By Fatos Bytyci

PRISTINA, July 9 (Reuters) - Newly independent Kosovo expects to secure up to 1.5 billion euros at a donor conference on Friday in what it hopes will be a first step towards self-sufficiency. The Albanian-majority territory seceded from Serbia in February after nine years as a U.N. protectorate.

For decades the poorest part of Yugoslavia, it is still weighed down by the destruction of the 1998-99 war and a legacy of waste and corruption under international stewardship.

"The expectations are high, people see this as the answer to all our problems," said Kosovo economist Shpend Ahmeti.

"We're talking about 1.5 billion euros now but we can't forget that since 1999 we got some 3 billion euros from donors, and today Kosovo is not really a success story. It's not the amount that counts, it's spending it effectively."

With efficiency in mind, the government has identified its main priorities and prepared a 145-page document outlining its plans for the conference hosted by the European Commission.

"The obstacles to economic growth are failings and shortages in the energy sector, in infrastructure, education, agriculture and health," said Kosovo finance minister Ahmet Shala.

"We believe we'll succeed if we invest in these sectors."

Aside from growth, good governance and fighting poverty are key, along with the practical aspects of its new independence, set along the lines of a plan by U.N. envoy Martti Ahtisaari.

"To implement the status settlement we need money," Shala said. "We have decentralisation, minorities, ministries of defence and foreign affairs, opening embassies abroad. For all those things we need money."

He says the government was careful to weed out and reject frivolous project proposals, and focus on the essentials.

"It is not wise to ask money for a football stadium when we don't have power," Shala said.

GREAT EXPECTATIONS

A large part of the total sum, meant to plug holes in the budget until 2011, will go to servicing Kosovo's share of the Yugoslav debt it inherited from Serbia on declaring independence.

Serbia lost control of its southern province in 1999, when NATO drove out Serb forces accused of mass killings of civilians in a two-year war on separatist guerrillas.

The United States, Kosovo's main Western ally, has pledged $400 million specifically earmarked for debt servicing.

"First we want to verify if the loans received for Kosovo were actually spent in Kosovo," Shala said. Talks with international financial institutions to determine the exact amount "may go on for months or even years."

Analysts say that regardless of the amount raised, the government will have a tough job fulfilling the expectations of its weary 2 million people, the youngest population in Europe but one struggling with over 40 percent unemployment.

Despite being recognised by 43 mostly Western states, a post-independence investment boom has not materialised.

Legal challenges by Serbia and its ally Russia also threaten to keep Kosovo out of some international bodies for the near future, robbing it of the legitimacy it needs to attract loans and investors put off by its limbo status.

"This conference was promoted as a magic wand that will solve everything" says Safet Gerxhaliu from the Kosovo Chamber of Commerce.

He said the government should have focused on making better use of the 300 million euros that ended up as a budget surplus last year, and the 700 million euros in privatisation and pension revenue locked in trust while Kosovo was a U.N. ward.

"We have a surplus, money from the pensions, privatisation income, and we ask for money from outside?" Gerxhaliu said.

"The money is here, we just don't know how to manage it. If you have a bad fiscal policy, an inadequate banking system, smuggling and uncontrolled borders, who is foolish enough to come and invest here?"

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