SEED Assistance Summary 1998
SEED Act
1994 | 1995 | 1996 | 1997 | 1998 | 1999
2000 | 2001 | 2002 | 2003 | 2004
Economic Developments
The Czech Republic has largely consolidated its economic transition to a market economy with most enterprises now in private hands. The Czech Republic enjoys moderate levels of external debt, a track record of relatively low budget deficits, strong foreign currency reserves, inflation below 10 percent, and moderate though rising unemployment. Due to lack of microeconomic restructuring coupled with recent austerity measures, the country is now undergoing needed economic retrenchment after high, but unsustainable, levels of growth in 1995 and 1996. Recent estimates from the Czech Statistical Office suggest that GDP will fall by almost two percent in 1998, following a sharp economic contraction in the first half of the year and GDP growth of one percent in 1997.
Vital microeconomic tasks remain, such as completing the privatization of the steel, utilities, telecommunications, and financial sectors; restructuring firms to maintain competitiveness; and strengthening the regulatory framework. The new social democratic government has publicly voiced its commitment to carry through on many of these reforms. Restoring health to an ailing financial sector, introducing more transparency in economic decision-making, and instituting incentives for good corporate governance remain essential.
Integrating the Czech economy into Western economic institutions, particularly the European Union, is a principal Czech foreign policy priority. The Czech Republic is a member of the WTO and OECD. It formally applied for European Union membership in 1996 and started detailed negotiations on EU accession in November 1998. During the transition to EU membership, the Czech Republic will harmonize its legal and regulatory framework with EU norms. The drive for EU accession should accelerate the implementation of remaining reforms needed to complete the Czech Republic's transition to a fully market economy.
Political Developments
Since 1989, the Czech Republic has undergone a radical political and economic transformation, returning to the ranks of free-market democracies. It is a fully functioning parliamentary democracy whose citizens enjoy the benefits of free speech, free assembly, and a vigorous free press. Vaclav Havel, the Head of State, is an internationally recognized advocate of human rights and social justice. The Constitution provides for an independent judiciary, which is impartial and independent in practice. The shortage of qualified judges and lengthy pretrial delays, however, suggest that additional reform is needed. The government has committed itself to further judicial reform as part of its efforts toward EU accession.
Parliamentary elections held in June 1998, precipitated by the fall seven months earlier of the government of former Prime Minister Vaclav Klaus, produced no clear majority winner. The Social Democratic Party (CSSD), which received a plurality of just under one-third of the vote, reached an agreement with the Civic Democratic Party (ODS) under which CSSD formed a minority government with the toleration of ODS.
U.S.-Czech-relations are excellent and reflect strong historical ties. The U.S. and the Czech Republic cooperate on a wide range of issues, including in the United Nations and in Trans-Atlantic fora such as the OSCE and NATO's Partnership for Peace. In April 1998, the U.S. Senate ratified Czech accession to NATO, which is expected to take place no later than April 1999. The Czechs continue to contribute to the NATO-led stabilization force in Bosnia. The U.S. IMET and FMF programs are designed to help produce a highly trained, mobile,
Western-style military force structure capable of working side-by-side with the U.S. and NATO. The U.S. also continues to provide training in defense planning, military doctrine, peacekeeping operations, and English as the language of peacekeeping.
SEED ASSISTANCE SUMMARY
Overview
As was agreed when the decision was made to end USAID activities in the Czech Republic, one USAID-funded program has continued beyond the end of USAID management of the SEED Act assistance. This is the Housing Guaranty-funded municipal finance program, which will continue to the year 2000. USAID's regional urban development office in Poland and the U.S. Embassy in Prague jointly carry out management and monitoring of this program.
Under this program, the Czech Municipal Finance Company (MUFIS) can borrow up to $60 million from private U.S. investors, and then on-lend in Czech korunas to commercial banks. The first tranche was borrowed in March 1995; a total of $44 million has now been borrowed and used to finance some 260 municipal infrastructure projects benefiting over 70,000 households. An important result of the program is the development of a functioning, market driven municipal credit market. An additional $8 million has been authorized, which MUFIS plans to borrow in March 1999, in order to continue to strengthen the market system and increase the provision of services such as water, sewerage, gas, solid waste disposal, and roads to an additional 13,000 households.
The associated technical assistance program has led to greater empowerment and expanded resources for municipal governments. It was instrumental in strengthening communications among local officials through support provided to the Union of Towns and Communities. USAID support has helped to establish a program for training bank staff in municipal credit practice; these courses are now offered on a commercial basis independent of USAID financing. USAID-funded advisors have also worked closely with municipal governments to improve management and accounting practices, while increasing the efficiency and quality of public services. The program of substantive technical assistance will be completed in 1999.
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