throughout the region, produce more 
suffering and more refugees, and seriously jeopardize U.S. 
interests in the region. At the same time, Milosevic knows that 
such action would pose serious risks for his own regime.
    Consequently, U.S. policy is focused on preventing a new 
Balkan conflict from erupting and on providing the necessary 
assistance to ensure Montenegro can continue to develop 
democracy in a market economy, and continue its positive force 
in the region.
    We have made strengthening the Djukanovic government a 
priority--as something good in itself--but also as a step that 
decreases the chances of conflict by raising the cost to 
Milosevic of any aggression against a strong and popular 
leader. Milosevic is fully aware of the priority that we place 
on the security of the region and of Western capabilities to 
respond to any destabilizing actions.
    Administration officials, including Secretary Albright, 
have reiterated over the last year our strong interest in the 
security of the region, including Montenegro; and NATO leaders 
have made clear the alliance is following developments there 
closely.
    The fundamental problem for Montenegro, as for its 
neighbors, remains the lack of democracy in Serbia and the 
Milosevic regime. As part of the Federal Republic of Yugoslavia 
or the FRY, Montenegro is highly vulnerable to pressure from 
Milosevic, who is fundamentally hostile to the Djukanovic 
government and its democratic reform program. Promoting 
democracy in Belgrade is therefore a priority for the 
Administration, also, as part of its Montenegro policy. We 
believe that a democratic Serbia would enable the two republics 
to found a new constructive partnership.
    During this winter, Montenegro endured additional pressures 
from Milosevic, including temporary closure of Montenegro's 
airports by Belgrade and blockade of Montenegro's trade with 
Serbia, which is ongoing.
    We have worked closely with the Djukanovic government to 
try to mitigate these pressures. While tensions remain, the 
situation is calmer now than a few weeks ago. Rather than 
falling into Milosevic's trap of confrontation, the Montenegrin 
government is working with its Yugoslav army contacts to 
prevent security incidents and tensions from escalating. This 
prudent approach denies Milosevic and his supporters a pretext 
for violence or intervention.
    Still, tensions could quickly rise again. The situation is 
fragile. Therefore, it is essential we maintain our support for 
the Djukanovic government.
    We will continue to demonstrate our political backing by 
maintaining regular and high-level contacts with President 
Djukanovic and his government. President Djukanovic met twice 
with President Clinton this past year, Secretary Albright met 
with President Djukanovic last month, and we are in daily 
contact with his government.
    An essential element to our strategy is to back up this 
political support with concrete economic assistance. After 
Montenegro took steps last fall to protect itself from hyper-
inflation exported by Belgrade and made the Deutsche Mark a 
legal currency, we sent economic advisers to Montenegro to help 
implement critical economic reforms. In this fiscal year 2000 
we are providing $26 million in SEED and $11 million in ESF 
economic support funds, as well as humanitarian and food aid to 
ease the pain of Belgrade's embargo against Montenegro; and 
last month we signed an OPIC agreement with Montenegro to help 
stimulate private sector investment there.
    However, we expect our monetary assistance for fiscal year 
2000 will not suffice, given that Montenegro's needs have risen 
due to Belgrade's trade embargo. Thus, we have requested an 
additional $34 million in SEED funding from the Congress in 
this fiscal year; and we appreciate the House's inclusion of 
this request in the supplemental bill passed on March 30 and 
hope the Senate will support it.
    Western assistance serves four valuable purposes. First, it 
helps to mitigate the destabilizing effects of Belgrade's 
economic sanctions against Montenegro. Second, it allows 
President Djukanovic to show that his policies deliver concrete 
results to the people of Montenegro. Third, it reduces pressure 
from pro-independence groups within Montenegro on Djukanovic to 
take risky steps. And, fourth, it concretely demonstrates to 
Milosevic our strong interest in Montenegro and to the Serbian 
people that our differences are with Milosevic and his 
policies, not with Serbs or Montenegrins.
    U.S. leadership and resources are essential, but we cannot 
meet all of Montenegro's needs alone nor should we do. Europe 
also has a strong interest in the success of Montenegro's 
reforms and an essential role to play, and the Administration 
has been working intensively at senior levels to encourage the 
European Union and others to deliver greater resources to 
Montenegro and to speed the delivery of those resources. The 
response has been encouraging recently.
    This year, the European Commission doubled EU assistance to 
Montenegro for 2000 from 10 to 20 million euros. The European 
Council has directed the European Investment Bank to find ways 
to finance projects in Montenegro, and this could be very 
significant. Last month, Stability Pact donors pledged funds 
toward a list of ``Quick Start'' infrastructure projects, which 
included $15 million of infrastructure projects in Montenegro; 
and EU members are moving to boost their bilateral assistance 
as well. Germany recently granted 40 million Deutsche Marks in 
investment credits, and the Netherlands has established a 
program of its own.
    We will keep working with our European partners to get 
Montenegro the assistance it urgently needs.
    In closing, let me thank you for the chance to discuss the 
situation in Montenegro and our policy. We consider the 
Djukanovic government's reform program both a model and a 
stimulus for democratization across the FRY. Montenegro is now 
moving down a road toward creating prosperity in cooperation 
with the international community that the people of Serbia 
could also travel were there democratic government in Serbia.
    We appreciate the strong support of this Committee and 
other Members of Congress both for Montenegro and for the 
Administration's efforts to help the government of Montenegro 
remain a model for democratization.
    Thank you.
    [The prepared statement of Mr. Swigert appears in the 
appendix.]
    Chairman Gilman. Thank you very much, Assistant Secretary 
Swigert and Ambassador Pardew, for your testimony which helps 
us have a better insight on what is going on in that part of 
the world. Just a few questions, and then I will turn to my 
colleagues.
    There have been a number of claims and counterclaims 
concerning amounts paid to Kosovo provided on the one hand by 
the United States and on the other by the European Union, 
including both contributions by individual EU members and by 
the EC. Can either one of you tell us how much respectively the 
United States and EU have been providing to Kosovo for 
humanitarian assistance, economic reconstruction and the cost 
of the KFOR mission?
    Mr. Pardew. Mr. Chairman, we always get into these 
financial discussions, and it is very easy to get off into 
apples and oranges. I would like to stay with the data which I 
provided in my statement which discussed burden sharing. For 
civil implementation in 2000, the U.S. share is 13.9 percent. 
Europe is paying the bulk of the remaining part of the $1.2 
billion. Our share of humanitarian cost----
    Chairman Gilman. Is that the total being provided, $1.2 
billion by everyone?
    Mr. Pardew. For civil implementation, sir?
    Chairman Gilman. By all parties?
    Mr. Pardew. Yes. This was committed at the donors 
conference last fall.
    Chairman Gilman. And we are providing 13 percent?
    Mr. Pardew. 13.9 percent. Our share of humanitarian 
assistance has been about 20 percent, and I don't have a total 
number, but I can get that for the Committee if you would like. 
Costs in the peacekeeping account have been about 25 percent of 
the UNMIK costs; and our OSCE share has ranged from 10 to 16.9 
percent. The Europeans have picked up the bulk of the remainder 
of those costs, although there are non-European contributors as 
well, like Japan and some others who have contributed, but the 
bulk of the burden was paid by the Europeans.
    Chairman Gilman. All of those costs you have just recited 
is $1.6 billion; is that right?
    Mr. Pardew. No, it would go well above that because of the 
humanitarian costs.
    Chairman Gilman. What are the total costs that have been 
invested?
    Mr. Pardew. Just a minute, sir while I look at the figures. 
The total cost for Kosovo--and I have civil costs here--$1.2 
billion.
    Chairman Gilman. You mentioned before $1.6 billion. Does 
this figure you are giving us now include all of the funds that 
we have allocated for Kosovo?
    Mr. Pardew. The figure of funds that we have allocated for 
Kosovo for civil implementation to include reconstruction in 
fiscal year 2000 is $1.26 billion. Excuse me, that is in 
Bosnia. In Kosovo, the total is $1.227 billion for fiscal years 
1999 and 2000. That includes money for stabilization, 
humanitarian, the U.N. costs, OSCE costs, and that is for 
fiscal years 1999 and 2000.
    Chairman Gilman. $1.27 billion?
    Mr. Pardew. For civilian assistance for fiscal year 1999 
and 2000.
    Chairman Gilman. That leaves out the military costs?
    Mr. Pardew. That leaves out the military costs.
    Chairman Gilman. And how much are the military costs?
    Mr. Pardew. The figure I have is for Kosovo, both again 
1999 and 2000, is $5.157 billion from the 050 Defense 
Department accounts.
    Chairman Gilman. $5.157 billion. So we are talking roughly 
$6 to $7 billion altogether, is that right, altogether our 
costs in Kosovo?
    Mr. Pardew. That is correct. For fiscal year 1999 and 2000 
our total costs for Kosovo, military and civilian, are $6.384 
billion from the 150 Foreign Operations accounts and the 050 
Defense accounts.
    Chairman Gilman. So we are paying in what percentage of all 
those costs? What does our average contribution amount to?
    Mr. Pardew. It varies from program to program, whether it 
is humanitarian, civil implementation or others.
    Chairman Gilman. You talked about 13 percent.
    Mr. Pardew. Thirteen percent of civil costs.
    Chairman Gilman. What about military?
    Mr. Pardew. I don't have the total military cost of the 
entire operation.
    Chairman Gilman. Can you provide that for our Committee?
    Mr. Pardew. I can try.
    Chairman Gilman. Thank you very much. We would welcome 
having it.
    Chairman Gilman. Why have the United States and EU accepted 
the de facto partition of Kosovska Mitrovice?
    Mr. Pardew. We have not accepted partition of Kosovo. In 
fact, we strongly oppose any action which would promote 
partition or be viewed as a partition of Kosovo.
    Chairman Gilman. What are we doing to allow displaced 
Albanians to return to their homes in safety in that area?
    Mr. Pardew. So far, in Mitrovice, there have been about 140 
Albanians returned to their homes on the north side of the 
river. This is not an acceptable level.
    Chairman Gilman. One hundred forty out of how many?
    Mr. Pardew. Out of probably 2,000 or 3,000 north of the 
river.
    Chairman Gilman. Only 140 have been able to return? What is 
holding things up?
    Mr. Pardew. The situation in Mitrovice is extremely tense. 
The Serbs have dominated the northern side of the river, the 
Albanians the south. UNMIK had not established its authority 
firmly there.
    Attempts to return Albanians across the river generated 
significant hostilities which KFOR had to deal with.
    The United Nations and NATO have developed a comprehensive 
strategy for Mitrovice, but this is not something that can be 
solved immediately, Mr. Chairman. This is a very complex 
situation that has to do with continued influence by Belgrade 
in the north of the area. Extremists on both sides have 
exploited the situation there. We have just put a strong civil 
administrator in Mitrovice to improve the civil administration 
there. So this is an ongoing process, but it is not going to be 
solved immediately.
    Chairman Gilman. So, Ambassador Pardew, essentially until 
that is clarified there is a de facto partition in Mitrovice.
    Mr. Pardew. There is an unacceptable separation in 
Mitrovice.
    Chairman Gilman. Did our Nation agree to the deletion of a 
provision requiring Serbia to return Kosovar Albanian detainees 
from Kosovo by Serb forces for the military technical agreement 
negotiated with the Federal Republic of Yugoslavia at the end 
of NATO's air campaign? Did our Nation agree to the deletion of 
a provision that required them to return these detainees?
    Mr. Pardew. I am not aware of the details of the 
negotiation, Mr. Chairman, but I don't recall ever seeing 
anything agreeing that detainees would not be returned. In 
fact, we have worked very hard to pressure the regime in 
Belgrade to return Kosovars who are held prisoner in Serbia, 
and there are quite a number of them, probably up to 2,000. 
Some have been returned but not nearly enough.
    Chairman Gilman. So Serbia is mandated to return these 
detainees that were taken from Kosovo by the Serb forces?
    Mr. Pardew. We certainly demand that the Serb return 
Kosovars who were taken from Kosovo at the end of the conflict.
    Chairman Gilman. One last question. What is the status of 
the Trepca mine? Have Albanian workers been permitted to resume 
their work there and does Serbia receive any of the proceeds 
from the operations of that mine at the present time?
    Mr. Pardew. The Trepca mine is a strategic issue associated 
with Mitrovice in northern Kosovo. An international mining 
consortium is currently in negotiations with UNMIK to look at 
the potential to reopen that mine. The U.S. Agency for 
International Development has a team in Trepca as we speak 
looking at the environmental impact of the Trepca mine. The 
Trepca mine is part of the strategic plan for northern Kosovo 
that UNMIK is working on. We believe it should be reopened to 
the degree that it can become economically viable, and it 
should be staffed and operated by the people of Kosovo.
    Chairman Gilman. Mr. Ambassador, I understand that the 
workers would like to go back there. They are ready to go back 
to work there. All they need to do is pump out some of the 
water that has accumulated there and to assure safety of the 
workers; is that correct?
    Mr. Pardew. There is much more to it than that, Mr. 
Chairman. The mine has been neglected. It was poorly run by the 
administration that ran it up to now. Parts of it are still 
under the control of Belgrade.
    Yes, certain parts of the mine are flooded, but other parts 
of the mine are a serious ecological problem. We will know more 
about how much of that mine can be reopened as soon as the 
USAID environmental team returns and when we have had a serious 
professional assessment of it.
    Chairman Gilman. I would hope that we could expedite that, 
since several thousand workers could be returned and several 
millions of dollars could be earned by the Albanians.
    Mr. Gejdenson.
    Mr. Gejdenson. Thank you, Mr. Chairman. I think what you 
are sensing here is a number of crosswinds that are running 
through the Congress, and part of it I kind of referenced at 
the beginning is the post-Soviet-era impatience, and I think 
what you are going to find is there are going to be attempts to 
restrict your discretion to a greater and greater degree.
    There is now legislation by the Chairman and Mr. Bereuter 
that would limit expenditures by the United States in 
southeastern Europe to 15 percent of the share of the EU.
    It was interesting, you stated that in our hemisphere the 
hurricane response saw the EU putting in about 30 some percent, 
but I think there is no argument that the United States has 
historically paid the largest portion of many of these 
international operations. And I think what you are going to 
have to do is you are going to have to find a way to convince 
Members of Congress and the American public that this is, one, 
a solid investment that represents America's best interests; 
and part of that you can, I think, show from a historic 
perspective. I mean, obviously, if there had been the time 
pressures for results at the end of the Reichstag and the Nazis 
we would have probably been out of Germany sometime in early 
1951, not having succeeded at accomplishing all of our goals 
and reconciliation in the area.
    But I can tell you that between now and the election there 
is going to be continued pressure, and I would suggest that you 
go back and talk to the folks at the White House and State 
Department and say that you are going to need to help those of 
us who supported the Administration with a demonstration that I 
think is doable, that the Europeans are carrying their burden, 
and where they are not, we ought to work together to get them 
to carry that burden.
    There is no question the United States rightly exercised 
the major portion of the military operation during the war in 
Kosovo because of our incredible ability, unmatched by any 
other country; and for that reason, frankly, I am a supporter 
of the Europeans having a European military strategy and a 
coordinated purchasing of equipment so they can play a more 
equal role in endeavors that the United States and Europe feels 
are important. I think that we ought to enter a dialogue to 
make sure the Europeans pay their part. I think it will be 
easier to get continued American support.
    And, you know, the pressure is going to continue from the 
majority in this Congress, and I think that you have got to 
come forward and help those of us who believe in what we are 
doing in Kosovo with the information that lets us work 
something out that will allow us to continue what I think is 
the best representation of America's involvement in foreign 
policy.
    We are doing what is right. We are doing it for the right 
reasons. We are not simply doing something simple, that looks 
good or doing something like protecting an oil-producing 
country that represents our need of foreign crude.
    So I admire what you have done and how you have done it 
there, and I think we need to make sure that we pull the 
information together that lets us come to a policy that will 
allow us to continue to take this leadership role in the world. 
And I thank you gentlemen for your testimony.
    Chairman Gilman. Thank you, Mr. Gejdenson.
    Mr. Bereuter.
    Mr. Bereuter. Ambassador Pardew, Secretary Swigert, thank 
you for your testimony. I am having a hard time understanding 
how I am going to direct comments to you.
    Ambassador Pardew, you have a very distinguished public 
service record as a civilian in DOD and as a military officer, 
and I know you are in a difficult position. But I do think that 
what you have presented here, in the way of written testimony 
and in your comments, do not give an accurate impression to the 
American people of the difficulties we are facing there and the 
fact that we have serious problems that are not being 
corrected. The situation is deteriorating.
    Effectively, we have a partition in Bosnia. We are moving 
to a partition in Serbia, and in that part of it that is 
Kosovo. You say we have made progress in restoring order and 
then you go on to list several areas. But progress from point 
zero is about what we are talking about, so it is extremely 
slow. There is no confidence or credibility in the people that 
will be managing the judicial positions nor is there likely to 
be.
    You saw how many votes, I imagine, that the Warner burden-
sharing proposal, as advanced by a bipartisan group in the 
House, received. I voted against that because I didn't think it 
was a good idea in the way they had framed it. But the United 
States did bear a large majority of the costs for pursuit of 
the war over Kosovo--in the backyard of the Europeans. 
Europeans should be expected to do more. I think it is only 
fair, as a representative of the American people, that we need 
to expect them to come forth and share the costs.
    The figures we have, for example, in international police 
is far less than requested in the first place, and the 
Europeans still haven't met what is now the downgraded number. 
I think it is reasonable to place not a dollar limit cap, but 
instead a percentage gap.
    Mr. Gejdenson referred to an element in the legislation 
that Chairman Gilman has offered with the support of many of 
us, including myself, and in that legislation, at least we do 
make it a percentage. It is at 15 percent, but I am quite 
willing to raise it to 18 percent because there is reason that 
it ought to be 18 percent. This is consistent with what the 
Administration has said at various times, although they would 
like to back away from that number now. Let us advance it from 
15 percent to 18 percent. If the Europeans and the Canadians, 
since Canada is a NATO member, come up with much more, then the 
amount we have to spend--which I hope we would spend well--in 
the Balkans area will go up as well. It is not a dollar cap. It 
is a percentage cap that we ought to expect, and it can be 
adjusted to see if, in fact, the forces meet their goals from 
year to year by what, in fact, we are willing to spend the next 
year.
    Just a minor correction, it is not just what the EU is 
spending. It is under our bill what the EU and NATO members are 
spending as contrasted with the United States. You have, for 
example, six European countries that are not members of the EU 
whose contributions would also be considered along with the 15 
members of the EU plus, of course, Canada. If they can't come 
up with 82 percent of the costs in Kosovo today, then they are 
not pulling their fair share. I think we need to assure the 
American people that there is a limit on how much of the total 
amount we are going to provide in the reconstruction of and in 
the attempt somehow to restore civil order to Kosovo and also, 
for that matter, to Bosnia.
    I welcome any comments you have, Ambassador or Mr. Swigert.
    Mr. Pardew. Well, thank you very much, sir.
    I don't want to leave anyone with the impression that we 
have had raging success in Kosovo yet or that we don't have 
significant problems ahead of us.
    You mentioned the police. The police are a problem. The 
international community is doing something with police that 
they have never done before. We have international police there 
with arrest authority and carrying weapons. At the same time we 
are trying to establish a judicial system. We are trying to 
establish a police and judicial system, first of all, with 
internationals, and then with locals.
    I would go back to the point in my statement which reminds 
us that we came into an area which was devastated. There was no 
government. There were no police. Jails--there are no detention 
facilities. So I don't want to leave with you a presentation 
that implies Kosovo is a rosy picture. But I will say it is far 
better than anything that existed at the end of the bombing 
campaign. We have a long, uphill way to go, but we think that 
we can overcome all the items that are difficult today, and 
that we are making gradual progress. I do not believe, sir, 
that we are sliding backward.
    Mr. Swigert. I might comment, if I could, on the question 
of European and Canadian and Japanese support. We certainly do 
see this as a necessity and a priority, and we are working very 
hard to ensure that Europeans follow through on their 
commitments and deliver the assistance that they promised in a 
timely fashion. This is an area in which we have had 
considerable discussion with the Europeans, and they have 
recognized that there is an issue here. At the latest meeting 
of the European Council in Lisbon, they undertook a number of 
steps to try and speed up the delivery of assistance. So I 
think this is an area where all of us can do more, both in 
specific situations and with respect to Kosovo and also across 
the board in southeast Europe.
    Mr. Bereuter. Thank you. We will try to stiffen your 
backbone by giving you some requirement that they will have a 
percentage of it but no more than a percentage. We will see if 
they are going to meet their commitment.
    Thank you, Mr. Chairman.
    Chairman Gilman. Thank you, Mr. Bereuter.
    Mr. Hastings.
    Mr. Hastings. Thank you very much, Mr. Chairman, and thank 
you for holding the hearing; and, gentlemen, thank you for your 
testimony.
    If I could begin, Secretary Swigert, with you and refer to 
your testimony where you say we firmly believe the 
establishment of a democratic government in Belgrade would make 
it possible for Serbia and Montenegro to establish a new 
constructive relationship in which Montenegro could be a 
genuine partner with Serbia in a democratic Yugoslavia. I 
firmly believe that, too, but how realistic is the prospect of 
that happening?
    Mr. Swigert. Well, you raise a very serious issue which is 
the presence in Belgrade of an antidemocratic regime, and I 
think that not just this Administration and the Congress but a 
number of countries around the world, our European partners, 
are all united in terms of working for democratization in 
Serbia. This is a priority for us, and it is a priority for 
Europe. We would like to see this happen sooner rather than 
later because of the drag that Serbia represents within the 
region and because of the additional suffering that the 
perpetuation of the Milosevic regime is bringing on the Serbian 
people.
    We have been carrying out a very active policy along three 
tracks of putting increasing pressure on the Milosevic regime 
through selective sanctions in conjunction with the European 
Union and others, through isolation of the Milosevic regime 
diplomatically and through strong support for democratic forces 
in Serbia, as well as support for the democratic government in 
Montenegro.
    The Montenegrin government of President Djukanovic has made 
clear that its priority is bringing about a different 
relationship with Serbia, not a break with Serbia but rather a 
new partnership; and in a number of the discussions we have had 
with representatives of the Serbian opposition, they have 
expressed support for that. So I believe that with democratic 
change in Serbia there can be a new arrangement reached between 
democratic forces in both republics.
    I think the question of when democratic change comes about 
in Serbia is something that really depends upon the Serbian 
people themselves. If you look at the opinion polls, Mr. 
Congressman, we see that Milosevic is going down and the level 
of frustration is tremendous. The democratic opposition in 
Serbia will have a demonstration this week calling for free and 
fair elections at all levels. It remains to be seen whether 
that will be a turning point. It will be, I think, a struggle 
to put more pressure on Milosevic, and the strategy that we are 
following I think is one that we need to stick with. We have 
been encouraged that the European Union has moved recently to 
strengthen its financial sanctions and expand the visa list 
that is directed against Milosevic's regime and his principal 
supporters.
    Mr. Hastings. Thank you very much.
    If I could turn to you, please, Ambassador Pardew, you 
cited Secretary Albright's recent New York Times op-ed in which 
she says, from your testimony, the day may come when a Kosovo-
scale operation can be managed without the help of the United 
States, but it has not come yet. If I can share the frustration 
that I hear among my colleagues with you and first preface that 
by suggesting that, when I voted personally in favor of our 
intervention, I made a floor statement in which I clearly made 
understood that I did not expect this to be a limited operation 
by any stretch of the imagination. One can't quantify very 
easily the amount of time when theorists are talking about an 
end game in something as complex as the Balkans. To ask for 
that certainty is almost impossible.
    At the very same time, when you hear my colleagues 
advancing with a great deal of seriousness the notion of 
capping the activity there, that comes about because we are 
feeling our pressure from our constituents saying, you know, we 
are spending a lot of money over there, you are telling us we 
don't have any money here to do certain things, and then we go 
home and face that. That said, is there any way that, with all 
of the things that are on the ground, that we can suggest to 
the American people that that day is going to happen, and even 
if we said 30 years, it might be better than leaving it to 
ambiguity all the time? Do I make myself clear?
    Mr. Pardew. Yes, Congressman, you do. And I would like to 
be able to give a date, but we learned from Bosnia that we 
really cannot set firm deadlines because our strategy needs to 
be based on the job that we have to do, and the missions that 
need to be accomplished. The answer to the length of our 
commitment in the Balkans is based on our interests; and, as I 
said in my statement, we have very powerful security interests 
in stability in the Balkans. And we have been engaged in this 
endeavor with our European allies much less overall than they 
have, but we have been involved because it is in our security 
interests to be involved.
    Our strategy for leaving is based on implementation of U.N. 
Security Council Resolution 1244 which stipulates the 
conditions required for a sustainable peace. When we leave 
Kosovo, we need to leave it in a condition which is stable, 
which is oriented toward Europe, which is a partner among 
Europe democracies, with an economy that is integrated into the 
European system.
    So I wish I could give a precise answer to a withdrawal 
date, but I can't. But I can say it is in our interests for us 
to be there, and it is in our interests to stay the course 
until such time as we have established the conditions for a 
long-lasting peace.
    Mr. Hastings. Mr. Chairman, I recognize that my time has 
run, but I am particularly interested, as a former jurist, in 
the development of the judicial system; and if you would please 
have someone followup with me personally so that I can be 
briefed regarding where we are in that regard. I would also be 
interested in further elaboration of the demilitarization of 
the KLA, but at the very same time I recognize that there are 
time constraints, and I want to compliment you, Ambassador and 
Mr. Secretary, for your testimony here today.
    Thank you, Mr. Chairman.
    Chairman Gilman. Thank you, Judge Hastings.
    Mr. Sherman.
    Mr. Sherman. Thank you, Mr. Chairman.
    I would like to echo and amplify what so many of our 
colleagues have said, and that is, that when it comes to the 
burden sharing in not only Kosovo but also Bosnia that our 
foreign policy establishment has really let down the American 
taxpayer.
    A week ago, we heard from the State Department with regard 
to Haiti, and I asked at that point, how are expenditures in 
the former Yugoslavia compared to European expenditures in 
trying to bring democracy, freedom and economic progress in 
Haiti? So far we don't have a response. I have always found 
that when people want to give me a response they are very 
quick. The message is very clear. When something goes wrong in 
Europe, the American taxpayer pays. When something goes wrong 
in the Americas, the European taxpayers pay virtually nothing.
    We have heard testimony here that says the Europeans are 
doing more than the United States. Along with several of my 
colleagues, we saw what was going on during the war. Virtually 
all the effective fighting was done by the United States.
    I don't always agree with the Governor of Texas, but he has 
put forward the theory that if the United States always has to 
be the peacemaker, that others should assume the duty of being 
peacekeeper. And yet here we are with no end in sight, doing 
the European work for them, not only doing what they couldn't 
do for themselves--in spite of their incredible wealth, in a 
population that is larger than ours, they couldn't deal with 
the military aspects of peacemaking. But now they clearly are 
capable of doing everything that needs to be done in Bosnia and 
Kosovo, and we are doing it instead.
    I think that the question really is, do the Europeans think 
that Kosovo and Bosnia is important? And, if so, if we announce 
that within 1 year we were leaving, would they come through 
with the billions and billions of Euros necessary to assume 
this duty? Or would they decide that the former Yugoslavia just 
isn't worth very much of their money?
    Mr. Pardew. Well, our participation, as I have said before, 
is based on our interest, and we have interests there.
    Mr. Sherman. Excuse me, I have a limited amount of time. I 
will ask you to focus on the question: If we stopped, giving 
the Europeans 12 months notice, would they step up to the 
plate? Or would they say, sorry, Kosovo and Bosnia are not very 
much in our interest, at least not enough to assume the full 
financial burden, and if they are not in your interest, so be 
it? I am not asking you whether Kosovo and Bosnia is in 
America's interest. I am asking you what would the Europeans do 
if we insisted they shouldered the entire load?
    Mr. Pardew. The Europeans would probably make the best of 
it.
    Mr. Sherman. We could pull out and the Europeans would 
handle the problem?
    Mr. Pardew. I said that they would probably do the best 
they could with it. The question is, should we be there? The 
answer to that is----
    Mr. Sherman. With all due respect, I am given 5 minutes of 
time where I am supposed to ask questions, and your response is 
to tell me the question is. I am very sorry. I am supposed to 
ask the questions. I know that you would prefer to be asked 
different questions, and perhaps one of my colleagues will come 
in and ask you the questions that you would like to answer.
    Mr. Pardew. Congressman, you have asked a very important 
and complex question. I would like to give you an adequate 
answer.
    Mr. Sherman. If you could stick to the question I have 
asked, I would appreciate it.
    Mr. Pardew. The United States is participating with our 
European partners in an issue that is of vital interest to the 
Europeans and the United States. The question is not whether we 
should be there but to what degree.
    Mr. Sherman. Excuse me, Ambassador, I will reclaim my time 
because, once again, you are saying what the question is. And 
it could very well be that that will be the question asked you 
by one of my colleagues, but I don't think that the question is 
whether--the degree to which we should be involved in the 
Balkans for 5 years, 10 years, 20 years. It looks very much as 
if we will be in the former Yugoslavia for at least as long as 
we have been in Korea. And, you know, Asia is a different 
circumstance, but here you have all of the wealth and power of 
Europe, which apparently is insufficient to deal with the 
problem in Europe, let alone grossly inadequate European 
contributions to that problem in Korea or East Timor or 
Columbia or Haiti.
    So I realize that you would prefer that I ask you a 
different question, but, in fact, the question is whether we 
will show, as civilian leaders, the same kind of courage that 
our men and women in uniform showed. They stood up to 
Milosevic. We now have to stand up to Paris and to Berlin and 
say that European problems need to be financed, the solutions 
to those problems need to be financed by European taxpayers.
    And you can say that we have an interest in former 
Yugoslavia. You could make an equal case that France or Britain 
or Germany should be concerned with the freedom and development 
of Haiti, and yet we are still waiting for those figures to 
come in. You can certainly say that Italy and Spain should care 
about the democracy and freedom of the people of South Korea, 
yet I am not aware of any European contribution on a 
significant scale.
    So it seems that where there is a European concern about 
something in the Americas or Asia, we have no money at all from 
the Europeans. We may see a little bit of French help to Haiti, 
a former colony, whose problems today are a direct result of 
colonial exploitation by the French themselves, but we will see 
very little German help for Haiti, very little Italian or 
Spanish financing of the military in South Korea, an inadequate 
European response to East Timor, and the fact that we would 
then do the European job of convincing the American taxpayer 
that that is an acceptable circumstance that we contribute 
mightily to Europe and they do nothing outside of Europe is 
very frustrating.
    Mr. Chairman, I yield back the balance of my time.
    Chairman Gilman. Thank you, Mr. Sherman.
    Mr. Pomeroy. I am sorry, Mr. Rohrabacher just arrived.
    Mr. Rohrabacher.
    Mr. Rohrabacher. Yes, I just did. I apologize. As you know, 
we have various hearings that we have responsibility to attend, 
and I was the chairman of the last one, and again I apologize 
if we are covering some ground--how much specifically have we 
spent in the Balkans for the last 5 years?
    Mr. Pardew. Mr. Rohrabacher, I knew you were going to ask 
me, and I have brought you an answer I hope will satisfy your 
question.
    Mr. Rohrabacher. All right.
    Mr. Pardew. The total cost to the United States since 1995 
in developmental, humanitarian and military costs is roughly 
$17.8 billion.
    Mr. Rohrabacher. That includes?
    Mr. Pardew. That is Bosnia and Kosovo. U.S. Military and 
foreign assistance in fiscal year 1996 to fiscal year 2000 is 
$11.366 billion from accounts---- and 
----. That is Bosnia.
    Mr. Rohrabacher. OK. Now hold on. First one was--$17 
billion is the total?
    Mr. Pardew. $17.8 billion is the total.
    Mr. Rohrabacher. OK.
    Mr. Pardew. For Bosnia, that total is $11.366. That is 
fiscal year 1996 to 2000.
    Mr. Rohrabacher. OK.
    Mr. Pardew. And in Kosovo--that is fiscal years 1999 and 
2000--the figure is $6.384 billion.
    Now, let me break down the $17.8 billion one other way. 
Military costs are $15.257 billion, civilian costs $2.5 
billion. So what I am saying is that the bulk of the U.S. 
funding has been military.
    Mr. Rohrabacher. Now you are saying that our military 
operation that brought the Serbs to their knees so they would 
agree to this peace plan in Kosovo cost us less than $15 
billion, all this bombing?
    Mr. Pardew. The military outlays for Kosovo, $5.157 
billion.
    Mr. Rohrabacher. That includes that whole----
    Mr. Pardew. That is the air campaign.
    Mr. Rohrabacher. How long was the air campaign?
    Mr. Pardew. Seventy-eight days.
    Mr. Rohrabacher. You are saying it is under $6 billion for 
that air campaign?
    Mr. Pardew. Right.
    Mr. Rohrabacher. That is phenomenal. I will just say that 
if I, being someone who is asked to look at the figures, that 
figure would jump out at me and say, look a little closer, that 
doesn't sound realistic.
    Mr. Pardew. Mr. Rohrabacher, unfortunately, I am not into 
the details of military cost sufficiently to answer a lot of 
detailed questions about them. These are figures that we 
received today from OMB and the Defense Department.
    Mr. Rohrabacher. OK. Well, you know, cost is something that 
we are supposed to look at very closely here, and, of course--
so $17 billion, you are suggesting that $17 billion is what the 
cost was--now, I don't know what the cost to us would have been 
to the strategy which was our alternative, and one alternative 
was just to recognize that the Albanians and Kosovo had a right 
to their self-determination, recognizing them and maybe 
providing them with some support so they could defend 
themselves. That was another alternative that I was suggesting 
and that some others felt would have been a moral alternative 
to direct military intervention. Would you guesstimate the cost 
on something like that? Wouldn't that have been something like 
$2 or $3 billion at the most?
    Mr. Pardew. I couldn't put a cost figure on that. I was 
involved in looking at some of those options, and I can tell 
you what I believed at the time. I believe that there was no 
way that we could adequately create an organization that could 
defend itself in the short-run against the Serb army and 
police. That would have been a long-term solution, but a lot 
more people would have died had we gone down that trail.
    Mr. Rohrabacher. Let us note that the Kosovars were here 
and were asking not for American troops in the beginning but 
were asking instead for just our recognition of their human 
rights, to control their own destiny and some support, some 
help so that they could fight their own battle rather than 
having American military personnel there and having American 
military people put themselves and their lives in danger and 
having over $17 billion expended in Treasury, which is a 
considerable cost, even though I think that is low balling it, 
frankly, once I take a closer look.
    And how much is our European allies then?
    Mr. Pardew. I don't have the total cost of the military 
campaign. I have the U.S. cost, but I do not have the 1995 to 
2000 total international costs for the Balkans.
    Mr. Rohrabacher. It would be of interest to us when 
analyzing whether or not this is a cost-effective approach to 
foreign policy in the future to see whether or not an 
expenditure in the tens of billions of dollars by the United 
States actually stimulated our European allies to get more 
involved or whether what happened was what most of us on the 
other side suggested would happen, that if we end up spending 
the money the European allies will be less likely to commit 
their resources and less likely to buildup their own military 
forces.
    So these are very pertinent issues, and I wish you success, 
and I yield back the balance of my time.
    Chairman Gilman. Thank you, Mr. Rohrabacher.
    Mr. Pomeroy.
    Mr. Pomeroy. Thank you very much, Mr. Chairman.
    I want to speak specifically to the cap proposal, and are 
we talking about the 15 percent cap, Mr. Chairman, or 18 
percent cap? Will it be amended?
    Chairman Gilman. It is going to be amended. Mr. Bereuter is 
suggesting the possibility of increasing it to 18 percent.
    Mr. Pomeroy. I am familiar with the notion that over a 
longer term project, longer meaning more than 1 year, there is 
going to be an ebb and flow in terms of shifting costs. For 
example, as we respond to what relief in Grand Forks, North 
Dakota, to build a permanent flood protection device there, the 
local share is greater at the first phase of the project, the 
Federal share greater in the middle, local share greater at the 
end, to ultimately, over several years, you have a 50/50 cost 
share, but that doesn't mean at any given point of time you 
have got a 50/50 cost share.
    Now, my question, Mr. Ambassador, is whether the same might 
be true here and, in fact, you have an ebb and flow in 
participation. I am informed, for example, that one of the 
things the United States does best is respond to emergencies, 
disaster assistance. We might bear perhaps more of that cost 
than the countries in that phase less when we are in the longer 
term restructuring phase.
    I would like to show a couple of pictures that I personally 
took when I toured Kosovo in December. This is a picture of a 
family living in a warm, dry room. Tens of thousands of 
Kosovars spent their winter in circumstances similar to this. 
Into a destroyed structure they take this warm, dry room kit, 
tiny little stove there for heating and then plastic sheeting 
on the ceiling and over the windows. Wholly inadequate housing, 
dangerous for the health of those living in here. They are not 
dying of exposure, but, obviously, we have got an enormous task 
in terms of still emergency housing reconstruction.
    Another thing that I saw was extraordinary damage, I mean 
unbelievable damage to the countryside. I put this picture up 
because it illustrates, I think, two things: devastation which 
was commonly seen throughout the country in terms of structures 
as well as damage to the agricultural infrastructure. It 
destroyed every damn tractor they could find and made the 
prospects of getting on with the normal activities in a farming 
region very, very difficult to obtain.
    Now, I use these photographs to point out perhaps it is not 
timely in any way to be talking caps yet because we are still 
very much in more of an emergency portion, disaster portion of 
the response, and what we see today isn't necessarily 
reflective of the longer term relationship that we will have 
with our European allies. By golly, they ought to carry more 
than 50 percent. They ought to carry way more of the costs of 
the long-term reconstruction than what we have invested to 
date, but it just seems to me that hard caps might interfere 
with the normal ebb and flow of things as you work toward 
getting this structure, even if we are all agreeing that 18 
percent is an appropriate figure to be at.
    If the Ambassador would respond.
    Mr. Pardew. I agree completely, Congressman. We think that 
any kind of cap limits our flexibility. It does not allow us to 
exploit some advantages that we have in the temporary 
circumstances you just described. In some cases, we can move a 
little quicker in meeting immediate humanitarian needs. In 
other places, such as reconstruction, the Europeans clearly 
should pay and, quite frankly, are willing to pay the vast 
majority of the costs. So we think that a hard cap absolutely 
limits our flexibility and sets up a precedent with our 
European allies which would not be helpful to us in areas where 
we might need their help.
    Mr. Pomeroy. The diplomatic dimension in terms of eliciting 
full European response, do you think they would respond well to 
this kind of activity out of Congress or might we actually set 
our own cause back, the objective being getting full European 
participation, reducing the U.S. participation, the 18 percent 
range? What is the best way to pursue that objective?
    Mr. Pardew. First, the President, the Secretary of State, 
and every senior Administration official I know who are 
involved in Kosovo and the Balkans have been working with our 
European allies to ensure that the message from Congress--that 
Europe must pay the lion's share--is understood by them. Europe 
is moving forward in this regard, some not fast enough. We 
believe however, that they accept their responsibility for the 
lion's share of the costs, and we believe that they accept 
responsibility for leadership. Therefore, we are confident that 
our European allies will, in fact, step up to the plate, as we 
say.
    Now, as to their attitudes, I think it will damage our 
relationship if this kind of hard ceiling is put on our 
spending flexibility. We can expect to see some sort of 
reciprocal position from them. They accept their 
responsibilities, they accept their position of leadership, and 
for us to make demands on some things that they can't fix is 
unfair.
    For example, their fiscal year is different than ours. We 
start in October. They start in January. So we have funding 
available in January that they can't match because they haven't 
gotten into their process. Those kinds of timing issues and 
technical issues make this even more difficult. So there are 
technical reasons not to set the cap. It will damage our 
relationship for sure, and I think it will hurt us in some 
other areas where we need their help.
    Mr. Pomeroy. In all of that, in developed Western Nations, 
we have got many--our relations with our allies are going to 
get through that, but who gets hit in the crossfire are these 
Kosovars again it seems to me.
    And just for an example, this picture haunted me, haunted 
me for weeks after, and I asked AID personnel to go back and 
see how these little kids were doing, and they weren't doing 
very well at all, and they ended up being able to draw up on 
additional resources, come in, get clothing, get a better 
housing put in place. They did a lot of work in this particular 
situation here because I asked; and they saved, in my opinion, 
those children.
    It would seem to me we could be getting ourselves in a 
situation--I think that might be kind of an analogy for what we 
might find--a situation that urgently required a response, but 
we are up against our cap, sorry, wait till the next fiscal 
year, wait till some headroom frees up and we will see what we 
can do.
    These caps imposed here in town have got nothing to do with 
real-life circumstances on the ground. The people that get hurt 
are the most helpless folks that have already been totally 
devastated through war they didn't bring on but got brought 
upon them. We have to think about these things.
    Thank you, Mr. Ambassador.
    Mr. Rohrabacher [presiding]. Thank you very much.
    Let me just note for the record that what H.R. 4053 
suggests, not only suggests but mandates, that in southeast 
Europe that the United States not provide more than 15 percent 
of the costs of the operations down there, humanitarian and 
military, starting next year. That is starting next year, so 
that the current fiscal year 2000 is not included.
    And I understand that there are people in need all over the 
world, and those people are wonderful people that you just 
showed us the picture of, and I certainly feel for them, but I 
will have to say that it is about time that our European allies 
do their part. And the more that they hear from Members of 
Congress who are not willing to be tough and set the 
guidelines, they will not step forward because they know that 
Uncle Sam is going to pick it up. And that is the history, and 
that is the way it is, because that is reality.
    And I am sorry that our European allies, in fact as far as 
some of us are concerned, our European allies, southern Europe 
is their responsibility and not the responsibility of the 
United States, and the money that we have poured in is a 
tremendous cost. Anyway, the bill also says that the Secretary 
of State will certify to Congress that our goal of this cap of 
15 percent is achieved and that the Europeans are certainly 
cooperating, and that is what this bill is all about.
    Mr. Pomeroy. Mr. Chairman, may I respond briefly?
    Mr. Rohrabacher. Wait one moment, and let me say I will be 
going to Kosovo over the Easter break, and we have people--you 
know, we have people down there that again for years came to us 
asking that they be permitted to defend themselves, and instead 
now we are deeply involved. And what I need to ask the 
Ambassador before I pay the courtesy of having my colleague 
answer some of the things I just mentioned, do we now recognize 
that Kosovo has a right to its own statehood or are we still--
and if we don't, what is our exit policy? How are we ever going 
to get out of this unless we at least recognize the people of 
Kosovo's right to determine their own destiny?
    Mr. Pardew. As I have said, our exit strategy is based on 
implementation of those elements of U.N. Security Council 
Resolution 1244 which creates the conditions for a sustainable 
peace. The U.N. Mission in Kosovo is the first step in building 
peace in Kosovo, and the second is to establish elements of 
democratic self-government. Our exit strategy is therefore 
predicated on implementation on U.N. Security Council 1244 as a 
means of obtaining substantial and sustainable autonomy. We do 
not support independence for Kosovo.
    Mr. Rohrabacher. I would suggest this, that if we do not 
support that, then this is all a facade. I mean, the fact is 
there will never be a time when we can leave because we have 
not laid the foundation and been honest with everybody that we 
are involved and that our major goal is to protect these--these 
people have a right to control their own destiny. They are not 
going to give up on that. They are willing to live in horrible 
conditions like we have just seen in order to achieve their 
right to control their own destiny, and that is what we see 
here, brave, courageous people willing to do that, and that is 
not going to change. They are going to always demand that. And 
unless we have come down and been unambiguous about this, we 
are wasting everybody's time and money.
    And, in fact, my belief is--and I am sorry to be so up 
front about this, but the fact is, that unless we are willing 
to be that demonstrable in our support, at least for the 
principle of self-determination, we shouldn't have gotten 
involved in this again, and we should--they came to us. That 
was their goal. They are willing to sacrifice. They are willing 
to go through this suffering in order to achieve, as other 
nations have done, in order to achieve their independence, and 
if we would just walk away without recognizing that it won't 
last, then everything we have spent will be for nothing.
    So it is just a thought, and I know you aren't making the 
policy right now. You are trying to do it the best you can, and 
I appreciate that. And I hope that when I go down there in a 
couple weeks--I know that you are doing your very best job in 
trying--in a very bad circumstance.
    I do think that my colleague from North Dakota certainly 
should have a right to respond.
    Mr. Pomeroy. Thank you, Mr. Chairman.
    I was going to respond briefly by saying that I don't think 
that, vis-a-vis our European friends, our diplomatic ends are 
best pursued by a punch in the nose. I think that having voices 
like yours in the debate are absolutely constructive and 
helpful. They ought to know there is a growing discord in terms 
of impatience about what is happening from the European 
participation side. I just hope that the U.S. Congress is a 
little more measured, a little more inclined to let the 
Secretary of State and the President advance the foreign policy 
of this Nation, rather than always trying to lead the President 
and the Administration, and that the debate is not about the 18 
percent figure, the debate is about the means to get there, and 
that is why I have serious reservations about this legislation.
    Thank you.
    Chairman Gilman [presiding]. We have two votes on the 
floor. We will briefly recess the Committee for about 10 
minutes. The Committee is recessed.
    I think we are finished with our panelists, and we thank 
you for your patience and your willingness to supply us with 
information. If you would provide the additional information we 
have requested.
    The Committee is in recess.
    [Recess.]
    Chairman Gilman. The Committee will come to order.
    It is now my privilege to introduce a former colleague Joe 
DioGuardi. Former Congressman DioGuardi has been involved in 
educating the American public and the Congress about issues 
concerning the Albanian population in the Balkans for over a 
decade. As founder and President of the Albanian American Civic 
League, Joe DioGuardi has promoted involvement in public 
affairs of our ethnic Albanian citizens from the northeast and 
throughout the United States.
    Joe and his good lady Shirley Cloyes have provided me and 
our staff with invaluable insights into the conflict in Kosovo 
since it flared up in 1998. In fairness to Joe, I should point 
out that he has warned us that Kosovo would be a serious 
flashpoint in the former Yugoslavia until justice was provided 
to its majority Albanian community. He first made that warning 
in 1989 soon after Milosevic had taken a step to strip Kosovo 
of its autonomy under the Yugoslav constitution.
    I hope that Joe's prescience that he has demonstrated over 
the years will help guide us today in this hearing. Clearly our 
present policy has some significant problems, and we invite Joe 
now to help enlighten us as to how we may best correct them.
    You may submit, Mr. DioGuardi, your entire statement for 
the record and summarize as you see fit without objection.

    STATEMENT OF THE HONORABLE JOSEPH DIO GUARDI, VOLUNTEER 
         PRESIDENT, THE ALBANIAN AMERICAN CIVIC LEAGUE

    Mr. DioGuardi. Thank you, Mr. Chairman.
    Thank you so much for all you have done in all these years. 
We started I guess in 1986 when we put the first resolution on 
the egregious human rights violations in Kosovo. I was a new 
Congressman back then and ethnic Albanians in my District came 
to see me, and I was shocked by what I heard from them about 
what was happening in the middle of Europe. And you and Tom 
Lantos and so many other good Congressmen and later Dana 
Rohrabacher joined with us.
    You know, if it weren't for the vigilance of this Committee 
and the actions that it has taken since 1989, especially under 
your chairmanship, Congressman Gilman, today Kosovo would be 
like Chechnya, a wasteland with hundreds of thousands of bodies 
strewn about and nobody would care. I really feel sorry for the 
poor people of Chechnya who did not have a voice in this 
Congress, but that is what Kosovo would have been had it not 
been for people like you. And we really appreciate all that you 
and this Committee have done, but the job is not over.
    I know you have to leave. You can pass the baton to Dana, 
and I will let you know the bottom line.
    Chairman Gilman. I sorely regret. I am being called to 
chair another meeting with the World Bank President. As you 
know, he is being challenged this weekend here in Washington, 
all kinds of demonstrations against the World Bank.
    I am now going to ask Dana Rohrabacher, our distinguished 
senior Member of our Committee, to conduct this; and I will try 
to return as soon as we finish our other meeting. Thank you for 
being here, Congressman, and thank Shirley Cloyes for her 
interventions. Mr. Rohrabacher.
    Mr. DioGuardi. What I would like to do Congressman, Mr. 
Chairman, is to basically summarize what I think are the key 
issues and the matrix we can use is, one, legal; two, economic, 
practical; and three, political.
    What I will do is submit for the record a statement 
prepared by our Balkan Affairs Adviser Shirley Cloyes, my wife. 
She is a volunteer, by the way, as I am, and she prepared 
something that is probably the most complete analysis of what 
this body and the Administration has to do to win the peace. We 
know we won the war, but it looks like, as you have suggested, 
we are losing the peace.
    Mr. Rohrabacher [presiding]. Your statement will be 
included in the record.
    Let me note that there will probably be another vote around 
35 minutes from now, and if we could have your testimony and 
the testimony of the next panel, that is the way it is going to 
get done. Otherwise, somebody will get shortchanged. So if you 
could summarize your testimony and we get to the next panel, we 
will get everything on the record.
    Mr. DioGuardi. We look forward to the meeting with you 
tomorrow so that we can help you on your trip to Kosovo and 
meet the fine people we have brought here, because it is 
important that you get all the information possible to bring 
back to this body.
    So what I would like to do is start with the legal issue, 
and we have with us today one of the most prominent professors 
of international law in the Albanian world. He is a Professor 
of Law at the Universities of Prishtina and Tetova, Prishtina 
in Kosovo and the University of Tetova in Macedonia. He is Dr. 
Esad Stavileci. He is not able to speak today, but he did 
prepare a statement that is in English, and I would like to 
submit this for the record.
    Mr. Rohrabacher. The statement will be made a part of the 
record. So ordered.
    [The prepared statement of Mr. Stavileci appears in the 
appendix.]
    Mr. DioGuardi. He has come to the same conclusion as Noel 
Malcolm has, the English scholar, the gentleman from Oxford who 
said that under international law Kosovo deserves its 
independence, as you have suggested. He has prepared a book on 
this. Dr. Stavileci has summarized that book in his statement, 
and basically the bottom line is that Yugoslavia is a 
confederation that is in the process of disintegration.
    It is not only Albanians that are saying that, Mr. 
Chairman. You can turn to some well-known Slavs. One that I 
want to quote here is the Croatian scholar, Branka Magas. She 
stated in a speech to the Bosnian Institute in London on May 
10, 1999: ``Unless the process of dissolution of Yugoslavia is 
allowed to be completed and the Former Republic of Yugoslavia 
dissolved into its component parts, thus setting Kosovo on a 
path to independence, it will be impossible to build a peaceful 
and democratic state system in southeastern Europe.''
    Mr. DioGuardi. It can't be said any better than that, and 
this is not an Albanian speaking. It confirms what you said. 
What are our choices here? Our choices are to stay there for a 
long period of time or allow the Albanians to control their own 
destiny.
    Let me go to the next phase, which is the economic and the 
practical. That is why we brought Dr. Muhamet Mustafa. He is an 
expert on the economy of Kosovo. He put together a group called 
the Riinvest Institute for Development Research. He is the 
chairman. He has many contacts in the United States. His papers 
have been quoted here in the newspapers in Washington and the 
bottom line is that Kosovo does have the resources to be 
economically independent. It has mines, the Trepca mines. It 
has many factories, many that are being occupied by the bloated 
bureaucracy called UNMIK right now, so that Albanians can't 
even reclaim the factories so that they can return to their own 
jobs.
    Kosovo does not want to be another Bosnia. It doesn't want 
to be a ward of the United States and of the rest of the world. 
Bosnia, as you know, is an ethnically divided, carved-out 
enclave, totally dependent and going nowhere. It is very 
important to hear Dr. Mustafa's message.
    Let me go on to the third phase, the political. This is 
where the rubber hits the road, Mr. Chairman. If we don't 
understand that it took a bold stroke by the United States to 
jump in and do what we did--and it was costly, as you said. You 
should have asked your old buddy, Joe DioGuardi, the only 
certified public accountant ever elected to this body in 200-
and-something years, and he could tell you why the Kosovo 
military campaign was more expensive than the figures indicate. 
But Ambassador Pardew couldn't explain this to you because 
government operatives don't understand their own accounting 
system. In effect, all the bombs that were dropped were part of 
some other budget in years past. We are not on an accrual 
system here. So every bomb, every plane they used, everything 
that was destroyed was already written off. The government 
doesn't consider that a cost. If you are in business and you 
used that system, you would be indicted if you had a publicly 
traded company. But that is the system we have here.
    What you have to say to them is, wait, I want to know what 
we used during this war, not what you just put into this year's 
budget because you had to replace something and drop it. What 
did you use? And you will find out that the real cost is tens 
of billions of dollars for sure.
    The political solution for Kosovo is going to be a tough 
one. You have the United Nations with a resolution that is bad 
law. We have had bad laws in this country. Remember the Dred 
Scott decision that black Americans were just property. We had 
to get rid of that law. It was bad. We had a Civil War over it.
    U.N. Resolution 1244 is bad law. Let me tell you why. On 
the one hand it asserts the sovereignty of Serbia over Kosovo, 
and on the other hand it dismantles Serbia's sovereignty. You 
have created an ambiguity here that doesn't allow the Kosovars 
any ability to stand on their own feet. And you have got now a 
bureaucracy called UNMIK and OSCE and several others that are 
trying to work within this resolution.
    The worst result is the situation in Mitrovice. That is why 
we brought the mayor of Mitrovice, Bajram Rexhepi. Bajram 
Rexhepi is a medical doctor. We also have here the former 
Albanian director of the Trepca mines. He can tell you how to 
put those mines back into service. They even have a pro forma 
where this year they can make money if you allowed them to do 
that, but they can't control their own mine. The problem is the 
United Nations It is trying to impose or trying to implement 
bad legislation, and we have got to do something about it.
    Now, I am going to give you my last comment and this is 
where the conundrum is. How do you deal with it? If the United 
States hadn't taken the lead with NATO in stopping the 
genocide, there would have been a tremendous conflagration. We 
know that Greece and Turkey would have been at each other 
because of Macedonia being right there. We did the right thing. 
It is still in our vital interest to do the right thing. By the 
way, the paper that was prepared by Shirley Cloyes was 
delivered to the White House 2 weeks ago because we wanted the 
President to know. He has a chance to be bold again, and he is 
being too cautious.
    [The prepared statement of Mr. DioGuardi appears in the 
appendix.]
    Mr. Rohrabacher. What is the right thing?
    Mr. DioGuardi. The right thing right now is to look at the 
real villains. Villain one, Slobodan Milosevic, is still there 
doing damage. I heard Congressman Bereuter complaining about 
how the Albanians are treating the Serbs so badly. He forgot 
what Slobodan Milosevic did, to kill Albanians, including 
pregnant women, to rape and torture them. Everything that we 
have seen in Nazi Germany was repeated. He didn't want to 
mention the resentment for some reason.
    The point is you have Slobodan Milosevic. He has got to be 
picked up, just like we picked up Krajisnic last week or the 
week before. We have to get the French out of the way and bring 
this guy to justice. Without that, there will never be peace in 
the Balkans.
    To get justice, you have two other problems. You have China 
and Russia. This is where the United Nations is not the place 
for the solution. As long as you look to the United Nations for 
the solution of Kosovo, you will never have the solution. Why? 
Russia has lost its influence all over the world. It is 
embarrassed now to retreat because it wants to find some place 
where it has some influence. Russians have their Serbian 
surrogates, their Serbian Communist regime. They are going to 
stay in the Balkans until we tell them, if you don't move, we 
are not going to give you the World Bank credits, the aid you 
need. So Mr. Putin, back off. We will work with you in some 
other areas.
    And China, my God, what did the Chinese just do? Another 
Communist regime. They gave $300 million to Slobodan Milosevic. 
Is that kicking us in the head? They want us to give them Most 
Favored Nation status on a permanent basis, without conditions; 
but yet they give a war criminal that is trying to reassert his 
dominance in this area, that will kill the peace in the Balkans 
and Europe, they give him $300 million.
    What is Slobodan Milosevic going to do with this money? 
Create jobs? No. He is going to pay his army and his police. So 
we have to back China off, and we have the leverage to do this. 
I hear people asking what are we going to do? It is going to 
take too long.
    Mr. Rohrabacher. Your solution is, No. 1, to make sure that 
Slobodan Milosevic is arrested as a war criminal.
    Mr. DioGuardi. Absolutely. You have to do something more 
than just wish it.
    Mr. Rohrabacher. No. 2 is to get Russia and China out of 
the way.
    Mr. DioGuardi. They need our trade and our economy. They 
need our aid, and we have to assert that.
    Mr. Rohrabacher. Do you have another point to make? 
Otherwise, I think we need to get onto the panel.
    Mr. DioGuardi. There is a reason to do it. This will 
prevent another Balkan war. If we don't do this, you are 
heading for another Balkan war. I know the Albanian people. 
They are certainly not going to go back under Serbian 
sovereignty. So we need to find a solution. I have pointed the 
way. You guys have to find a resolution.
    Mr. Rohrabacher. May we put the next panel up, because we 
are going to have a vote in 20 minutes.
    Mr. DioGuardi. Thank you for the hearing.
    Mr. Rohrabacher. Thank you. You are making sure that your 
entre is used for righteous causes.
    We are proceeding now with the second panel. We have Ms. 
Linda Dana. She is from a town in the center of most of the 
heavy fighting, and she is a former medical student and will 
testify about her family's and her own personal experiences 
during the war. I am grateful to Mr. Pomeroy who has actually 
arranged for Ms. Dana's appearance here today. Would you like 
to say a few words in introduction?
    Mr. Pomeroy. I met Linda Dana when I had my trip in 
December. She is in the United States at this point in time 
acting as a medical interpreter for two children who are 
undergoing medical procedures in Cleveland. So it was very 
fortunate, I believe, for us that she happens to be in the 
country at the time of this important hearing, and the Chairman 
was very kind to acquiesce to my request that she testify.
    Mr. Rohrabacher. If you have a written statement for the 
record, if you can put that in the record. If you can summarize 
in just a couple of minutes for your testimony, then we will 
have everyone summarize and come back for questions for 
everyone on the panel. We want to make sure that everyone gets 
heard.

 STATEMENT OF LINDA DANA, INSTITUTIONAL CONTRACTOR IN KOSOVO, 
            INTERNATIONAL ORGANIZATION FOR MIGRATION

    Ms. Dana. Thank you, Mr. Chairman, Members of the 
Committee, and Congressman Pomeroy. My name is Linda Dana. I am 
from Gjakova in the western region of Kosovo. I am happy and 
grateful to have the opportunity to speak with you today about 
missing and imprisoned people, an issue that touches many 
Albanian families in Kosovo, including mine. It is estimated 
that 4,500 Kosovar Albanians are imprisoned in Serbia and are 
still unaccounted for. To date, Serb authorities have not been 
forthcoming with any information. Until we know the fate of our 
family members and fellow citizens, the war will not be over 
for us. I am here today to ask the U.S. Government to help us 
find out what happened to these people.
    Today, I speak for the people of my city, prisoners and 
missing persons. Before the war, I was a medical student. I was 
born and grew up in Gjakova, the third largest municipality in 
Kosovo. Gjakova was both a cultural and industrial center. The 
prewar population of the city and surrounding villages was 
approximately 141,000 residents; 2 percent were Serbs.
    Kosovar Albanians were not free. At best we are second 
class citizens. We could not hold jobs in state-supported 
enterprises, attend state secondary schools and universities, 
or travel freely. We were forced to live in a parallel system, 
but we survived.
    The war came to Dukagjini region in western Kosovo in the 
summer of 1998, long before NATO bombing. The city of Gjakova 
was almost totally blockaded. Travel in and out of the city was 
dangerous if not impossible. There was continual heavy fighting 
in villages around Gjakova between Serb military forces, the 
KLA and civilians. On March 24, 1999, Serb military and 
paramilitary forces burned the historical sections of Gjakova 
to the ground in an act of revenge. For 450 years Old Town was 
built, and after one night it is gone. The burning of Old Town 
marked the beginning of terror for us because it was a symbol 
of pride of this community.
    During the next 2\1/2\ months, many people were forced to 
leave the city. Of the almost 60 percent that stayed, 1,500 
people were either killed or captured by Serb forces. Some are 
known prisoners, but the fate of many other remains unknown.
    In the city, paramilitary forces went from home to home, 
sometimes torturing, looting, or rounding up men and boys. 
There are stories of people being killed who refused to open 
their doors to police. Civilians were forced to hide in their 
homes. As many as 30 people gathered in one house, posted 
lookouts and waited for Serb police.
    On the night of April 1, my neighborhood was in flames. I 
was alone with my mother and father because my brothers had 
been on the run for 5 days. I don't know how we survived. On 
the morning of April 2, we were forced to leave our home with 
thousands of people.
    I left with my childhood memories, with my youth songs, but 
without my brothers. In the hope that we would find my brothers 
among the lines of people, we walked for 9 hours to get to the 
Albanian border and stood there for 2 rainy nights until we 
reached Kukes.
    But my brothers never came. They never passed the border of 
hope; rather, they are forced to stay in the city of hell and 
be threatened every minute with death.
    After 72 long days the war was finished, but not my 
suffering and the suffering of many Albanian families. I had 
lost my home, and my second brother was missing in town, 
together with thousands of people all over from Kosovo.
    Between May 7 and May 15, 300 people were taken from their 
homes. At 8:30 a.m., on May 10, paramilitary forces entered the 
street Asim Vokshi, at my uncles's house where my brother was 
staying. They separated men and boys from women. Then they beat 
an old lady who refused to let go of her sons. They forced the 
other women to leave the streets. According to eyewitness 
accounts, 30 men, including my brother and 9 members of my 
large family were taken into the street where the police 
checked documents, beat some of them and shot the others. The 
bodies were later removed. Witnesses also claim that they saw 
some men forced into a police van which was driven away. We 
don't know who the men in the van were.
    My story is not unique. It is just one of the stories that 
people have to tell. It just happens that I am here and telling 
the story. It is hard to go back and to face your destroyed 
town and face your friends and relatives. The story of my 
hometown remains painful and unfinished. The drama continues. 
Every Friday people stop working for an hour and they protest 
with photos of their loved ones.
    A citizens' organization from Gjakova, the Office for 
Information on Detainees and Missing People, has been working 
with national and international organizations to gather 
information about missing, detained and imprisoned persons. It 
is known that when Serb forces retreated, they transferred 
prisoners from Kosovo to Serbia. According to the records, 370 
people from the municipality of Gjakova are in Serbian prisons; 
703 people fate is still unknown. Local organizations and the 
newly appointed Gjakova municipal commission are working 
closely with the Kosovar Transition Council's Commission on 
Prisoners and Detainees and the International Committee of the 
Red Cross to bring this issue to the attention of international 
community. They have called upon the former Republic of 
Yugoslavia and Serb authorities to provide a full accounting of 
known dead and persons currently detained and imprisoned in 
Serbia as well as immediate release and return of prisoners and 
detainees. They have also requested that the Secretary General 
of the United Nations appoint a special envoy to address the 
issue of missing persons. On their behalf, I am asking the U.S. 
Government to support these efforts.
    I know that in the recent weeks representatives from the 
U.S. Government and the governments of western Europe have 
expressed concern about incidents of ethnic violence directed 
at Serbs and other minorities in Kosovo. We too want the 
violence to end because until it does, the conflict in Kosovo 
will not be over. It is also true that until we know what 
happened to the members of our families, we will not be free to 
build a better future for all Kosovars.
    In closing, I want to say on behalf of all Albanian 
Kosovars, I want to express our sincerest gratitude to the 
American people, President Clinton, the Congress of the United 
States and all of the NATO allies. It is because of you we are 
free, because of you we are alive and we have human dignity 
back, and our eyes look forward to the future.
    The task of rebuilding our lives and communities is well 
underway. I have seen firsthand the impact of the United States 
assistance to Kosovo as an employee of the USAID Office of 
Transition Initiatives. I have worked in partnership with 
communities throughout Kosovo to provide emergency relief, 
rebuild homes, schools, and repair water and electrical 
networks. With continuing support of the United States and the 
European allies, we will build a better future. Please do not 
lose faith in us. I hope that my voice has conveyed the clear 
message of gratitude and appreciation of all Kosovar people and 
I thank you today.
    Mr. Rohrabacher. Thank you very much for your testimony.
    Ms. Dana. Thank you for listening to me.
    [The prepared statement of Ms. Dana appears in the 
appendix.]
    Mr. Rohrabacher. We appreciate your colleague from North 
Dakota to make sure your message got out. We will make sure 
that whatever issues take place, that the issue of missing 
people will be high on the list of priorities.
    The next witness that I have down is Dr. Bajram Rexhepi. 
Dr. Rexhepi is a medical doctor and he has been very actively 
involved in Albania, and frankly he has focused attention of 
ethnic lines between northern and southern sectors.
    You may proceed. I would suggest that when that bell goes 
off for a vote, we have very little time left. We have 10-15 
minutes to get all of the testimony in, if you can summarize.

  STATEMENT OF BAJRAM REXHEPI, M.D., CHAIRMAN OF THE COMMUNE 
                           MITROVICE

    Dr. Rexhepi. I am pleased, Mr. Chairman, that Mr. Gilman 
has invited me to present testimony to your Committee regarding 
the city of Mitrovice which has been illegally divided. I will 
focus on the problems that are obstacles to resolving the 
Mitrovice issue and that thereby prevent the establishment of 
peace and stability in postwar Kosovo.
    I want to begin with the roots of the problem. The 
following factors contribute greatly to the crisis in 
Mitrovice:
    First, Milosevic has created a system of parallel Serbian 
institutions with Serbian agents from Belgrade acting in 
Mitrovice in an unrestrained way.
    Second, the Serbian regime has created executive councils 
in the Serbian areas of Mitrovice to implement Serbian control 
in violation of U.N. Resolution 1244.
    Third, undercover Serbian police masquerade as civilians, 
while they in fact operate with sophisticated communications 
equipment and weapons.
    Fourth, parallel courts operate in a continuation of 
Serbian prewar trials.
    Fifth, even local services, such as elementary schools, 
high schools, the universities, and the hospitals, are provided 
by a parallel system of local institutions and communes.
    The current reality in postwar Kosovo is that, Albanians 
have always been cooperative, with the aim of creating, as soon 
as possible, joint organs of local administration. The Serbian 
side has been marked by a lack of cooperation, intentional 
obstruction of efforts to create a joint administration, and 
outright acts of violence. This behavior belies the reality of 
what is happening inside the Serbian population at the local 
level. Many Serbs are actually ready and willing to cooperate, 
but they have been prevented from doing so by extremists who 
have threatened them and their relatives with death.
    I will try to be short. Serbia wants to divide Mitrovice 
and have control of the Trepca mines. In order to keep the 
mineral wealth of Trepca in his hands, Milosevic must dominate 
the political dynamics in the region. He is trying to create a 
geographical and ethnic connection between Serbia and the 
northwestern part of Kosovo. The populations of Peposaviq and 
Zubinpotok, for example, are now 90 percent Serbian and 10 
percent Albanian. With the ethnic cleansing of the northern 
part of Mitrovice, the city is now divided by the Iber River 
between Serbians in the north and an Albanian majority in the 
southern part.
    The northern sector is, as I stated earlier, a haven for 
Serbian war criminals, gangs, and members of organized criminal 
syndicates. Their unrestrained movement between Serbia and 
Kosovo and their stockpiling of weapons has been very visible. 
It is becoming increasingly apparent that Milosevic wants to 
control the northwestern part of Kosovo as the first step in a 
strategy to destabilize or attack Montenegro, the Sandzak, and 
Kosovo. The principal source of provocation and new conflict is 
the continuing existence of Milosevic's regime.
    In order to prevent the permanent partitioning of 
Mitrovice, the multinational KFOR forces must control the flow 
of arms and use of covert communication devices on both sides 
of the city. The border between Serbia and Kosovo must be 
controlled. Under U.N. Resolution 1244, Serbian troops and 
nonresidents of Kosovo must remain 5 kilometers behind the 
border.
    The U.N. police must play an active professional role in 
the life of the city. The arrest of criminals and the removal 
of troublemakers will lower tensions and make it possible to 
begin the path to peaceful coexistence between Albanians and 
Serbs. All residents of Mitrovice should be assisted in 
returning to their homes and buildings on both sides of the 
city. Schools that have been occupied by Serbs must be 
released, so that students may return to their classrooms. 
Steps must be taken to reactivate the economy with an emphasis 
on the stimulation of small- and medium-sized businesses. This 
cannot happen unless joint institutions and a local 
administration are established immediately.
    Regarding the latter, the existing measures set forth by 
the Transitional Council of Kosovo to ensure freedom of 
movement throughout Mitrovice, while not ideal, should 
nevertheless be implemented as soon as possible. There is a 
pressing need to increase the efficiency of UNMIK's civilian 
administration. This could be accomplished, in part, through 
closer and more complete collaboration between UNMIK, the 
police, and KFOR and greater engagement with the local 
population.
    I want to close with a word of thanks. In spite of all of 
the problems that Mitrovice continues to face, the NATO 
intervention in Kosovo stopped Milosevic from implementing 
full-scale genocide, created the possibilities for the return 
of the Albanian population, and provided a path that ultimately 
will enable us to create conditions for a normal life. Without 
this action by the West, especially by the United States, with 
the constructive commitment of the Congress, the world would 
have abandoned us and itself to barbarism.
    Thank you.
    I would like to present some documentation about the 
structural nature of the population because before the war, it 
was 62 percent Albanian, and there has been much ethnic 
cleansing.
    Mr. Rohrabacher. We are happy to put that into the record.
    [The prepared statement and additional documentation of Dr. 
Rexhepi appears in the appendix.]
    Mr. Rohrabacher. We are now joined by Congressman Engel 
from New York who has been a real hero in this effort over the 
years and we recognize not only his good heart, but his 
tremendous energy that he has put out in this part of the world 
to try to save people's lives and bring about peace in that 
area.
    We will have a couple more testimonies, and then questions 
and answers. The next witness is Dr. Muhamet Mustafa, and he is 
from an economic think tank that is focused on some of the 
requirements that are necessary for the Kosovar economy to 
become independent and for Kosovo to become a real and 
legitimate country, and we are very interested in your 
analysis. You may proceed.

STATEMENT OF MUHAMET MUSTAFA, PRESIDENT, RIINVEST INSTITUTE FOR 
                      DEVELOPMENT RESEARCH

    Mr. Mustafa. Thank you, Mr. Chairman, Members of the 
Committee, ladies and gentlemen, it is a great honor and unique 
privilege for me to have the opportunity to address you during 
these challenging times for Kosovo.
    I will stress only some points in my speech because we are 
behind schedule, it seems.
    My organization has conducted several surveys to identify 
the impact of the war on Kosovo, which I would like to share 
with you today in order to illustrate our challenges. During 
the war, about 88 percent of the Albanian population was 
deported out of Kosovo or displaced from their residences in 
Kosovo. Families' incomes were reduced by 70 percent; 70 to 80 
percent of household goods were destroyed or looted. The 
private housing stock was reduced by 40 percent.
    In commercial life, 90 percent of private companies 
suffered some form of damage. Livestock and farming equipment 
levels were reduced by 50 percent. The situation in our 
socially owned companies and public companies was compounded by 
technical degeneration from the last 10 years of rule by the 
Serbian regime. Our unemployment rate immediately prewar was 74 
percent. When we consider the systematic destruction of the 
Milosevic regime in interethnic relations during the last 10 
years and the terrible social and psychological consequences of 
the war for thousands of families and individuals in Kosovo, we 
have a more complete picture of the devastation in postwar 
Kosovo.
    However, there is good news to share. We estimate that 
about 95 percent of the deported and displaced population have 
returned in or near to their previous residences, and are 
showing their interest in rebuilding their lives. Family 
businesses such as shops, restaurants, handicrafts, and 
services have been reactivated. Around 70 percent of small and 
medium enterprises have restarted and increased their turnover 
by 40 percent. Employment increased by 27 percent and salaries 
64 percent compared to 1998. Farming and land cultivation lags 
behind due to the large-scale devastation of the villages.
    Public services and utilities have been reactivated but 
with significant problems due to the consequences of the decade 
of neglect and current inefficiencies in developing central and 
municipal administrative structures.
    The U.N. administration has made significant efforts to 
establish the basic legal framework for a market economy. 
However, the participation of Kosovars in this administration 
and the reconstruction process needs to be advanced. There is a 
need for more direct Kosovar input in a process that will bring 
a sense of ownership in it and in policymaking. This is 
essential for public support and the strengthening of the rule 
of law and a sustainable public finance system.
    There is a feeling that the U.N. administration is being 
built more under the influence of the political spectrum rather 
than working to include and strengthen civil society capacities 
and technical resources. Shifting from emergency to a 
sustainable phase of reconstruction strategy should include 
building up economic independence with an open economy and 
regional and European integration. Kosovo's advantages are 
human capital, entrepreneurial spirit and energy, a positive 
attitude to transitional reforms, natural resources, optimism, 
and the people's strong determination to rebuild their country.
    Kosovo is a post-colonial country with heavy war 
consequences. When Kosovo had broad autonomy during the 
seventies, its economic viability substantially improved, and 
during 10 years of peaceful resistance Kosovars survived within 
their own institutions. In today's postwar environment, they 
are exhibiting an impressive readiness to rebuild their 
society. Technical and financial assistance needs to capture 
this energy and should be focused on increasing development 
capacities according to modern development concepts based on 
entrepreneurship rather than the creation of yet another aid 
economy.
    The quality of economic viability not only of Kosovo but 
also the other countries in the region will depend on the 
outcome of the current efforts within the Stability Pact and 
other initiatives.
    Mr. Chairman, the stance respectively of this House and the 
U.S. Administration toward the Kosovar issue was essential for 
our hope in the hard times that we have just passed through, 
and it is of key importance not only from the perspective of 
building up a democratic society in Kosovo, but for the 
transformation of the Balkans into a region of cooperation free 
from the burdens of the past and history. From their 
perspective, Kosovars believe in European values and they 
understand the importance of the role of the European Union in 
the postwar period, but we believe also that the role of the 
United States in Kosovo and in this whole, sensitive region is 
crucial. For it provides the most effective channel to overcome 
the historical burdens that plague the Balkans and to promote 
the values of openness in this new era of globalization.
    Mr. Chairman, Members of the Committee, let me express my 
gratitude toward our [Riinvest] American partners, the Office 
for International Private Enterprises, the National Endowment 
for Democracy, USAID, and Freedom House. These organizations 
have assisted in the growth and development of Riinvest, the 
private think tank in Kosovo that I represent, and who work 
closely with us in enhancing Kosovar capacities for economic 
and social development and democracy. Also I thank very much 
the American Albanian Civic League for bringing here the 
reality of Kosovo. Thank you very much.
    Mr. Rohrabacher. It is very good to hear that the National 
Endowment for Democracy has been investing in this type of 
long-term approach and analysis. We appreciate your testimony.
    [The prepared statement of Mr. Mustafa appears in the 
appendix.]
    Mr. Rohrabacher. Next, if I pronounce it correctly, is Ilir 
Zherka, Executive Director, National Albanian American Council, 
which is a nonprofit organization which fosters a better 
understanding of Albanian issues and promoting peace, human 
rights and development in the Balkans.

STATEMENT OF ILIR ZHERKA, EXECUTIVE DIRECTOR, NATIONAL ALBANIAN 
                        AMERICAN COUNCIL

    Mr. Zherka. Thank you, very much, Mr. Chairman. I will 
submit my full statement for the record. You know, I think that 
the international community has had a mixed record in postwar 
Kosovo. There have been some successes and some failures. But 
the answer to winning the peace is more U.S. leadership, not 
less. I think the American people understand this. There was a 
poll conducted last month that showed that two-thirds of the 
American people think that the U.S. military should stay in 
Kosovo until we finish the job, the transition to democracy and 
also protecting the people. That poll, Mr. Chairman, you will 
be happy to know, also showed that 79 percent, close to 80 
percent of the American people, support a proposal to create a 
democratic, independent Kosovo.
    Getting back to our involvement, I think that the American 
people support it and it is critical here, but in order for us 
to win the peace, we have to maintain our flexibility and our 
focus, and I think that H.R. 4053 unfortunately limits that 
flexibility and diverts some of our focus.
    On the question of flexibility, we need to be in there, we 
need to be doing the right thing. And, sure, the Europeans 
ought to be paying the bulk of the expenses on reconstruction, 
and they are. This policy is working and I think the 
Administration has gotten the message, but I think a hard cap 
sends a bad message that we are willing, if the Europeans 
reduce their spending by 50 percent, to follow in suit, which a 
hard cap would result in. I think it also would be very 
difficult to administer. You would have the Administration 
looking over its back to figure out where they are in 
relationship to the Europeans, and that is not what we want 
them to do.
    It would also take away one of our strengths in the postwar 
Kosovo. Again, if you are having to look over your shoulder and 
figure out what you are spending in relationship to other 
people who are pledging one thing today and delivering 
something else later, I think it makes it difficult. That is 
the first issue.
    The second is the question of our focus, and I think that 
another thing that is unfortunate about the bill is not only 
that we set this spending cap, but then we protect money to 
Montenegro, Macedonia and Serbia against a cap. Although this 
bill doesn't limit aid to Kosovo and Albania, I think the 
message is that Macedonia shall be a priority for funding. The 
message is that these other places are a priority and maybe 
Albania and Kosovo are not.
    We haven't won the peace in Kosovo, and we need to be more 
engaged, not less. We need to be focused on winning the peace 
there. As all of us know, the Albanian people are staunch, pro-
Americans. They believe that they have a special relationship 
with this country that started with Woodrow Wilson and 
continues on to today. We should cultivate that relationship 
and finish the job in Kosovo and we should have a regional 
approach to aid that emphasizes burden sharing by the Europeans 
at a much larger level than ours but that treats the region 
fairly and adequately.
    And I think if we are going to have a priority in the 
region, Kosovo ought to be it. It is the most dangerous place 
there, and it continues to be the most dangerous place. I would 
say that this bill--although I understand the intention of the 
sponsors of the bill, I think it sends a mixed message to the 
region--would limit the flexibility of the Administration and 
also would focus our energy, we believe, at the National 
American Albanian Council where we ought not be going.
    That is a summary of my testimony.
    [The prepared statement of Mr. Zherka appears in the 
appendix.]
    Mr. Zherka. I wanted to offer the results of the poll that 
I mentioned to add to the record.
    Mr. Rohrabacher. Without objection, so ordered.
    We appreciate your summarizing your testimony. It was 
forceful and direct, and we thank you for that. I will now--let 
me just say a couple of words and then I will turn it over to 
my colleagues.
    About 8 years ago now, my attention was first drawn to the 
Balkans, and most Americans didn't pay much attention to the 
Balkans until all of this happened. Let me just note that I 
don't believe that what has happened there is something that 
was mandated by history and by the underlying animosities 
between races and ethnic groups and religions which went on. I 
think the U.S. Government, not just starting with this 
Administration but starting with the Bush Administration, blew 
a chance for peace in the Balkans. I think our problem in the 
Balkans stems back to a speech given by Secretary of State Jim 
Baker in Belgrade when he gave the impression to Milosevic and 
his crew that stability was America's No. 1 goal in the Balkans 
and that they would be the instrument for stability. Shortly 
after that, Milosevic sent his tanks into the neighboring 
countries.
    That was very sad because I think before that time if the 
stress would have been on freedom and free trade and enterprise 
and opportunity and justice, which is what--frankly, which is 
what Ronald Reagan stressed compared to George Bush, his 
successor--a free system could have been established in which 
people wouldn't have felt so threatened. If there would have 
been democracy in Serbia and a more democratic system there, 
people could have, I think, cooperated.
    It is one of the true tragedies of our time that what 
evolved wasn't a more peaceful evolution into a better world 
after the Cold War ended in the Balkans but instead devolved 
into this mess. As I say, I think the policy of the United 
States Government--when you do not stand for freedom and you 
talk about stability, in the end you don't have stability or 
freedom. Needless to say, another to way to put it, pragmatism 
just doesn't work. And I know that sounds rather ironic, but if 
one is trying to be pragmatic instead of principle-based, it 
doesn't work in the long run.
    Nowhere was that brought home more to me than the fact that 
Croatia has had--people say, who are the bad guys; they are all 
bad guys. Well, I am afraid that is just not the case. Croatia 
has had a democratic election, and in that democratic election, 
the party that was in power has been removed and a new party 
has been put in its place; and Croatia has a relatively free 
system now, and Serbia still has the same old dictatorship and 
same old click, and there is no more reason to think that the 
people of Kosovo should be less free than the Croatians or 
Albanians or any of the others. And yet our government still 
insists on calling Serbia Yugoslavia.
    The basic problem I see is that we have not been willing to 
insist that the fundamentals are spelled out and that we 
instead made a principled stand. And the most important 
principled stand is that ballots and not bullets should 
determine people's future, and the people of Kosovo have a 
right, just like everyone else, to have ballots determine their 
future rather than bullets, especially if those are bullets are 
from guns from Serbians and people intent on forcing their 
control over a much larger population, as it is in Kosovo.
    So I appreciate your testimony today. Let me just say we do 
have a real hero. I tried to be helpful and Joe has been here 
working over the years to draw our attention. One of the true 
heroes of your effort has been Eliot who has just earned our 
respect. I would like to ask if Eliot has some questions, and 
then we will go to Mr. Pomeroy.
    Mr. Pomeroy. I think it appropriate we yield to a hero and 
just get back to a Member later.
    Mr. Rohrabacher. Thank you.
    Mr. Engel. Thank you. Now that my colleagues have swelled 
my head, I want to thank them both for their kind remarks. They 
are both very kind because both of them have been stalwarts in 
the fight for freedom, particularly in the Balkans. I know Mr. 
Rohrabacher is going to be there within the next couple of 
weeks, and I know that he will come back and report on what he 
saw. He has been one of the most engaged Members on the issue 
of Kosovo and the Balkans and really believes in what he says 
in terms of freedom. We disagree very little regarding the way 
that things ought to be in the Balkans.
    Earl Pomeroy represents a district in the heartland of 
America, and you would think that he wouldn't be concerned with 
things that happen overseas, and he is as concerned as anybody 
else.
    Mr. Rexhepi, I saw you Sunday night in New York. It is good 
to see you again.
    Dr. Mustafa, we have had an opportunity to meet. Ms. Dana, 
we met yesterday, and that was a pleasure. Mr. Zherka and I 
have gone to Kosovo together numerous times and is a good 
personal friend of mine.
    Rather than ask questions, I want to emphasize a few 
things. Dana, Mr. Rohrabacher, said it very well. The only 
solution, in my estimation, long term for Kosovo is 
independence; self-determination. There is no other solution. 
It is ridiculous to think that the Serbs could ever again run 
or control Kosovo or that Kosovo could be autonomous within 
Serbia. It is ridiculous. Ten years ago, 12 years ago, sure, 
that would have been possible. It would have been welcomed. 
Twelve years ago I would have thought a third republic would 
have been a solution within Yugoslavia. It is not a solution 
now. It is ludicrous.
    What makes it difficult is that we entered this war, we won 
the war, and now we have to win the peace. We seem to have 
adopted conflicting goals. While we have driven the Serb army 
out of Kosovo, oppressive force is not what the Serb population 
wants. I believe everyone has a right to live in Kosovo. We 
have driven Milosevic and his miserable people who practice 
apartheid and genocide and ethnic cleansing out of Kosovo. They 
can never come back in. And as Mr. Rohrabacher pointed out, 
people here who oppose Kosovo independence say it is not a good 
idea to have countries break up. If we allow each ethnic group 
to form their own country, you would have hundreds and hundreds 
of ethnic groups from all over the world breaking countries 
apart and forming their own country.
    Well, that might be true if Yugoslavia still existed, but 
Yugoslavia doesn't exist anymore, as Mr. Rohrabacher pointed 
out. It is just Serbia and Montenegro, and the Montenegrans 
want out, and so it is ludicrous to call it Yugoslavia. The 
Bosnians and the Croats and the Macedonians all had the right 
to self-determination and independence, and all had the right 
to form their own nation, the people of Kosovo have the same 
right, and the people of Montenegro have the same right as far 
as I can see.
    Unless NATO or the United Nations or the West wants to make 
Kosovo a protectorate forever, and I don't think that is the 
solution, then we ought to be looking at independence and 
looking at ways to achieve that independence. I think the 
quickest way to achieve that, and it is the best way, is to 
make sure that democracy establishes itself quickly in Kosovo, 
we should have elections even on the municipal and local level 
as quickly as possible, and then on the national level so that 
the people of Kosovo can run their own nation and be a 
democratic nation.
    Therefore, I think the logical conclusion for the world 
would be that they deserve to have their independence. I think 
that is an issue that I am going to keep fighting for. It is 
good for Kosovo and it is good for the United States, freedom 
and democracy. It makes the most sense.
    As Mr. Zherka pointed out, nearly 80 percent of Americans 
support independence for Kosovo. We should not stay there any 
longer than we have to, but we shouldn't leave 1 day earlier 
than we have to, and we shouldn't leave until independence is 
solidified.
    I wanted to also highlight the issue of the prisoners, at 
least 5,000 of them, Albanians who have been taken back to 
Belgrade and Serbia when Milosevic and his people retreated. We 
must continue to urge the release of the Kosovars who are 
illegally imprisoned by Milosevic. We need to constantly raise 
that issue and constantly force that issue.
    Those are really the statements that I wanted to make. I 
just wanted to throw out to the panel what you see, if anyone 
would care to comment, as the most important thing that can be 
done right now. I tell all my friends back in Kosovo that it is 
really important to work together. Everyone in Kosovo agrees on 
the same thing, and that is independence. There may be 
differences on how best to achieve it, but everyone agrees that 
independence is the only solution.
    I would like to ask what we ought to be doing that we are 
not doing in the United States. What do you think are the 
issues that we ought to emphasize in meetings with Dr. 
Kouchner? He is very frustrated that the European nations have 
not come forward with the aid, the police or the things that 
are needed. What do you see are the most important things, and 
what can we do right now in the Congress to solidify that?
    Mr. Engel. And, Mr. Mayor, let me just quickly--I talked 
too long, but I want to just mention one other issue that is 
dear to your heart, and that is the division of your city. We 
cannot, I believe, continue to stand idly by and allow 
Mitrovice to be partitioned because the partitioning, the 
division of Mitrovice, is the effective partition of Kosovo. We 
cannot allow the partition of Kosovo from the bridge north 
through the mines and then up through Serbia. So, I want to you 
to know that your struggle is our struggle because we must not 
allow that continued division of your city.
    Dr. Rexhepi. Any kind of division of Mitrovice and 
partition of Kosovo is unacceptable. I tried to say, very 
shortly, that I think the best solution for stability in the 
Balkans is the independence of Kosovo. I think Professor 
Stavileci gave in written form one project about that, and it 
represents my way.
    Mr. Mustafa. May I add something? I think that the most 
important thing is to channel the determination and energy of 
Kosovars to fully participate in reconstruction and in building 
up institutions, municipal elections, the parliamentary and 
other elections, and to assist Kosovars to inject this energy 
in building up a democratic society. And that in economics, we 
just need an open system of market economy. We need technical 
assistance to engage our population, which is young and which 
is ready to accept new technological challenge. So we need to 
stimulate private sector small- and medium-size enterprises. We 
need to stimulate family businesses and to urge them toward a 
market economy.
    We need to avoid the confusion that was created about the 
ownership of socially-owned companies. The ownership of 
socially-owned companies of Kosovo is the same as ownership of 
socially-owned companies in Slovenia and in other parts of 
Europe. So there is no necessity, there is no reason to make a 
confusion that we do not need and that which doesn't exist.
    Mr. Rohrabacher. Thank you very much.
    Mr. Mustafa. Thank you. Mr. Chairman, I am submitting 
several documents for the record.
    Mr. Rohrabacher. We will be very happy to put that in the 
record.
    Mr. Pomeroy.
     Mr. Pomeroy. Thank you, Mr. Chairman, and I thank you for 
your conduct of the hearing, letting all the witnesses go, and 
driving us right to the vote which has now been called. I think 
you have facilitated a full discussion this afternoon. I 
appreciate it very much and appreciate Eliot's comments as 
well.
    A couple of points. First, relative to the missing 
persons--clearly Ms. Dana, you have made a compelling statement 
today--let us know the personal impact as well as the 
importance really in terms of the recovery of the region, and I 
think that you have certainly refocused this Committee on the 
imperative of a full accounting of missing persons and release 
of prisoners of war by Serbia, before any sanctions can be 
lifted, as one of the utmost priorities with which we hold the 
continuation of sanctions. We will need to continue to press as 
hard as we can on this question.
    More broadly, I want to ask the panel about what might be 
the Kosovar perception of the legislation under consideration 
to cap the United States' participation in the recovery. You 
have indicated, I think each of you, the tremendous 
appreciation of the role, the leadership role the United States 
has played in bringing things to where they are to date. This 
isn't aimed at you, it is aimed at our European allies, and we 
want their full participation. But would there be a perception 
of the people of Kosovo that we are walking away, we are 
diminishing our role, and what would be the psychological 
dimensions that this bill would have for the people there?
    Mr. Zherka. If I can start off, and then we can turn to the 
other witnesses, I think there has already been a little bit of 
that signal. And certainly people up here on the Hill are 
frustrated with the responsiveness or the nonresponsiveness of 
our allies, but in the recent action here in the Congress, you 
had Administration requests for supplemental spending for 
Kosovo drastically reduced. The request was for about $150-
some-odd million. The allocation was for 12.5. Last week there 
was a vote in the House on the Kasich amendment, and of course 
now there is this bill, not to compare this bill to those 
actions certainly, but I think there is a message that is 
coming from the Congress that there is frustration here and I 
think that that is understood.
    This bill represents yet another signal, I think, of people 
of getting the message. But we have on this bill supporters of 
the Albanian people who have been there, like the Chairman and 
others in the past, and so I guess the message to our 
supporters who are on this bill is that the cap puts a limit on 
flexibility where it probably ought not--it doesn't need to be 
there.
    Mr. Pomeroy. It seems to me, we have got to roll here, you 
know; we have got these folks, they are facing unbelievably 
difficult circumstances in the rebuilding. I have seen it. The 
devastation is unbelievable. They are dealing with personal 
grief circumstances, virtually everyone, in some measure, and 
it would seem to me that if our frustration is the Europeans, 
this deals with the Europeans. But for Congress to move this 
legislation is going to kick the very people who are down and 
we don't intend to kick at a time when the United States has 
been there. We are the people that have brought them freedom 
today. We are the people that are almost--that are very 
important to them in terms of a feeling of hope and promise in 
the future. And without feeling that things are going to get 
better tomorrow, I don't know how in the world they can 
confront the terribly difficult rebuilding challenges that face 
them right now.
    And so I just think that this would have unintended 
consequences. No one on this Committee means to send that 
signal, but I think it is inescapably drawn from this action.
    Ms. Dana, do you have a comment on that?
    Ms. Dana. Yeah. I would like to add here we have a big 
responsibility ourselves, too, on establishing a civil society, 
and we know that. We still have to say that we have a great 
people, and which half of them are youth. That is good to have, 
smart young people. But what I was hearing these days is like 
we are a kid that just started walking, and pushing a kid that 
has started walking not to walk as fast as he needs to walk and 
he is willing to walk is the same that is doing Kosovars today. 
Freedom has brought to us a big energy. We know that, but we 
have a long way to walk. It is going to be bumpy, it is going 
to be hard. We still need your support on that, and my words 
are words of ordinary people. I am facing these people every 
day in the field, and just saying to them that I am an employee 
of USAID, which is a governmental organization, I see a big 
smile. I am defending that smile today here in front of you. I 
wish I can do it and you can see it. Thank you.
    Mr. Pomeroy. Beautifully said.
    Mr. Rohrabacher. Thank you very much. I think we should 
close on that. I appreciate all the hard work that Joe has put 
into this and all of you. I appreciate you coming halfway 
around the world here to talk to us. We are the United States 
of America. If we don't stand for freedom we don't stand for 
anything, and we are very proud that the people of Albania want 
to have democratic government and have the courage and strength 
to stand up to tyranny, and we are on your side. So God bless 
you, and this hearing is now adjourned.
    [Whereupon, at 6:10 p.m., the Committee was adjourned.]


      DEVELOPMENTS IN THE BALKANS: CRIME AND CORRUPTION IN BOSNIA

                              ----------                              


                        WEDNESDAY, JULY 19, 2000

                          House of Representatives,
                      Committee on International Relations,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:13 a.m. in 
room 2172, Rayburn House Office Building, Hon. Benjamin A. 
Gilman (Chairman of the Committee) presiding.
    Chairman Gilman. The hearing will come to order. This 
morning's hearing focuses on a distressing problem that 
threatens to undermine our accomplishments in Bosnia and 
perhaps elsewhere in the Balkans. Pervasive crime and 
corruption has tainted all levels of Bosnia's society, 
particularly its political institutions and its economy, and is 
now jeopardizing the basic peace framework that was mandated by 
the Dayton Peace Accord.
    This is a principal finding by our General Accounting 
Office pursuant to a study they conducted that was requested by 
our Ranking Democratic Member, Mr. Gejdenson; our Committee 
Vice Chairman, Mr. Bereuter; and myself last September. Because 
this finding has such profound implications for our goals in 
Bosnia and perhaps lessons for our mission in Kosovo, I have 
convened this hearing in order to allow our Members of our 
International Relations Committee to have the opportunity to 
review and question the GAO authors of this report and also to 
hear our State Department's response to the report.
    I am informed that during a review of the GAO's draft by 
all interested agencies in our government no one challenged the 
essential finding concerning the impact of endemic crime and 
corruption in Bosnia. Given that fact, I am anxious to hear, as 
I am sure my colleagues are, of just what we are doing to 
confront this important issue. I am also informed that our good 
Ambassador, Tom Miller, who has been in charge in Sarajevo 
since last August, has made it his top priority to root out and 
resolve difficulties that have impeded the Bosnian economy.
    Ambassador Miller is focused on the problem of 
privatization and has withheld U.S. funds that would go to 
supporting the budgets of our two main entities in Bosnia, the 
Federation and the Republika Srpska, until the appropriate 
measures are put in place by the local political leaders that 
will ensure a fair and effective privatization of the publicly 
held assets in Bosnia.
    To be fair to the Bosnian people and the situation itself, 
we should note that Bosnia is not only a post- conflict 
situation where a devastating war raged for nearly 4 years, 
forced nearly have of Bosnia's citizens to become refugees or 
internally displaced persons, killing thousands more in the 
massive distribution of problem, but is also a post-communist 
society which has not had the benefit of functioning Democratic 
institutions nor the experience of a free-market-based economy.
    Our purpose today is not to be engaged in the blame game, 
but to determine what needs to be done in order to salvage our 
policy in Bosnia. We have spent a billion dollars in providing 
assistance in Bosnia since 1995 and billions more for troops 
serving there as part of the NATO peacekeeping mission.
    Clearly, our investment is huge, and we can neither ignore 
this problem or simply walk away from our effort. We hope that 
our witnesses today, therefore, can provide us with some 
incites and some suggestions as to what we need to do to make 
our Bosnian policy a success.
    We are joined today by Harold Johnson, who is the Associate 
Director of GAO's International Relations and Trade Issues; Mr. 
James Shafer, the Assistant Director of that office; and David 
Bruno, who is the Evaluator in Charge of this study. 
Subsequently, we will here from Ambassador James Pardew from 
the State Department, who is the principal Deputy Special 
Advisor to the President and the Secretary of State for Dayton 
implementation and Kosovo.
    I now would ask if our Ranking Minority Member of the 
Committee, the gentleman from Connecticut, Mr. Gejdenson, has 
any opening statement. Mr. Gejdenson.
    Mr. Gejdenson. Thank you, Mr. Chairman, and, I think, all 
of us who believe in a dynamic American foreign policy have to 
be vigilant when it comes to looking at what happens to 
American resources. And while the vast majority of American 
resources got to where they were supposed to go and did 
apparently much better than any of our allies, any time money 
is not achieving the targeted effect, it obviously is something 
we need to focus on. So I think there is obviously good news 
here as well as some small areas of major concern, I think, for 
many of our European allies.
    One of the things that I have worked on this year is 
legislation dealing with fighting corruption, and if we look at 
the crises around the globe in many of the most impoverished 
nations, we can often look to decades of corruption and 
thievery by the elected leaders. Clearly, in a case like 
Nigeria, the newly elected democratic government faces a very 
daunting task as a result of the theft of billions of dollars 
in what should be a very rich country.
    So this is an important hearing, and I think that figuring 
out ways to help establish practices that fight corruption and 
bribery is something the United States ought to take a 
leadership role in. I think we can commend the people involved 
in America's AID program for generally doing a very good job, 
and we want to work with them to make that even more 
successful. Thank you, Mr. Chairman.
    Chairman Gilman. Thank you, Mr. Gejdenson. If there are no 
other Members seeking recognition, I now invite Harold Johnson. 
Mr. Johnson has served as director of the International 
Relations and Trade Issues at the General Accounting Office 
since 1996, and prior to that he served in a number of senior 
positions at GAO, including director of international affairs 
issues, foreign economic-assistance issues, and military 
manpower issues. He has been a recipient of many awards during 
his career, such as the Distinguished Service Award.
    Mr. Johnson is joined today by his deputy, James Shafer, 
who has also served as assistant director of GAO's European 
office, and he has been the assistant director of acquisitions 
in the GAO's Army group and previously led numerous reviews of 
military and international issues.
    We are also pleased to have with us David Bruno, who is the 
evaluator in charge of the report that is the subject of 
today's hearing, and Mr. Bruno has participated in or directed 
evaluations of United States and the United Nations' foreign 
affairs and assistance programs for over 10 years, including 
U.S. agricultural-credit programs for the Soviet Union, USAID 
business-development programs in Russia, child-survival 
programs in Africa, and counterdrug assistance in Latin 
America.
    Gentlemen, we welcome our entire panel. We appreciate your 
good work on this report. Mr. Johnson, you may now proceed, and 
you may summarize your statement, which will be entered in full 
in the record, whichever you may deem appropriate. Please 
proceed.

STATEMENT OF HAROLD JOHNSON, ASSOCIATE DIRECTOR, INTERNATIONAL 
RELATIONS AND TRADE ISSUES, NATIONAL SECURITY AND INTERNATIONAL 
        AFFAIRS DIVISION, U.S. GENERAL ACCOUNTING OFFICE

    Mr. Johnson. Thank you very much, Mr. Chairman. We are 
pleased to be here today to discuss the report we completed at 
your request and the request of Congressmen Gejdenson and 
Bereuter on the impact of crime and corruption on the 
implementation of the Dayton Agreements. The agreement, which 
was signed in December 1995, created the Bosnian National 
Government and recognized two entities that were created during 
the war, the Bosnian-Croat Federation and the Republika Srpska.
    During the past 4 years, from 1996 through 1999, the 
international community has provided about $4 billion to 
finance the civil aspects of the agreement. About $1 billion of 
that is from the United States--slightly over $1 billion is 
from the United States. More importantly, as of March this 
year, U.S. military costs to support the agreement have totaled 
over $10 billion.
    The United States, NATO, and the Peace Implementation 
Council have developed conditions often called ``benchmarks'' 
to help determine when military forces can be withdrawn from 
Bosnia. Several of these conditions relate to reducing 
corruption.
    Our report focused on three areas: First, how crime and 
public-sector corruption have affected implementation of the 
Dayton Peace Agreement; second, what the international 
community has done to improve Bosnia's law enforcement and 
judicial systems; and, third, how assistance resources are 
being safeguarded and whether such assistance is being used in 
Bosnia in place of domestic revenues lost to crime and 
corruption.
    I would like to note at the outset that in doing our work 
we did not conduct independent investigations of specific, 
corruption-related cases. Instead, we examined studies, 
reports, and other documents published by NATO, the Department 
of State, the Agency for International Development [USAID], the 
United Nations, and many other international organizations. The 
evidence and conclusions presented in these documents are based 
on analysis and investigations of corruption in Bosnia.
    We also interviewed an extensive list of more than 40 top 
officials, both governmental and nongovernmental, responsible 
for and knowledgeable about programs and activities in Bosnia. 
We based our conclusions and recommendations on this extensive 
documentation coupled with the first-hand experience and 
judgment of high-level, international officials in Bosnia.
    Very briefly, we found a near consensus opinion among 
officials that we interviewed that crime and corruption in 
Bosnia is endemic and that it is threatening the successful 
implementation of the Dayton Peace Agreement and that until 
this situation is satisfactorily addressed, the conditions that 
would allow for the withdrawal of NATO-led forces cannot be 
met.
    Although clearly some progress has been made and some of 
the benchmark conditions have been met, progress in 
implementing the conditions is not yet self-sustaining. 
Bosnia's law-enforcement and judicial systems are inadequate 
and institutionally incapable of prosecuting cases of 
corruption or administering justice. Bosnian, international, 
and U.S. efforts to correct weaknesses in these systems have 
achieved only limited success and have not measurably reduced 
political influence over the judiciary or the economy.
    We found that international assistance, including U.S. 
assistance, is generally not being lost to fraud and corruption 
and that except for some budget support, such assistance has 
been protected by numerous internal controls. However, we did 
find incidents of corruption in the international-assistance 
effort.
    More importantly, however, this assistance provided by the 
international community could supplant the hundreds of millions 
of dollars the Bosnian Government loses each year to customs 
fraud and tax evasion. Moreover, the Bosnians spend a large 
percentage of their revenues maintaining three competing 
militaries that are primarily designed to fight each other. 
According to the High Representative, the size and structure of 
these forces are incompatible with the defense needs of Bosnia 
and are financially unsustainable.
    The international community has provided about $407 million 
in budget support to cover Bosnia's budget deficits, and most 
of this support has not been controlled or audited. The 
exception is the support provided by the United States.
    I would like to expand just briefly on each of the three 
points that we looked at. Pervasive illegal activity is 
negatively affecting the progress of reforming Bosnia's legal, 
judicial, and economic systems; achieving U.S. policy 
objectives in Bosnia; and attaining the Dayton Peace 
Agreement's ultimate goal of self-sustaining peace. Unless 
Bosnian officials make concerted efforts to address this 
problem, the benchmarks that would allow for the withdrawal of 
NATO-led forces cannot be met. According to U.S. and 
international organization officials, to date, Bosnian leaders 
have not demonstrated sufficient political will to reform.
    Bosnia's nationalistic political parties continue to 
control all aspects of the government, the judiciary, and the 
economy. Thus, they maintain the personal and financial power 
over their members and authoritarian control over the country. 
We were told that Bosnian leaders from all ethnic groups may 
have little incentive to combat corruption, since curbing 
corruption may reduce their ability to maintain control.
    War-time, underground networks have turned into political/
criminal networks involving massive smuggling, tax evasion, and 
trafficking in such things as women and stolen cars, and other 
things. Investigations have shown that certain smuggling 
operations have been successful only with the participation of 
customs officials.
    According to the State Department, criminal elements 
involved in narcotics trafficking have been credibly linked to 
public officials. The proceeds of this narcotics trade are 
widely believed to support illegal, parallel institutions 
maintained by ethnic extremists.
    Numerous reports show, and international organization 
officials confirm, that Bosnian law enforcement officers' 
allegiance is often to the ethnic, political parties rather 
than to the public. For example, police in some areas work for 
local party officials and protect the business interests of the 
officials, intimidate citizens, and prevent return of refugees.
    Similarly, political officials are involved at many stages 
in the judicial process. The selection of judges in Bosnia is a 
product of political patronage. Judges' salaries are controlled 
by political-party structures.
    We were told that there are good and honest individuals 
throughout the judicial system. However, criminal leaders, many 
of whom are closely linked to ruling political parties, are 
ready to threaten judges, prosecutors, police officers, 
lawyers, witnesses, with violence, even death, to act in a 
particular way. Such influence over the courts often prevents 
cases involving organized crime and corruption from being 
heard.
    Bosnian, international, and U.S. anticorruption and 
judicial-reform efforts have been initiated over the past 4 
years, but they have achieved only limited success in reducing 
crime, corruption, and political influence.
    While international efforts could correct weaknesses in 
Bosnia's legal and judicial system and provide needed 
supporting structures for the rule of law, Bosnian government 
efforts have primarily resulted in the creation of committees 
and commissions that have failed to become operational or 
measurably reduce crime and corruption. The Office of the High 
Representative has developed a strategy for coordinating 
international anticorruption efforts. However, the strategy 
essentially is a recitation of existing international efforts, 
and although the work of the international community is 
collegial, it is not truly coordinated.
    Despite the lack of a truly coordinated effort, the 
international organizations, including the European Commission, 
NATO, and the United Nations, have implemented a number of 
anticorruption and judicial-reform efforts. I will cite a few 
examples.
    The European Commission's Customs Assistance Office has 
established an anticorruption program that is considered the 
most successful effort. The office has assisted in establishing 
customs legislation and customs services at the entity level. 
Investigations conducted and systems put in place by the office 
have identified incidents of corruption and illegal activities 
that have resulted in the loss of millions of dollars in 
customs duties and tax revenues. In addition, customs officials 
perpetrating illegal activities have been exposed.
    The NATO-led, Stabilization Force helped the entity armed 
forces establish an office of inspector general to help 
eliminate fraud and corruption in the entity armed forces. The 
office's investigations have led to the removal, reassignment, 
or suspension of noncompliant personnel.
    Finally, the U.N.'s International Police Task Force, the 
IPTF, has focused on restructuring, retraining, and 
democratizing local police. The task force has established a 
certification process through which each police officer is 
evaluated against specific criteria, including whether they 
were involved in human-rights abuses during the war.
    In addition, the task force has created specialized units 
to train Bosnian police in public-security issues such as 
organized crime, drug-related activities, corruption, and 
terrorism. Some progress has been made, but the linkages 
between the police and the political parties has not been 
broken.
    The international community has implemented a number of 
efforts to make Bosnia's weak and politically influenced 
judiciary more independent and professional. The Office of the 
High Representative, for example, has imposed laws to expand 
the jurisdiction of the Federation Supreme Court and the 
Federation Prosecutor's Office and provided special witness 
identity protection. In addition, the United Nations 
established the Judicial System Assessment Program in 1998 to 
monitor and assess the judicial system in Bosnia. However, 
these and other efforts have had only minimal impact on the 
problem, partly because high-level Bosnian officials have not 
demonstrated a sufficient commitment to fighting crime and 
corruption.
    U.S. anticorruption efforts, led by the Agency for 
International Development, seek to curtail corruption through 
the elimination of the communist-era financial-control systems, 
primarily the payment bureaus, and by privatization of state-
owned enterprises. Experience has shown that the best and 
possibly the only way to accelerate the establishment of a 
sound and competitive, commercial banking system is to attract 
reputable foreign banks. Although efforts to establish a 
private banking system in Bosnia are progressing, the U.S. 
Government and the international community have had little 
success in attracting prime-rated, international banks to come 
to Bosnia.
    Privatization has encountered problems, and corruption is a 
concern. According to the United Nations and other experts, the 
privatization process is another opportunity for government and 
party officials to profit through corrupt activities. For 
example, officials may solicit bribes from those interested in 
obtaining assets or sell assets to themselves below value. 
Further privatization could legitimize political factions' 
ownership of companies.
    The documentation required to privatize Bosnian companies, 
including opening balance sheets and privatization plans, is 
being provided by the enterprise managers who may themselves 
bid on the companies, clearly a conflict of interest. Several 
officials told the Agency for International Development that 
they were depressing the value of their firms so that they 
could purchase them for less than their true value. Also, the 
Office of the High Representative publicly stated in April of 
this year that a majority of the already privatized companies 
now belong to the nationalist political parties.
    Finally, you asked about controls over international aid 
and whether assistance supplants Bosnian funds. As I mentioned, 
the United States and other international donors have 
established procedures for safeguarding assistance to Bosnia, 
and we found no evidence that assistance has been lost on a 
large scale because of fraud or corruption.
    Most of the $4 billion supported Bosnia's physical 
reconstruction, which has been largely successfully completed. 
However, we did find instances of corruption within the 
international assistance effort. I will cite three examples.
    The United States still has not recovered the approximately 
$935,000 of U.S. Embassy operating funds and AID Business 
Development Program loan payments deposited in a bank that was 
involved in corrupt activities and is now bankrupt, but the 
recovery process is underway. In July 1998, AID's Business 
Development Program manager, a Foreign Service national, was 
terminated for receiving payments for helping a loan applicant.
    And the final example is about $340,000 in World Bank-
provided funds lost as a result of a procurement scheme 
perpetrated with fraudulent documents. As of May, no arrests 
had occurred. There may be other examples, but those are 
illustrative.
    Despite the international community's success at 
controlling the use of assistance funds, such assistance has 
supplanted millions of dollars the Bosnian governments lose 
every year to corrupt activities such as customs fraud and tax 
evasion. Determining the total amount of revenue lost because 
of corrupt practices would be difficult, and the international 
community has not systematically attempted to make such a 
determination.
    However, evidence gathered during successful customs 
investigations and a partial analysis by the Office of the High 
Representative showed that losses total hundreds of millions of 
dollars annually. For example, the Office of the High 
Representative concluded that a moderate estimate of revenue 
lost to tax evasion in the Republika Srpska is about $136 
million, or 46 percent of the entity's annual budget.
    Due to shortfalls in revenue, partly because of corrupt 
practices noted above, the entity governments incur budget 
deficits which are then funded through direct budget support; 
that is, moneys that are provided and not earmarked for a 
specific purpose. Most of the $470 million committed by the 
international donor community for general budget support is not 
controlled or audited, although the $27 million committed by 
the United States has been controlled and audited.
    Meanwhile, the Federation and Republika Srpska budgeted 
about 41 and 20 percent, respectively, of their average annual, 
domestic, financial revenues on military expenditures from 1997 
through 2000, despite the High Representative's opinion that 
sustaining three large, separate armies primarily designed to 
fight each other, is not financially feasible.
    If the Bosnian governments strengthened the rule of law and 
identified ways to collect some or all of the hundreds of 
millions of dollars lost annually as a result of widespread tax 
and customs-duty evasion, the amount of budget support being 
provided might not be needed.
    Our report recommended that the Secretary of State take the 
lead in a reassessment of U.S. strategy for assisting Bosnia. 
We believe that such a reassessment is necessary because 
without it the United States and other donors may continue to 
fund initiatives that have little hope of resulting in a self-
sustaining, democratic government and market economy based on 
the rule of law, and thus allow for the withdrawal of NATO-led 
forces.
    In particular, we believe State should consider whether 
supporting the provision of direct budget support is an 
appropriate form of assistance in the current environment in 
Bosnia, and second, how it can support those political leaders 
in Bosnia whose goals for addressing the corruption problem are 
consistent with the goals of the United States and the rest of 
the international community.
    We also suggested in our report that Congress may wish to 
require the State Department to certify that the Bosnian 
governments have taken concrete and measurable steps to 
implement anticorruption programs and improve their ability to 
control smuggling and tax evasion. State disagreed with our 
recommendation. According to the Department of State, by 1998, 
it had undertaken a broad reassessment of the strategy for 
Bosnia, and it continually reassesses assistance priorities in 
Bosnia. However, we found no evidence that State's reassessment 
or its current strategy addressed the underlying causes of 
corruption and the lack of reform, namely, the continued 
obstructionist behavior of hard-line, nationalist, political 
leaders. Mr. Chairman, that concludes my prepared statement.
    [The prepared statement of Mr. Johnson appears in the 
appendix.]
    Chairman Gilman. Thank you very much, Mr. Johnson. Do your 
colleagues wish to make any opening remarks? All right. We 
welcome having you here, and I am sure there may be some 
questions.
    Mr. Johnson, you stated that the USAID-led anticorruption 
activity of reforming the political-party-based payment bureaus 
is one of the more important, major actions taken by a U.S. 
entity.
    Mr. Johnson. Yes.
    Chairman Gilman. Could you elaborate further on the 
specific transfers of responsibility from the bureaus to other 
government ministries and banks other than tax collection, and 
is the process to eliminate the payment bureaus on track to be 
completed by December of the Year 2000?
    Mr. Johnson. We were told that the process is on track. It 
is a little difficult for us to accept that because they still 
do not have a banking system in place that will accommodate the 
banking function that the payment bureaus currently perform. 
That is an essential element of the whole process and a key 
critical point.
    I would like to ask Dave Bruno to elaborate on that a 
little bit because he has looked into this in some detail.
    Chairman Gilman. Mr. Bruno.

  STATEMENT OF DAVID BRUNO, EVALUATOR IN CHARGE, U.S. GENERAL 
                       ACCOUNTING OFFICE

    Mr. Bruno. Thank you, Mr. Chairman.
    Chairman Gilman. Could you put the mike a little closer to 
you, please?
    Mr. Bruno. Well, currently, as you alluded to, some of the 
functions of the payment bureaus are being moved to other 
ministries--tax collection, statistics, that type of thing. The 
key function of the payments bureau is to facilitate payments 
between enterprises and individuals. The bureau basically 
served as a bank under the former socialist system in place in 
Yugoslavia. Until there is a transparent banking system in 
Bosnia, the key functions of the payment bureaus cannot be 
replaced.
    There have been some laws passed or imposed which have 
allowed certain payment transactions to be made through banks, 
banks currently in Bosnia, but until there is an open and 
transparent banking system to replace the payment bureaus, 
large-scale, foreign investment is unlikely.
    As we mentioned in our report, corruption is one of the 
main reasons why investments, foreign investment, and even 
domestic investment by private entrepreneurs, has not 
accelerated and, in fact, taken the place of assistance. Until 
a banking system is in place, the economy won't be revived 
because there will be no investment.
    Chairman Gilman. Thank you. According to the GAO and USAID, 
the only way to establish a sound, competitive, commercial-
banking system that fulfills key market functions is the entry 
of reputable foreign banks. But as you maintained earlier, 
investment in Bosnia, post-1995, has been greatly deterred by 
the systemic corruption that takes place in the Bosnian 
economy.
    That said, how can our nation persuade a strong financial 
institution to get involved with such risks being present? If 
ending corruption is contingent upon attracting foreign banks 
while investment is contingent upon ending corruption, don't we 
have a case of the chicken and the egg here?
    Mr. Johnson. There is a bit of a catch-22 there, but that 
is not from lack of trying to get international banks, a 
reputable international bank, to come in. It is our 
understanding that there have been discussions with a Turkish 
bank, which is maybe not a Bank of America or Citibank, but one 
that would probably be interested.
    Chairman Gilman. Does that look promising?
    Mr. Johnson. From what we were told, there are discussions 
under way. What the status of those discussions are, I am not 
sure. Ambassador Pardew could probably respond to that better 
than I can.
    Chairman Gilman. Aside from that interest, have any other 
banks shown any?
    Mr. Johnson. No.
    Chairman Gilman. Critics of the Dayton Peace Agreement 
point out that because the DPA provides for only a very weak 
national government, it is the DPA itself that limits the 
ability of the Bosnian government to forge the anticorruption 
institutions at the national level where they are most 
necessary, and it leaves it to the leaders of the two entities, 
where nationalist pressures are most easy to bring to bear. 
What is your response to that kind of criticism?
    Mr. Johnson. The peace agreement did create a weak, 
national government, and there are problems related to that, 
and one of the problems that is probably most pronounced is 
that there is not strong support for the departments and 
institutions already being created at the national level. It 
leaves them in a rather weak position, but I do not want to 
imply that it is not workable.
    I think it is the system that we have, and it needs to be 
pursued, the system in place is apparently the best that could 
be gotten in 1995 when they negotiated the agreement, and so it 
is what we have to live with.
    Chairman Gilman. Thank you. Mr. Gejdenson.
    Mr. Gejdenson. Thank you, Mr. Chairman. Let me first say 
any money that is American taxpayer money that is lost is 
something that troubles all of us. How much money do you think 
was lost as a result of corruption here? We have seen numbers 
across the board in the newspapers. What's your estimate?
    Mr. Johnson. U.S. money lost to corruption?
    Mr. Gejdenson. U.S. money.
    Mr. Johnson. Well, the money that we know about is 
basically the money that is involved with the BH Banka 
situation that you are aware of.
    Mr. Gejdenson. And how much is that?
    Mr. Johnson. And that is about $935,000.
    Mr. Gejdenson. So $900,000 out of how much?
    Mr. Johnson. Well, over a billion dollars, a small 
percentage.
    Mr. Gejdenson. Over $1 billion.
    Mr. Johnson. Yes.
    Mr. Gejdenson. And so that is 1 percent. Is that correct?
    Mr. Johnson. About.
    Mr. Gejdenson. About 1 percent.
    Mr. Johnson. Excuse me.
    Mr. Gejdenson. No. Go right ahead.
    Mr. Johnson. I think it is important, the amount of U.S. 
money that would be lost, but I think the more important issue 
is whether or not the problem in Bosnia will unravel the entire 
process, and that is what we tried to focus on. I think the 
international organizations have basically done a good job of 
trying to control the money that we provide. There is not a 
debate about that.
    Mr. Gejdenson. And there is some pressure here in Congress 
to try and press our allies to rapidly disperse their funds so 
that they will meet certain targets, or they want us to pull 
out. Now, I guess what I would say is, is there a mechanism in 
place that would allow this to happen without actually just 
losing more money?
    Mr. Johnson. Well, there has definitely been a criticism of 
our allies throughout the Balkans, but in Bosnia in particular, 
about the slow disbursement rate. And when we talk to Bosnian 
officials or even AID officials, we hear this criticism that 
the European Union is very slow in disbursal. They could be 
more rapid in disbursing money and still maintain the controls, 
is the general perception.
    Mr. Gejdenson. You know, it may be human nature, but you 
get the sense that at the beginning of a crisis or the end of a 
war there is this inclination in Congress, and the public that 
Congress reflects, to have a significant response. And so, in a 
sense, are we front loading too much of the money? Is the money 
available only at the beginning when oftentimes there are not 
the systems in place, and would we be better off trying to get 
Congress to commit the money over a longer period of time with 
some more flexibility here?
    Mr. Johnson. Well, I think as a general proposition, you 
are probably correct. I think in the case of Bosnia the money 
was put up front and was needed up front for reconstruction.
    Mr. Gejdenson. Uh-huh.
    Mr. Johnson. I do not think there was unwarranted front 
loading in the case of Bosnia. That criticism, I think, is more 
applicable to some other situations in Eastern Europe.
    Mr. Gejdenson. And, you know, money is fungible.
    Mr. Johnson. Sure.
    Mr. Gejdenson. And so when you sit here and you are looking 
at these factions having larger military-police units than they 
ought to have, and, of course, the problem is always what do 
you do with them if you disband them. These people need 
salaries. You are creating political problems on the ground and 
what have you. But how do you look at these situations and say, 
well, we are going to take U.S. assistance and use it for good 
causes because the government is using its money for military 
forces they really do not need.
    Mr. Johnson. That certainly is a dilemma. The international 
community does have some leverage, however, that it probably 
has not used as much as it could. The High Representative has a 
lot of authority to influence the Bosnian governments, both the 
Federation and the Republika Srpska, as to the size and 
function of their military. And clearly, up to this point both 
of those entities have received support from outside for their 
militaries. So that is a problem that can be addressed probably 
more readily than it has been.
    Mr. Gejdenson. Let me ask you one last question. What would 
be the most important change you would desire that Congress 
would execute in how we deal with these situations? What could 
we do that is most helpful in changing the way we operate?
    Mr. Johnson. I do not know that I would recommend 
necessarily a change. I think that we have--over the past 4 or 
5 years GAO has looked at the program in Bosnia and evaluated 
the progress, and we have generally been supportive of the 
program that has been put in place. There are obviously 
glitches along the way.
    I think the fact that this hearing is taking place, that 
light is being focused on this problem, is a helpful thing. I 
think we need to signal to the rest of the world that 
corruption is not something that we can tolerate in programs 
that we are participating in, and it is not just the money that 
we provide bilaterally. We spend a lot of money on the IMF as 
well as the World Bank and have considerable resources at 
stake. So I think efforts like this to focus attention on the 
problem is a very helpful thing.
    Mr. Gejdenson. If I could indulge the Chairman just one 
more question, and you do not have to give me the entire answer 
here now, but on the issue of corruption, I have seen some 
progress in recent years from our G-7, G-8 partners, but some 
of them still allow for bribery to be a deductible tax expense. 
Is that correct?
    Mr. Johnson. It is my understanding that this occurs, 
although the OECD in Paris has reached an agreement----
    Mr. Gejdenson [continuing]. To end that.
    Mr. Johnson [continuing]. To end that.
    Mr. Gejdenson. Well, it seems to me that that is terribly 
important because if the most important industrial nations in 
the world accept bribery as a price of doing business, to turn 
around to these fledgling nations and expect them to be 
policing themselves is a little bit unrealistic. And if 
European and other partners of ours think it is OK to go in and 
bribe governments for contracts, it is a little hard for us to 
then come back and say, ``Gee, we want to fight corruption.''
    So I certainly hope that you will give me any advice that 
we can strengthen our fight against bribery and corruption 
because, I think, when you look around the world at the 
failures we have had, a lot of it ends up going back to that 
particular problem.
    Mr. Johnson. That is right.
    Mr. Gejdenson. Thank you.
    Chairman Gilman. Thank you, Mr. Gejdenson. Mr. Chabot.
    Mr. Chabot. Thank you, Mr. Chairman. My understanding of 
your statement here this morning is that the government is 
losing a lot of their own resources to crime and corruption and 
many other things, which obviously should not be going on. You 
are saying the resource that we are directly losing, our aid, 
is somewhat minimal. But our resources going to them are 
relieving perhaps the necessity for them to seriously confront 
the reforms that they need to carry out, such as cutting down 
the corruption and actually collecting the taxes they are owed, 
and things of that nature. Is that correct?
    Mr. Johnson. That is correct. Yes.
    Mr. Chabot. And I guess the logical followup is that some 
portion of our aid there is counterproductive, that we are 
essentially subsidizing behavior that over the long term may 
actually hurt the government and the people that we are trying 
to help. Is that correct?
    Mr. Johnson. I do not know if I would characterize it as 
counterproductive necessarily, but there is a contradiction 
there that we need to address, and the Bosnian government needs 
to address, and that is one of the reasons we made the 
recommendation to the State Department that it reassess the 
strategy because that is something that needs to be looked at 
by the people who run a program, whether or not there is a way 
to squeeze on that.
    Now, the United States does not provide very much budget 
support, so the amount of leverage, direct leverage, that the 
United States has is minimal, but the United States, through 
the World Bank, does provide a substantial amount of budget 
support, and working through the executive director's office at 
the bank, that problem could be addressed, we believe, in a 
more forthright way.
    Mr. Chabot. Using taxes as an example, I think your 
testimony was that they have a pretty ineffective way of 
collecting taxes.
    Mr. Johnson. Yes. And their tax law is so convoluted that 
people just cannot pay.
    Mr. Chabot. Right. I would argue that our tax system is 
pretty convoluted as well, but nonetheless it is relatively 
effective. I think our government is pretty good at collecting 
what it is owed, or pretty bad, however you want to put it. We 
collect a whole lot of money here very effectively, and we are 
shifting some of those resources over to countries which have 
not gotten their act together and are not collecting their 
taxes. I would argue from the American taxpayer's point of 
view, that this is not a very good deal, but let me move on.
    As far as how long we are in Bosnia, many of us were very 
skeptical of the President when he suggested early on that we 
would be there a year and that our cost would be ball-park $2 
billion. That year obviously has extended far beyond that. It 
has been 4 or 5 years and we have spent, in your testimony I 
think, over $10 billion, so we are way over what we were told 
in length and in cost. But how long we are in Bosnia, to some 
degree, depends upon how quickly they get their act together, 
how quickly they have an independent judiciary, a workable 
government, a system of collecting taxes.
    But since we are subsidizing by giving them money, we are 
making it so that they do not reach the crisis that sometimes 
you have to reach before you actually take action. We are 
dragging the day of reckoning out even further. Therefore, we 
may be there a heck of a lot longer even than the President 
might suggest that we be there. So I just wonder whether our 
policy makes much sense at all.
    One final point. Mr. Gejdenson mentioned the one case of 
the bank where, I think, we know $935,000 was lost----
    Mr. Johnson. We are still negotiating to get some of that 
back, and I think they will get a large share of it back.
    Mr. Chabot. OK. I think, Mr. Gejdenson said important words 
when he said that is a million dollars or so out of a billion. 
I mean, that is that we know of. And as far as how many dollars 
have been directly lost, we really do not know, but the fact is 
we are spending an awful lot of money over there. The thing 
that concerns me is that we may be subsidizing dependency and 
irresponsible behavior and putting off the actual reforms that 
need to take place. I thank you for your testimony here this 
morning.
    Mr. Johnson. I think you have expressed a legitimate 
concern. One of the things that we tried to keep in mind when 
we did this work was exactly what you have talked about. The 
peacekeeping operation in Cyprus has been there for many years, 
and the situation in Bosnia--I think it would not be in our 
interest to have a peacekeeping mission in Bosnia for the 
length of time that we have had the U.N. peacekeeping operation 
in Cyprus.
    Mr. Chabot. Thank you very much. I certainly share that 
point of view. I would hope that the Bosnia peacekeeping 
mission would be much, much shorter than Cyprus. Thank you.
    Chairman Gilman. Thank you, Mr. Chabot. Mr. Sherman.
    Mr. Sherman. Thank you. I would simply observe that I do 
not see any facts in play now that would cause our peacekeeping 
operation in Bosnia to be shorter than that in Cyprus.
    Mr. Johnson. That is right.
    Mr. Sherman. Certainly, the level of ethnic opposition and 
tension is at least as high as in Cyprus, and one cannot point 
to any trends that would make peacekeeping there unnecessary.
    Mr. Johnson. You are right.
    Mr. Sherman. Our decision to insist that Bosnia be a multi-
ethnic state made up of ethnicities who have shown a tendency 
to kill each other over the last several hundred years ensures 
that there will be a multi-ethnic state of people with a 
tendency to kill each other, and that we will have to be there 
for a long time preventing those deaths.
    I want to pick up on Mr. Gejdenson's remarks about the 
deductibility of bribery, and I realize that is a little step 
or two away from the purpose of these hearings, but I am 
picking up on the Ranking Member's comments. We have the 
largest trade deficit this month, or rather last month--the 
report just came out today--the largest monthly trade deficit 
in the history of human kind, period, largest ever in a month. 
And it is relatively nonremarkable because the month before 
that we also set a record, and we have been setting records 
each month.
    I do not think there is any way to quantify how much of 
that trade deficit is due to the fact that our competitors pay 
bribes and we do not. There was a declaration several years ago 
by the other OECD countries that they would embrace a concept 
similar to the Foreign Corrupt Practices Act. Perhaps you 
gentlemen could indicate whether that has gone beyond the 
principle stage.
    Mr. Johnson. I would hesitate to comment on that at this 
point. I am not quite up to date on where they stand on that, 
but I can get that information to you.
    Mr. Sherman. I can only assume that in those countries 
where bribes are tax deductible they are not illegal, and I 
realize you may not have come here prepared to focus on that, 
but Mr. Gejdenson at least pointed that out. Do any of the 
other panelists have a further comment on that?
    Mr. Shafer. No.
    Mr. Sherman. The other thing I would like to point out is 
there is only one reason we are in Bosnia--Bosnia is in Europe. 
I mean, the human rights violations there were terrible, but 
not nearly as bad as what had happened in several places in 
Africa and what is happening today in Sudan.
    So we were told Bosnia is different because it is in 
Europe, and Europe is vital because Europe is rich, powerful, 
and technological. That is why I have got to wonder why for a 
problem in Europe, America does the lion's share of the 
fighting, pays the lion's share of the defense cost, provides 
the lion's share of the strategic backup. When I say 
``Bosnia,'' I am including Kosovo. They are two very related 
problems here. And at the same time, when there are problems in 
this hemisphere, Europe does almost nothing with regard to 
solving many of the problems in this hemisphere--a little 
contribution toward Colombia, a little contribution toward 
Haiti.
    I think, while we can and have lost money due to theft, and 
you do point out the $900,000 at issue that is the focus of 
these hearings, that we lose an awful lot more because we 
decide that where something is important to the Europeans, it 
means we have to pay the lion's share of the cost, and that is 
not just $900,000. So thank you, Mr. Chairman.
    Chairman Gilman. Mr. Tancredo. Thank you, Mr. Sherman.
    Mr. Tancredo. Thank you, Mr. Chairman. Just one quick 
question, because I was late, and I apologize. I just wonder if 
you would agree with the feeling that I have gotten from your 
presentation, certainly among many other things, that the 
problems in the area are systemic. The problems with corruption 
are systemic and are not necessarily personality driven. That 
is to say that even if we were able to incarcerate people, 
Krajisnic and others, that would not change the situation all 
that much because the problem is, in fact, systemic.
    Mr. Johnson. The problem is systemic. You are absolutely 
right. In fact, when you look at who is involved in the corrupt 
activities and the linkages between those involved in corrupt 
activities, the judiciary, and government officials, you see 
linkages.
    I guess a good way to look at the problem is that corrupt 
activities are being pursued in Bosnia as another means to 
continue the war aims that the parties had throughout the 
period of the war. They want to continue separation. They want 
to continue having ethnically pure entities, ethnically pure 
cantons, within the Federation part of the country, and a lot 
of the corrupt activities support those war aims. So it is a 
very systemic problem and not one easily fixed. This is not 
garden-variety corruption that is taking place in Bosnia.
    Mr. Tancredo. Thanks very much. I have nothing else, Mr. 
Chairman.
    Chairman Gilman. Thank you, Mr. Tancredo. I have just one 
more question for our panel. How do you assess the 
anticorruption efforts of the Office of the High 
Representative? Do you agree with the critics who maintain that 
that office actually is preventing more effective programs 
initiated by the United States and the World Bank?
    Mr. Johnson. I do not know about preventing. I would like 
to turn to Mr. Shafer to respond to that.
    Chairman Gilman. Mr. Shafer.
    Mr. Shafer. I would not characterize the Office of the High 
Representative's efforts as preventing progress in this area. 
As Mr. Johnson has pointed out, this is an extremely difficult 
problem that is not easily solvable by any one person or series 
of actions. In fact, recently, the Office of the High 
Representative has gotten much more active, for example, in 
eliminating key cantonal officials and ministers for various 
corrupt activities, and that is a positive step in and of 
itself. They have established a number of efforts to bring 
together the international community, and it is going to take a 
long time, I think, before we can see any results from the 
antifraud unit within the Office of the High Representative.
    Chairman Gilman. Any other comments by the panelists before 
we conclude? Mr. Bruno.
    Mr. Bruno. I would like to elaborate on that a little bit. 
Although there are a lot of individual efforts conducted by or 
somewhat coordinated by the Office of the High Representative, 
there are some other nuts-and-bolts types of things that have 
not been done by the High Representative, the World Bank, or 
others. As we point out in our report, there has been no 
analysis of the revenue loss, no systematic analysis. There are 
some estimates but no systematic analysis.
    There has been no audit of expenditures of the entity 
governments to see where our budget support is going, ``ours'' 
meaning the international community, and how those funds may 
support illegal parallel institutions or the political parties. 
There has also not been a review of the actions taken by the 
financial police to see exactly what they are doing to fight 
corruption and what they need in terms of assistance.
    And as my colleague stated, the High Representative has 
removed officials, high-level officials, but removing them does 
not always remove their power, and it is not enough to remove 
them. It would be better if there was an example made of those 
individuals. If they have abused their power and it is an 
infraction of the law, then an investigation should follow and 
not simply just the removal of that official.
    Chairman Gilman. Well, I want to thank our GAO 
representatives for being here today and for your extensive 
report, which is most helpful to us, and we will be passing it 
on to some of the other people who will be doing some work in 
that part of the world. We appreciate your time and your 
effort. Thank you, gentlemen.
    All. Thank you.
    Chairman Gilman. We will now move on to our second panel. 
Ambassador Jim Pardew is no stranger to our Committee. He has 
appeared both in open and public sessions and private briefings 
with us on a number of occasions. He has served in both our 
Departments of Defense and State, brings to us a long period of 
expertise in Balkan affairs, and we welcome you to our hearing 
this morning. In a sense, Ambassador Pardew has become the 
institutional memory for our Balkan policy due to his long-term 
involvement in U.S. policy in that region during the past 
decade.
    We are grateful for your willingness, Ambassador, to appear 
today, and we welcome your testimony, which you may summarize 
without objection. Your full statement will be entered into the 
record. Please proceed, Mr. Ambassador.

   STATEMENT OF AMBASSADOR JAMES W. PARDEW, PRINCIPAL DEPUTY 
  SPECIAL ADVISOR TO THE PRESIDENT AND SECRETARY OF STATE FOR 
       DEMOCRACY IN THE BALKANS, U.S. DEPARTMENT OF STATE

    Mr. Pardew. Mr. Chairman, I welcome the opportunity to 
again appear before the Committee to discuss our programs and 
strategies for addressing crime and corruption in Bosnia, and I 
take note of the new technical developments of the Committee 
since I was here last. The next time I appear before the 
Committee I would like to use the new capability to perhaps 
make my presentation a little better.
    I will update the Committee this morning on the nature of 
corruption in Bosnia and our strategy for dealing with it. I 
will also respond to the specific points raised in the GAO 
report. With your permission, I will summarize a more detailed 
statement, which I submit for the record.
    The problem of corruption and crime in Bosnia should be 
considered in the context of what has been achieved there since 
the war. Great strides have been made in security, 
reconstruction, refugee return, and other critical elements of 
Dayton implementation. That said, we agree with the basic 
thrust of the GAO report, that corruption and crime are endemic 
problems in Bosnia. Crime and corruption seriously inhibit 
Dayton implementation and economic and political development.
    The political environment in Bosnia is a direct legacy of 
the war and the communist political past in which transparency 
and accountability were of no concern. The inclination of the 
current political leadership is to continue to do business as 
usual. There are, however, democratic, reform-minded leaders in 
Bosnia, and we want to work with them.
    And our message to the people of Bosnia in the run up to 
the parliamentary elections this November is that they often 
deserve better leadership and should use the elections in 
November as an opportunity for change.
    Let me briefly review our investment in Bosnia and how the 
focus of our assistance program has shifted. We pledged and 
disbursed $1.007 billion from 1996 to 1999, primarily for 
critical, post-war requirements. This represented 18.5 percent 
of the $5.4 billion total, international, civil program for 
Bosnia. Beginning with a reassessment in 1998, our focus 
shifted to helping Bosnia begin to reform itself as a stable, 
peaceful, free-market democracy that can function without heavy 
engagement of the international community.
    This year, we are spending $100 million in SEED, or Support 
to European Democracy, funding and about $40 million in 
peacekeeping-operations funding in Bosnia.
    Fighting corruption and crime requires action in two 
general areas. The first is reform of the political and 
economic structure. The second is establishing the rule of law 
with effective enforcement. Bosnia must achieve major progress 
in both of these areas if it is to counter current levels of 
corruption and crime.
    I would point out that USAID has been a leader in the 
anticorruption effort in Bosnia, and I would like to submit for 
our record a summary of their anticorruption program.
    Chairman Gilman. Without objection, it will be made part of 
the record.
    Mr. Pardew. I have already mentioned upcoming elections as 
a potential road to political reform. Successful reform also 
requires a new and transparent legal and structural framework. 
The international community has identified over a dozen pieces 
of specific legislation and administrative actions to 
restructure the Bosnian government, many of its functions, and 
the economy.
    The most important of these laws and actions will 
accomplish the following: Formation of an adequately paid, 
well-trained, professional civil service; the establishment of 
modern, effective, impartial, and professional law enforcement 
and judicial bodies; the establishment of a strong, central 
treasury. Within a year we expect to see the state treasury 
established and significant progress on overhauling the civil 
service and judicial and law- enforcement bodies. Judicial and 
law-enforcement reform is already under way.
    Other high-priority tasks include the following: The 
abolition of the payments bureaus, which were discussed earlier 
this morning. These are a major source of funding for the 
nationalist parties, and the process is on schedule for closure 
of these bureaus by the end of the year. Next is the creation 
of strong, central, regulatory authorities for the financial, 
telecom, and power sectors. Progress is underway in 
establishing an effective banking supervisory agency and 
regulatory framework for the financial sector. We expect 
movement soon on establishing an effective, central-regulatory 
body for the energy sector.
    Privatization of key industries is another major area of 
reform. This is intended to break control of key businesses by 
the nationalist parties. The United States is leading the 
effort to move quickly on large-scale privatization of over 100 
key business entities.
    Another area is the establishment of effective auditing 
organizations to search out and deal with fraud and corruption. 
We are providing $1.3 million in funding for auditors and 
specialists to support this effort.
    The second part of our anticorruption strategy is the 
enforcement framework, which I subdivide into police 
enforcement and judicial reform. Until recently, the police 
lacked even the most basic law-enforcement tools for policing 
in a democracy. We are helping restructure, downsize, train, 
and equip the Bosnian police to give them the basic tools to 
function. We are also working with them on more complex 
challenges such as fighting organized crime.
    Let me quickly cover our new initiatives. The International 
Police Task Force recently established a joint task force 
operating in both entities that can monitor high-profile 
investigations. It has handled approximately 30 cases in 1999. 
It is currently overseeing 120 cases, and has assisted INTERPOL 
with an additional 50 cases. We have provided two FBI agents to 
assist the Bosnians in several high-profile investigations and 
help them further their anti-organized-crime capacities. Later 
this year, we will give specialized training for the Bosnian 
police in major case management, public corruption, and 
transnational money laundering. We also are funding an 
organized-crime adviser to begin duties later this year.
    We are working with police in both entities to establish 
professional-standards units that both conduct internal 
investigations and promulgate codes of ethics. So far, these 
units have investigated over 380 cases of misconduct by the 
police, and these have resulted in dismissals of several 
policemen.
    We also support the work of the IPTF's noncompliance unit, 
which audits the practices of local police organizations and 
investigates reports of misconduct or anti-Dayton actions by 
local police. We recently donated $1.95 million to aid and 
development of multi-ethnic border service, which began initial 
operations in the Sarajevo Airport last month. The border 
police is the first armed, joint institution in Bosnia and will 
greatly increase the ability of the Bosnian government to 
secure its own borders and will help prevent the trade in 
illegal goods and disrupt trafficking of persons.
    This month, we transferred $1 million to expand operations 
of the antifraud unit in the Office of the High Representative. 
With the antifraud unit's increased activity, our funding will 
be used to hire additional investigators and prosecutors.
    Bosnia's judicial system needs a major overhaul. Through 
the American Bar Association's Central and East European Legal 
Initiative and others, we are working with Bosnia to establish 
a politically independent, professional, and effective legal 
system. Primary activity includes vetting and training judges 
in establishing the security of courts, the court police, and 
other measures.
    In July last year, the Office of the High Representative 
produced a comprehensive, judicial-reform strategy that 
includes specific action plans to effect reforms. A judicial-
reform law will be adopted shortly that will replace current 
party controls over the appointment of judges.
    In May, we approved a $1.75 million Department of Justice 
allocation for expanded programs to strengthen prosecutors' 
offices and begin ground work for establishing a vetted 
investigative strike force.
    Turning to the GAO report, it made three specific 
recommendations to combat crime and corruption: that we use 
more conditionality, that we end direct budget support, and 
that we reassess our assistance program.
    We agree with serious conditionality, although we need to 
make sure that conditionality supports our objectives. Our aid 
is increasingly focused on supporting minority returns and 
forcing the pace of judicial structural reforms. The threat of 
denial of such aid is not an effective lever.
    The most effective form of conditionality currently is 
through the international financial institutions, which 
continue to provide significant amounts of investment project 
credits and budget-adjustment lending. We are working closely 
with the World Bank, the IMF, and the EBRD to strengthen 
conditionality.
    We coordinate closely with the international community and 
OHR to supply as much leverage as possible to overcome 
resistance by the Bosnian leadership to implement the change 
necessary to undercut corruption.
    We also agree with moving away from direct budgetary 
support. We have already terminated such support bilaterally, 
and we do not envision resuming bilateral budget support. We 
continue to believe, however, that such support should be 
provided by the international financial institutions based on 
strict conditionality. IFI adjustment lending provides an 
important incentive for structural and economic reform and 
reinforces our anticorruption program by requiring greater 
budget transparency, improved expenditure control, and 
government-audit requirements.
    On the third recommendation, we do not see the need to 
reassess our assistance programs at this time. We made a 
fundamental shift in 1998 based on the completion of the most 
urgent funding needs. We are fully on track with our reform 
priorities, including stemming corruption and crime problems. 
As we implement our programs, we are continuously fine tuning 
our strategy and tactics based on developments on the ground.
    In closing, Mr. Chairman, the program to reduce crime and 
corruption in Bosnia is very ambitious. It cuts across all 
elements of Dayton implementation, and we need to be in it for 
the long term if we expect to help bring democracy and 
prosperity to Bosnia.
    Unfortunately, attacking crime and corruption is not a 
short-term problem. It is a never-ending struggle even in 
advanced democracies, but in Bosnia there is good news as well. 
The international community is in agreement on the high 
priority of stemming corruption and crime. They are now the 
very high priority of the Office of the High Representative, 
and we are starting to make headway in all of them. Thank you, 
Mr. Chairman.
    [The prepared statement of Mr. Pardew and USAID Anti-
Corruption Efforts appear in the appendix.]
    Chairman Gilman. Thank you, Mr. Ambassador. The GAO has 
recommended that the Congress condition further aid on Bosnian 
political leaders taking specific steps to demonstrate their 
commitment to the anticorruption effort.
    Mr. Ambassador, what is your view of that recommendation, 
and how much of United States-provided assistance to Bosnia 
would be appropriate to use as leverage for this issue?
    Mr. Pardew. Mr. Chairman, we will always gladly take a look 
at the specific recommendations of the Congress, and I would 
have to do that before I would make a final determination on 
how we might view a particular proposal. But I pointed out 
previously that anticorruption and anticrime are major 
initiatives of the Administration and of the High 
Representative. And so before the Congress acts, I think we 
should very carefully review the programs that we have in place 
and avoid unnecessary restrictions.
    Chairman Gilman. Should we condition our assistance on 
their cleaning up the corruption?
    Mr. Pardew. We are conditioning our assistance on cleaning 
up corruption. Everything that we are providing right now has 
some type of conditionality on it, and crime and corruption are 
very high on our agenda. I do not think at this point it is 
necessary for the Congress to assist, but we will certainly 
take a careful look at anything you might propose.
    Chairman Gilman. And what is our nation doing to bring 
together the EU and other donors to work with us to confront 
this problem that we have?
    Mr. Pardew. This problem was a discussion topic at the 
recent Peace Implementation Council ministerial. It is always 
on the agenda of the Peace Implementation Steering Group. We 
use all forums that oversee the international effort, and we 
also stress this bilaterally. It is a very high-priority 
program at this time.
    Chairman Gilman. And, Mr. Ambassador, how difficult would 
it be to revise and modify the Dayton framework so as to 
strengthen the national government to better enable it to 
confront crime and corruption throughout Bosnia?
    Mr. Pardew. Mr. Chairman, as I have testified before, the 
issue of strengthening central institutions, first of all, it 
is a high-priority issue and needs to be done. It is largely a 
matter of the will of the leadership. I do not think we need to 
reopen the Dayton Agreement in order to strengthen the national 
government.
    Chairman Gilman. Thank you very much. Mr. Gejdenson.
    Mr. Gejdenson. Thank you, Mr. Chairman. You paint a pretty 
rosy picture here. You think it is going to be that good, huh?
    Mr. Pardew. I think we are doing a lot, Congressman. I do 
not want to overdramatize success. As I have said, this is a 
major problem, and it does hinder our overall efforts in 
Bosnia. I think corruption and crime have to be looked at in 
the context of what has been done since the Dayton Agreement 
was signed. I can point to improvements of the security 
situation and the reconstruction that have been dramatic. We 
are gaining ground in the return of refugees, the Brcko, 
creation of central institutions, and I can go on and on. The 
point is that crime and corruption must be put in the context 
of a number of good things that have happened.
    Mr. Gejdenson. It is good to get an optimistic note. Our 
colleagues on the other side of the aisle here are constantly 
seeing the end of the world approaching.
    Let me ask you a couple of questions here. With the end of 
these Soviet-era payment bureaus, are the private banks going 
to come in on their own? Is there a sense that somebody is 
going to step up to the plate and see an opportunity to make 
money here and not get shaken down, or is there something else 
that is going to need to happen? Are we going to need, like, an 
OPIC guarantee system, or will it happen without us?
    Mr. Pardew. Closing the payments bureau is one of the most 
critical structural reforms that needs to take place. Closing 
them is on track to end this year, and that will be a major 
step toward creating a banking system. There is already a 
functioning central bank in Bosnia, and it is working very well 
under international leadership.
    Creating a banking system in Bosnia has been a long, uphill 
struggle. The situation is not as bad as was presented earlier, 
in my view. At least one Austrian full-service bank is, I 
believe, about to open for business. A Turkish bank is there 
operating already. We have encouraged U.S. banks to go there as 
well, but, quite frankly, Bosnia is a small market for some of 
the big, international banks.
    In addition, the Office of the High Representative [OHR] 
has a banking agency. That banking agency is trying to clean up 
the local banks. There are over 12 banks now being closed to 
try to clean up and make economically viable the existing 
banking system as we try to bring in international banks.
    Mr. Gejdenson. And you mentioned the refugee return and the 
increased numbers of refugees that are returning. They have 
come from western countries in many instances. They have got to 
be a pressure point for change as well, and it seems to me an 
almost good news/bad news scenario in a number of these places 
around the world that as information is spread through society 
about the alternatives out there, there is going to be a 
heightened demand for improvements in people's, situations. And 
are these governments going to be able to deliver a better 
standard of living, improvements in the people's living 
situations, sense of security economically?
    Mr. Pardew. Bosnia must change. As you point out, there are 
refugees who are returning, and they are returning from more 
advanced western democracies in some cases, and they have high 
expectations about the economic structure. They are simply not 
going to accept on a long term this old communist economic 
system.
    I think young people are another factor. If Bosnia wants to 
keep their young people in Bosnia, they must have to have 
economic opportunities for them, and those opportunities must 
be based on a conventional, western, transparent, market 
economy.
    Mr. Gejdenson. Well, thank you very much. I hope you keep 
us informed.
    I think an important part of this is a dialogue with the 
Congress because often our colleagues are left with bits and 
pieces of information, headlines that leave a misimpression. 
Many of our colleagues do not fully understand the magnitude of 
the European participation, and we always jump to the 
conclusion that we are providing the most troops, the most 
money. In almost every category that seems to be not case. 
Could you just, in my final moment here, run through again what 
portion we are paying and what portion the Europeans are 
providing in this?
    Mr. Pardew. In Bosnia our total funding on the civil side 
is about 18 percent. The Europeans have paid most of the rest, 
although there are some non-European donors. I think U.S. troop 
levels are about 20 percent. The bulk of the troops are being 
provided by the Europeans.
    Mr. Gejdenson. That is really an astounding situation, when 
you take a look at the historic portion that America has given 
in almost any other effort, that the idea that the United 
States is participating at about a fifth or less is a real 
statement that the Europeans are stepping forward, as they 
ought to. And we want to thank you for the work you are doing, 
and stay in communication with us. Thank you very much.
    Mr. Tancredo [presiding]. Thank you, Mr. Gejdenson. I just 
have a couple of things, in a way a followup on the question I 
posed to the panel before, and that is with regard to what hope 
there can be that we can take from the possibility of 
incarcerating some of the people there with higher visibility I 
suppose, and what hope do we have that something like that, if 
we were able to, incorporate Mr. Krajisnic or others that we 
would oftentimes like to see incarcerated, and which we 
certainly do now want to see incarcerated, what hope do we have 
that that would actually change the situation, especially with 
regard to corruption in Bosnia?
    Mr. Pardew. The war criminal issue has a powerful, symbolic 
effect. First of all, we have made significant progress over 
time on bringing indictees to justice. We started, obviously, 
with zero. We are now 49 of the people who have been indicted 
by the ICTY have gone to The Hague. However, the two most 
significant indictees, Krajisnic and Milosevic, are not there 
yet. They have simply evaded capture, either by the local 
police or SFOR.
    It would be a tremendous psychological boost to the whole 
area, if these prominent war criminals were brought to justice. 
The arrest of Mr. Krajisnik, who was head of the Parliament was 
significant. He was a corrupt official, and bringing him to 
justice also helps create an atmosphere that corruption will 
not be tolerated.
    Mr. Gejdenson. You heard the testimony of the panel before 
you, and one of the individuals indicated that beyond just 
removing people from office some other action has to be taken. 
Do you agree with that, and what specific action would you 
propose?
    Mr. Pardew. Absolutely. People who are found to be in 
violation of the anticorruption or other laws need to be 
brought to justice. We have to do many things at once, though. 
We have to strengthen the judicial system, and many of the 
other things I addressed in my testimony. In some cases, I am 
not sure they are ready for some of the more sophisticated 
anti-crime activities, but we are working on them.
    But those who violate the laws need to be brought to 
justice, and officials in Bosnia need to be held accountable 
for their actions. This is the structural changing that I was 
talking about. In the old system, leaders were not accountable, 
and the current situation is a carry over from the old days. We 
have to change the structure as well as take the proper 
measures against individuals.
    Mr. Tancredo. Yes. Well, changing the structure is 
certainly an enormous undertaking that one can, I guess, 
understand, or we can rationalize in the amount of time that we 
have spent and that we probably will be spending there, but it 
is nonetheless quite frustrating for Members of Congress and, I 
am sure, members of the general public, when you really can 
never see an end to the tunnel.
    Let me ask you, can the goals of the Dayton Agreement be 
achieved in the near future, and with such emphasis on aiding 
the economy of Bosnia, are prospects dimmed by the fact that in 
a time of great economic prosperity in the world little 
progress has been actually realized? Somewhat of the same vein, 
same question.
    Mr. Pardew. I think the goals of Dayton implementation can 
be achieved, but it certainly has not been, nor will it be, 
easy, and I cannot put a specific timeframe on it. We have a 
set of benchmarks which we are working toward. We have made 
progress in a number of those benchmarks.
    The benchmarks have been sent to the Congress along with 
our report on their status, but implementation is difficult, 
and it is long term. I think we have some tough sledding ahead 
of us to make these fundamental changes that we were seeking.
    Mr. Tancredo. Thank you, Mr. Ambassador. I appreciate your 
testimony.
    Mr. Pardew. Mr. Chairman.
    Mr. Tancredo. Yes.
    Mr. Pardew. Could I make one point for the record.
    Mr. Tancredo. Of course.
    Mr. Pardew . In the earlier testimony today they talked 
about the United States loss of money in this BH Banka. I would 
like to set the record straight on that, if I could?
    First of all, we are very heartened by the GAO's report 
that recognizes that the United States and international donors 
have established procedures for safeguarding assistance to 
Bosnia and that there is no evidence that that assistance is 
being lost. The BH Banka case, there is $900 million----
    Mr. Tancredo. $900 million?
    Mr. Pardew [continuing]. $900,000--I am sorry. Did I say 
$900 million? I do not want to set that record today. I just 
increased the problem significantly. We have not given up on 
that money. That money is not lost. We are working with the 
Office of the High Representative and the Federation to get the 
$900,000. We will take whatever legal measures are necessary to 
ensure that our money is recovered. So we do not consider that 
money lost, and we will stay on this.
    Mr. Tancredo. Thank you, Mr. Ambassador. We appreciate your 
testimony here today, and the Committee is adjourned.
    [Whereupon, at 11:37 a.m., the Committee was adjourned to 
reconvene subject to the call of the Chair.]
      
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                            A P P E N D I X

                       April 11 and July 19, 2000

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Prepared Statement of Ambassador James W. Pardew, Jr., Principal Deputy 
Special Advisor to the President and Secretary of State for Kosovo and 
   Dayton Implementation, U.S. Department of State Before the House 
                  Committee on International Relations

                             april 11, 2000
    Mr. Chairman, thank you for the opportunity to update the Committee 
on the situation in Kosovo. This presentation will review our interests 
and objectives, areas of progress in civil administration and 
reconstruction, current challenges, what we are doing to overcome them, 
and sharing the burden of the international effort.
    Our continuing engagement in Kosovo relates directly to our 
national security interests. We know from history that a stable Europe 
is vital to American security, and that Europe is not stable if its 
southeastern corner is in turmoil. In the past four years, the U.S. and 
our allies have successfully contained, then subdued, conflicts in 
Croatia, Bosnia, and Kosovo as the former Yugoslavia broke apart. But 
the area's stability remains at risk from the Milosevic regime and the 
fragility of states recovering from conflict. International military 
forces are critical to creating a secure environment in Kosovo. 
However, sustaining the peace and establishing the conditions for long-
term stability in the region require robust political, economic, and 
reconstruction programs backed by sufficient resources to make a 
difference.
    There are two immediate civil implementation objectives in Kosovo. 
The first is to complete the establishment of an interim international 
administration under which the people can enjoy substantial autonomy. 
The second is to develop local, provisional, democratic, self-governing 
institutions to ensure conditions for a peaceful and normal life for 
all inhabitants of Kosovo.
    One year ago, the North Atlantic Treaty Organization was engaged in 
an intensive air campaign to halt Milosevic's brutal repression of the 
people of Kosovo and restore order in the region. In 78 days the air 
campaign, supplemented by intensive diplomacy, succeeded in driving 
Milosevic's forces from Kosovo. The success of the NATO campaign set 
the stage for the deployment to Kosovo of the international security 
force and the international civilian administration organization. The 
NATO-led Kosovo Force (KFOR) and the UN Mission in Kosovo (UNMIK) 
remain the heart of the international effort in Kosovo today.
    All of us would welcome faster progress for civilian implementation 
in Kosovo, but remember the situation ten months ago when Serb forces 
began withdrawing from Kosovo. The conditions encountered by UNMIK as 
it deployed and began to organize in Kosovo were desperate:

        Over one million people dislocated and traumatized by 
        war.
        No economy; no government.
        Major destruction, including 120,000 homes damaged or 
        destroyed.
        Infrastructure either destroyed or neglected.
        A communist legacy.

    Today, the situation on the ground in Kosovo is dramatically better 
and continues to improve gradually day by day. International efforts 
have returned more than one million refugees and internally displaced 
persons (IDPs) to their homes, demilitarized the KLA, established a 
growing international police presence, and begun training local police. 
Humanitarian agencies have met basic shelter, food and medical 
requirements and pulled the population through the winter. Recently, 
UNMIK and KFOR have made progress in restoring order in Mitrovica, 
increasing CIVPOL deployment, increasing Kosovo Police Service 
training, preparing the groundwork for municipal elections this year, 
and securing Serb participation in UNMIK governing structures. Further, 
public and independent media are regaining their voices.
    As NATO Secretary General Robertson pointed out recently, any 
Kosovar child can tell you how life has improved since the arrival of 
UNMIK and KFOR. Children have begun to attend school again, even if in 
tents. Many ethnic Albanians are studying in their own language for the 
first time in 10 years.
    UNMIK, we must remember, has been on the ground for only about 10 
months. The International Community's post-conflict task of repairing 
years of damage wrought by the Milosevic regime is extremely complex; 
many challenges remain. Ethnic tensions continue at an unacceptable 
level. The chronic problems in the divided city of Mitrovica will 
resume without an aggressive, sustained effort on the part of UNMIK and 
KFOR. FRY forces and ethnic Albanian insurgents confront each other in 
the Presevo Valley region of southern Serbia, where we face a tough 
challenge in preventing potential violence there from destabilizing the 
situation in Kosovo. The economy needs to be rebuilt and organized 
crime suppressed. UNMIK and KFOR must continue to improve security for 
Serb and other minority refugees and displaced persons so that they can 
return to their homes. In addition, we continue to see the need for 
countries to provide police up to the higher authorized level, an 
improved judicial system, and more complete staffing of UNMIK.
    These are tough challenges, but they are not insurmountable. I 
would like to update you on programs to address these issues. Let me 
start with one of the most difficult problems--Mitrovica. Despite 
significant opposition from extremists opposed to the International 
Community's efforts, KFOR and UNMIK have developed a comprehensive 
strategy addressing the issues of Mitrovica. The UN has appointed a 
strong administrator for the region in American William Nash. KFOR and 
UNMIK have already returned more than 140 displaced Albanians to homes 
north of the Ibar River and KFOR has established and expanded ``Zones 
of Confidence'' in key problem areas around two bridges and one 
neighborhood. An international judge and an international prosecutor 
are in place in Mitrovica, and several more are planned. Economic 
development in the area is another factor of the strategy.
    The UN remains short of civilian police, but it has made recent 
progress in CIVPOL deployments, with 2,757 regular police in country 
(513 Americans), out of an authorized 3,593. The UN has also begun to 
fill the 1,125 positions for special police units, which will assist in 
riot and crowd control. So far, 129 personnel have deployed, including 
a 114-member unit from Pakistan that will be assigned to Mitrovica. 
UNMIK is expecting two Jordanian units totaling 230 officers to arrive 
around April 18, and is working with other nations, including Spain and 
India, on further special police deployments in the near future.
    The development of the Kosovo Police Service (KPS) is also 
progressing. There are currently 451 KPS in classroom training, with 
the fourth class having started March 27, and 341 in field training. 
The police academy director just verified that the school in Vucitrn 
can now accommodate as many as 700 Kosovar students, up from the 
previous limit of 500, in two classes with staggered semesters. This 
will prove to be a cost-effective way to reach the goal of graduating 
3,600 officers by February 2001, toward a total KPS force of 4,000.
    The Kosovo Protection Corps (KPC) is also progressing as an 
organization. A total of 4,500 KPC candidates have been selected, out 
of a ceiling of 5,000. The International Organization for Migration has 
begun training for field members in each of the six Regional Task 
Groups. The KPC is the most important element of a broad program to 
provide employment for KLA veterans. During this development phase, we 
are urging NGOs in Kosovo to utilize KPC for public works projects 
during periods when KPC members are not otherwise occupied.
    We are keenly aware of the possibility that some demobilized 
members of the former KLA, including those who have joined the KPC, may 
act inappropriately. KFOR retains high standards for participation in 
the organization and are enforcing a zero tolerance policy regarding 
illicit activities. On March 1, KFOR and UNMIK put into force the KPC 
Disciplinary Code (DC), which constitutes the formal mechanism for 
enforcement of the rules for compliance and disciplinary action against 
offenders. The DC applies to all KPC members and provides the legal 
basis for the commander of the KPC to take disciplinary action against 
non-compliant members. On March 17, UNMIK and KFOR signed the 
Compliance Enforcement Framework Document, which assigns responsibility 
for investigating criminal actions to UNMIK, administrative discipline 
to KPC, and compliance violations to KFOR.
    UNMIK has made progress in the creation of interim governing 
structures. On April 2, moderate Kosovo Serb leaders announced that 
they would participate in UNMIK-sponsored governing structures, 
particularly the Interim Administrative Council (IAC) and Kosovo 
Transitional Council. This was a direct result of Secretary Albright's 
dialogue with Bishop Artemije, who led this politically courageous 
change of policy. The Serbs will attend meetings as observers at first, 
but we hope and expect that this will quickly lead to full 
participation. Serb involvement in these joint institutions is vital to 
UNMIK's mission and it affirms the right of all Kosovo residents to 
play a meaningful role in their own governance.
    Elections will be the next major step in the process of 
establishing provisional self-government in Kosovo. Civil registration, 
the key to developing a voter registry, is set to begin in April and be 
completed in July, in time for municipal elections to be held this 
fall. UNMIK is reportedly close to issuing the regulation creating the 
Central Election Commission, which will be responsible for setting 
election rules, overseeing the conduct and supervision of the election, 
and certifying the results.
    As I noted earlier, Mitrovica and southern Serbia continue to be 
potential flashpoints. Ethnic Albanian insurgents in the Presevo region 
had pledged to reject the use of violence and seek a political 
solution, but we know that their insurgency actions continue. We will 
continue to warn extremists on both sides of the border that 
provocation and violence will not be tolerated. Additionally, KFOR and 
UNMIK are monitoring the situation carefully.
    We are concerned that UNMIK does not have enough administrators and 
staff with specialized technical skills. We are working with the UN 
Headquarters and UNMIK to identify specific personnel needs and will 
work with allies to further increase the numbers and skills of the 
UNMIK staff.
    An effective judicial system is a critical requirement in Kosovo. 
UNMIK has sworn in 289 Kosovar judges and 42 prosecutors. Criminal 
trials have recently begun in the district courts of Pristina, Prizren, 
Pec, and Gnjilane. The OSCE-established Kosovo Judicial Institute has 
begun training sessions for the newly appointed judiciary. However, 
qualifications, low pay, and intimidation remain significant obstacles 
to a working judiciary. A U.S. interagency judicial assessment team 
recently reviewed the state of the judicial system procedures and 
physical infrastructure. Its findings and recommendations will provide 
the basis to press for international support to rebuild the judicial 
system. We continue to work to further increase the number of judicial 
personnel and provide the basic equipment the court system needs.
    Another focus area is the suppression of organized crime, which as 
in any post-conflict environment is a problem for re-establishing the 
rule of law and as a potential security threat. The exact magnitude of 
the problem is not known, but it seems clear that opportunists and 
professional criminals from both inside and outside Kosovo are 
operating in the province and could be using it as a transshipment 
point for illicit goods. Together with some of our key allies, we are 
developing a strategy to support the UNMIK International Police efforts 
to identify and take action against organized criminal elements. We 
were disappointed to see that funding for this effort was not included 
in the supplemental passed by the House.
    The Kosovo media, which had been essentially silenced by Milosevic, 
has made a remarkable recovery following the cessation of hostilities 
in mid-June. Albanian-language newspapers and magazines are in Kiosks 
all over the major towns and a number of radio and TV stations have 
come on the air.
    The U.S. has major interests in Kosovo and therefore participates 
significantly in the international effort there. However, the Europeans 
must lead the international effort and bear the lion's share of the 
assistance burden. Europe accepts this responsibility. Out of about 
45,000 KFOR troops in Kosovo, European nations and Canada provide about 
72 percent of KFOR forces (80 percent if you include Russia.) The U.S. 
contribution of troops comprises about 13 percent of the total.
    In terms of civil implementation, the current total for all donors 
in fiscal year 2000 is just over $1.2 billion. The U.S. share of $168 
million is thus estimated at 13.9 percent of FY 2000 spending on Kosovo 
revitalization. Our share of humanitarian assistance has been about 20 
percent. Our costs for UN peacekeeping through UNMIK have been at the 
25 percent level mandated by U.S. law, and costs for the U.S. share of 
peacekeeping through the Organization for Security and Cooperation in 
Europe have ranged from 10.1 percent (FY 99) to 16.9 percent (FY 00).
    There are initiatives in Congress that propose an arbitrary limit 
on U.S. spending to support the international effort in Kosovo and the 
rest of southeast Europe. We believe that such legislation would be 
counterproductive. As Secretary Albright wrote in a recent New York 
Times op-ed piece, the day may come when a Kosovo-scale operation can 
be managed without the help of the United States, but it has not come 
yet. Proposals in the Congress to place a legal cap on U.S. 
expenditures would decrease our flexibility and harm, not help, our 
partnership with Europe in responding to future events. Such limits 
also do not take into account European contributions in our hemisphere. 
For example, the Europeans provided more than 60 percent of the 
bilateral aid pledged in the wake of Hurricane Mitch, assumed 33 per 
cent of the cost of establishing peace in El Salvador, and 34 percent 
in Guatemala.
    Having just returned from Kosovo, I can tell you that the people 
there have emerged from a difficult winter and are preparing to build a 
new future. Pristina and the countryside are alive with activity. 
Everywhere you look you see examples of construction and commercial 
activity that represent the height of human perseverance and ingenuity. 
These are tough, resourceful people. They are grateful for our help, 
but they are not sitting back and waiting for us to rebuild their homes 
and lives. They need some tools and guidance from us to get started, 
but they are eager and able to do the job.
    I hope this gives you a clearer idea of where we stand in Kosovo 
right now. I would be happy to answer any questions you might have. 
Thank you.
                                 ______
                                 

Prepared Statement of James W. Swigert, Deputy Assistant Secretary for 
   European Affairs and Deputy Special Advisor to the President and 
     Secretary of State for Dayton and Kosovo Implementation, U.S. 
    Department of State Before the House Committee on International 
                               Relations

                             APRIL 11, 2000

    Mr. Chairman, thank you for the opportunity to testify on U.S. 
policy toward Montenegro. I will begin by describing our view of the 
current situation, outline our strategy for advancing U.S. interests, 
and update you on our efforts to assist the reform government of 
Montenegro.
    President Djukanovic's prudent and forward-looking policies have 
made Montenegro a positive factor in the region. Montenegro opposed 
ethnic cleansing and supported a peaceful settlement in Kosovo; pledged 
support for the International Criminal Tribunal for the former 
Yugoslavia (ICTY); and has provided shelter and assistance to refugees 
and internally displaced persons. The Djukanovic government has also 
increased efforts to counter smuggling and organized crime and recently 
improved its police cooperation with Italy.
    We share the concern of many Members of Congress about the 
situation in Montenegro and in particular, the efforts of the Milosevic 
regime in Belgrade to pressure the pro-democracy government of 
President Djukanovic. The potential for aggression or serious violence 
provoked by Belgrade is real. An outbreak of violence in Montenegro 
could set back reform efforts in the region, produce more suffering and 
more refugees, and seriously jeopardize U.S. interests in the region. 
At the same time, Milosevic is aware that such action carries serious 
risks for his own regime.
    Consequently, U.S. policy is focused on preventing a new conflict 
from erupting and on providing the necessary assistance to ensure 
Montenegro can continue to develop democracy and a market economy. We 
have made strengthening the Djukanovic government, its base of support, 
and its ability to govern a priority--something good in itself--but we 
also see it as a proactive measure to decrease the chances of conflict 
by raising the costs to Milosevic of aggression against Montenegro's 
democratic movement.
    We and our allies have made it abundantly clear to Milosevic that 
we are watching the situation in Montenegro and Serbia very closely. 
Secretary Albright has reiterated over the last year, most recently in 
Sarajevo last month, our strong interest in the security of Southeast 
Europe, including Montenegro. SACEUR General Clark has repeatedly 
stated, most recently in March, that NATO is watching the situation 
very closely. Last October NATO Secretary General Robertson assured 
President Djukanovic of the continued support of the Allies for his 
government and its efforts to promote political and economic reforms. A 
year ago NATO Heads of State and Government reaffirmed their strong 
support for the democratically-elected government of Montenegro. In 
December NATO Ministers stated they were concerned about continued 
tensions between Belgrade and the democratically-elected government of 
Montenegro and called on both sides to resolve their differences in a 
peaceful and pragmatic way. NATO ministers have also repeatedly called 
on both sides to refrain from any destabilizing measures. By now, 
Milosevic is fully aware of the priority we place on the security of 
the region and of Western capabilities to respond to any destabilizing 
actions.
    The fundamental problem for Montenegro, as for its neighbors, 
remains the lack of democracy in Serbia. Because of its status as 
sister republic to Serbia in the Federal Republic of Yugoslavia (FRY), 
Montenegro is particularly vulnerable to pressure from Milosevic, who 
is fundamentally hostile to the Djukanovic government and its reform 
program. The Milosevic regime has routinely ignored or trampled on 
Montenegro's rights under the Yugoslav constitution.
    During this winter, Montenegro was subjected to additional 
pressures:

        The temporary closure of the civilian airport in Tivat 
        and the civilian-military airport near Podgorica.
        A build-up of Yugoslav Army presence at and 
        interference with newly-opened border crossing points.
        The initiation of illegal television broadcasts of 
        Milosevic propaganda from Yugoslav Army installations in 
        Montenegro.
        An embargo slapped on by Belgrade to block trade with 
        its fellow Yugoslav republic.

    We have worked closely with the Djukanovic government to help it 
overcome these pressures. While tensions remain, and the embargo has 
raised costs to Montenegro of basic goods and medicines--also depriving 
Serbia of natural markets--the situation is calmer now than it was a 
few weeks ago. Rather than falling into Milosevic's trap of 
confrontation, the Montenegrin government is working with its Yugoslav 
Army contacts to prevent security incidents from escalating. The 
prudent approach taken by the Djukanovic government denies Milosevic 
and his supporters any pretext for violence or intervention.
    At the same time, we recognize that tensions could spike upward 
again and do so quickly, given Milosevic's hostility to Podgorica. 
Therefore, it is essential we maintain our support for the Djukanovic 
government and continue to actively promote a democratic transformation 
in Serbia. We firmly believe the establishment of a democratic 
government in Belgrade would make it possible for Serbia and Montenegro 
to establish a new, constructive relationship in which Montenegro could 
be a genuine partner with Serbia in a democratic Yugoslavia.
    The reform program of the Djukanovic government is already acting 
as a model and a stimulus for democratization throughout Yugoslavia. 
Today, Montenegro is moving down a road toward greater prosperity that 
the people of Serbia could also travel, were their government 
democratic and willing to cooperate with the International Community. 
The Montenegrin government has worked actively with us and the EU in 
our dialogue with the Serbian opposition on promoting democratization 
throughout the FRY.
    President Djukanovic has kept Montenegro on the path of peace and 
reform. His government, a multi-ethnic coalition of three democratic 
parties, has committed itself to building democracy and a market 
economy. Montenegro has progressed, thanks in large part to the strong, 
pragmatic leadership President Djukanovic has provided. His careful and 
steady approach has enabled Montenegro to provide a more tolerant and 
prosperous society, despite tremendous pressure from the Milosevic 
regime to fall in line.
    Recognizing the constructive approach the new Montenegro government 
was taking, the U.S., and increasingly, the European Union, have 
supported the Government of Montenegro politically and with economic 
assistance.
    Western assistance serves four valuable purposes. First, it helps 
to mitigate the destabilizing effects of Belgrade's economic sanctions 
against Montenegro. Second, it allows Djukanovic to show that his 
policies deliver concrete benefits to the people of Montenegro. Third, 
it reduces pressure from pro-independence groups on Djukanovic to take 
risky steps. Fourth, it concretely demonstrates to Milosevic our strong 
interest in Montenegro and to the Serbian people that our differences 
are with Milosevic and his policies, not with Serbs or Montenegrins.
    The U.S. has become and continues to be the Djukanovic government's 
leading supporter and most vocal advocate:

        We exempted Montenegro from sanctions against the FRY--
        including the flight ban, the oil ban, and the financial 
        sanctions--and persuaded the EU to follow suit.
        We worked with our NATO allies to minimize the impact 
        on Montenegro of air strikes against FRY and Serbian forces to 
        avoid inadvertently weakening support for President Djukanovic 
        and his reform policies.
        We demonstrated political support through high-level 
        contacts: President Clinton met twice with President 
        Djukanovic; Secretary Albright hosted President Djukanovic in 
        Washington last fall and met him in Sarajevo last month; and we 
        have remained in close daily contact with key Montenegrin 
        officials despite the inability to maintain a permanent 
        presence in Montenegro.
        Following Montenegro's adoption of the Deutsche Mark as 
        a parallel currency, we sent a team of economic advisors to 
        assist in developing and implementing urgently needed reforms 
        of Montenegro's macrofinancial policies, budgeting processes, 
        tax system, banking sector, and payment systems. The EU is also 
        providing advisors in coordinated efforts.
        Last month, we signed an OPIC investment incentive 
        agreement with Montenegro to help stimulate private sector 
        investment, which is essential to building a vibrant economy. 
        The agreement allows OPIC to offer political risk insurance and 
        financing to U.S. firms for projects in Montenegro. It also 
        allows OPIC-sponsored investment funds to invest in U.S. and 
        non-U.S. projects in Montenegro.

    Furthermore, an essential element of our strategy has been to back 
up our political support with concrete economic assistance. In fiscal 
year 1999, we provided $26 million in SEED funds for programs and 
budget support, $15 million in economic support funds (ESF), and a 
substantial amount of humanitarian and food aid to help them cope with 
the sudden influx of tens of thousands of Kosovar Albanians. In fiscal 
year 2000, we are providing another $26 million in SEED for program and 
budget support and $11 in ESF while continuing to provide considerable 
humanitarian and food aid to alleviate the impact of Belgrade's 
economic sanctions against Montenegro.
    However, we expect that the amount of monetary assistance for 
fiscal year 2000 will not be adequate to meet Montenegro's needs, which 
have increased due to Belgrade's intensified economic sanctions against 
Montenegro. Consequently, we have submitted to Congress a supplemental 
request for an additional $34 million in SEED funding. We appreciate 
the House's inclusion of this request in the supplemental bill passed 
on March 30 and hope the Senate will also support it.
    While U.S. leadership and resources have been and remain essential, 
the U.S. alone cannot provide sufficient support for Montenegro, nor 
should we do so. Europe too has a strong interest in the success of 
Montenegro's reform efforts and an essential role to play. Thus, we 
have been working intensively at senior levels to encourage the EU to 
commit greater resources to Montenegro, and speed their delivery, 
bearing in mind the importance of strengthening the Djukanovic 
government at this particular moment. The response has been 
encouraging. This year:

        (1) The European Commission doubled EU assistance to Montenegro 
        for 2000 from 10 to 20 million Euros.
        (2) The European Council tasked the European Investment Bank 
        (EIB) with developing a plan for financing projects in 
        Montenegro.
        (3) In Brussels on March 30, Stability Pact donors pledged 
        funds against a list of ``Quick Start'' infrastructure 
        projects, which included $15 million of projects in Montenegro. 
        We have submitted for congressional notification the intended 
        U.S. share of this effort, which will leverage far larger 
        European sums.
        (4) EU members are looking for ways to increase their bilateral 
        assistance to Montenegro. Germany has granted DM 40 million in 
        investment credits and the Netherlands has also offered 
        significant new assistance.

    We will keep working with our European partners to get Montenegro 
the assistance it urgently needs.
    For the Montenegrin government, keeping the economy stable and 
showing that relations with the West pay dividends are critical in the 
run-up to the June 11 municipal elections in Podgorica and Herceg Novi. 
About one quarter of Montenegro's electorate will be eligible to vote 
in these elections, which are expected to gauge popular support for the 
Djukanovic government's policies of democracy and economic reform. 
Currently, the economy surpasses relations with Serbia as the issue of 
greatest concern to voters.
    Popular support for independence has grown considerably over the 
last few years, but the Montenegrin people remain sharply divided over 
the question. A substantial portion of the population, perhaps a third 
or more, remains strongly opposed to independence. Given Milosevic's 
support for Serb loyalists in Croatia, Bosnia, and Kosovo, we believe a 
unilateral move toward independence by the Montenegrins would provoke 
Belgrade to respond with force.
    Absent Milosevic's threats, we would still be convinced that the 
best future for Montenegro is to remain with Serbia in a democratic, 
prosperous, and reformed Yugoslavia. Such a relationship would preserve 
the traditional ties between the peoples of each republic and 
facilitate their economic development. Clearly, a democratic Montenegro 
can be a model and stimulus for democratization throughout the FRY.
    In closing, let me thank the members of the committee for this 
opportunity to discuss the situation in Montenegro and our policy 
there. We appreciate the strong support of this committee and other 
members of Congress both for Montenegro and for the Administration*s 
efforts to help the government of Montenegro remain a model for 
democratization in the FRY. 
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    Prepared Statement of Ilir Zherka, Executive Director, National 
  Albanian American Council Before the House International Relations 
                               Committee

                             APRIL 11, 2000
    Mr. Chairman, thank you for inviting me to join you today to 
discuss the situation in Kosova and your bill, H.R. 4053, the ``United 
States Southeastern Europe Democratization and Burdensharing Act of 
2000.''
    As we all know, last year at this time Serb forces were on a 
murderous rampage in Kosova. In their effort to rid the country of its 
indigenous, Albanian population, Serbs committed horrific acts of 
violence. In the village of Kline, 11 children, including a two-year 
old, were shot at close range by Serb forces. In Gjakova, Valbona Vejca 
together with her three children, including a 3-month old baby boy, 
were murdered at a pool hall where they sought shelter. In Izbicaj, 
nearly 50 elderly men were beaten by Serbs, their faces smashed in, 
before being shot at close range. And throughout Kosova, young girls 
were raped, some in front of their families, as an instrument of war.
    At the end of this killing spree, nearly ten thousand were dead, a 
million forced out of their homes, a whole nation traumatized. The war 
in Kosova was the central part of Milosevic's final solution to the 
Albanian question. Whatever history will say about the post-war 
situation in Kosova, the fact is that the United States of America led 
the military effort that put an end to the Serb campaign of murder, 
rape, and brutality against the Albanians. For this, Albanians will be 
forever grateful and indebted to this great nation, and all Americans 
should be proud of our actions in Kosova.
    We should also be proud and thankful that the United States broke 
the chains of repression in Kosova. For the first time in history, the 
people of Kosova are free--free to express themselves, free to realize 
their individual potential, and, fairly soon, free to elect their own 
leaders and decide their own fate.
    But, while the international community was successful in war, it 
has had a mixed record in peace. The international community has been 
unable to tackle some of the fundamental problems in Kosova, such as 
the inadequate supply of water and electricity, the division of 
Mitrovica, and the lack of law enforcement.
    Part of the solution to the problems that plague the international 
mission in Kosova is for the United States to assert greater 
leadership, not less.
    The American people understand what we have accomplished in Kosova 
and they support the need for continued American leadership. A poll 
conducted last month by Penn, Schoen, and Berland, showed that a 
majority of Americans supported the air campaign against Serbia. More 
importantly, a full two-thirds of the American people say they support 
the decision to put Kosova under NATO and U.N. control, and two-thirds 
believe that the U.S. military should stay in Kosova to help the 
transition to democracy, protect the people, and finish the job we 
began.
    As a side note, the poll also revealed that nearly 80 percent of 
Americans support the creation of a democratic, independent Kosova.
    After the United States incurred the bulk of the costs of the 
military campaign against Serbia, we support the idea that Europeans 
ought to pay for the bulk of the costs of peacekeeping and institution 
building in Kosova. But, at the same time, the United States must 
maintain flexibility to make the strategic investments needed 
throughout the region to ensure that stability and democracy firmly 
take hold in the Balkans.
    Unfortunately, the assistance cap in H.R. 4053 does not provide 
enough flexibility. Instead, the bill would tie our aid to the levels 
provided by the international community. Under this bill, if European 
contributions dropped by 50 percent, we would be forced to do the same 
even if we thought it very unwise. Also, the 15 percent cap would be 
difficult to calculate and negatively effect our ability to deliver aid 
to Kosova. Today, we are able to get aid much more quickly to Kosova 
than the Europeans. Under the cap, however, the Administration would be 
forced to constantly reevaluate its efforts, causing delays. 
Additionally, the cap in H.R. 4053 would tie us to an arbitrary number, 
15 percent, again limiting our flexibility in the region.
    Beyond the problems presented by the funding cap, H.R. 4053 shields 
Montenegro and Macedonia from potential funding cuts, but not Albania 
and Kosova.
    Although assistance to Albania and Kosova is not necessarily 
restricted in H.R. 4053, the language of the bill seems to suggest that 
these two countries are less of a priority for the United States.
    We firmly believe that helping to create a strong, stable, and 
democratic Albania is essential to maintaining peace in the Balkans. 
Moreover, we have yet to win the peace in Kosova. Congress should 
consider doing more, not less to help establish long lasting 
institutions there. After all, we are spending billions of dollars to 
keep our military in Kosova. We should also be willingly to leverage 
that money with adequate sums to rebuild the economy and establish 
democratic institutions.
    The people of both Albania and Kosova are staunchly pro-American. 
In fact, Albanians throughout the world believe that they have a 
special relationship with the United States. That affinity began when 
Woodrow Wilson helped protect Albania's independence and continues 
through today with the U.S.-led NATO air campaign against Serbia. We 
should try to cultivate that special relationship and work to ensure 
that a spirit of democracy and respect for human rights prevails in 
Albania and Kosova.
    We also believe that, as we provide aid to Montenegro and 
Macedonia, we should continue to press those countries to work harder 
to provide equal rights and equal opportunities to their Albanian 
population.
    With the emergence of the Stability Pact, the United States and the 
international community is taking a regional approach to the Balkans. 
Congress should continue that approach by removing in H.R. 4053 the cap 
on our assistance and by adopting funding principles and goals for the 
entire region.
    Again, I thank you for inviting me to address this Committee. I 
look forward to answering any questions you may have.
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