SEED Assistance Summary 2000
SEED Act
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Economic Developments
The Czech Republic is still consolidating its economic transition to a market economy, with most enterprises now in private hands. Having largely created a free, competitive market, it is now struggling with problems stemming from unfinished structural reforms in bank privatization, privatization of strategic firms, industrial restructuring, legal and judicial reform, and financial market transparency. While the government is taking measures to address many of these issues, the pace of reform remains uneven.
The country is emerging from a deep recession, which can largely be attributed to these unfinished structural reforms. Record levels of foreign investment and stronger growth in the Czech Republic's principal export markets have led the way to recovery, with the economy expected to grow by over 2 percent this year. Inflation is 3.6 percent now, and unemployment has leveled off at 8.5 percent, after nearing double-digit levels.
Integrating the Czech economy into Western economic institutions remains a principal foreign policy goal. Already a member of the WTO and the OECD, the Czech Republic formally applied for European Union membership in 1996, and started detailed negotiations on EU accession in November 1998. During its transition to EU membership, the country will harmonize its legal and regulatory framework with EU norms. The drive for EU accession will likely ensure that the remaining reforms needed to complete the Czech Republic's transition to a fully market economy will be completed over the next few years. U.S. economic relations with the Czech Republic are strong.
Political Developments
The Czech Republic has experienced a radical political and economic transformation since 1989, returning to the ranks of free-market democracies. It is now a fully functioning parliamentary democracy, whose citizens enjoy the benefits of free speech and assembly, a vigorous free press, and other basic rights and freedoms. President Vaclav Havel is an internationally recognized advocate of human rights and social justice. The constitution provides for an independent judiciary, for which long overdue procedural and structural reforms are needed. The government has proposed broad judicial reforms, which are the subject of difficult negotiations between it and Parliament.
The current minority Social Democratic government (CSSD) of Milos Zeman assumed power in July 1998, after negotiating an "opposition agreement" with the center right Civic Democratic Party (ODS) of former premier Vaclav Klaus. A lack of previous governing experience, corruption allegations, and legislative gridlock plagued the government's first year in office. Rising popular dissatisfaction with the government, ODS criticisms, and the shock of the second sharply critical annual report from the EU Commission on the Czech Republic's preparations for EU membership prompted Prime Minister Zeman to streamline his cabinet in late 1999 and early 2000. The government also enacted a flurry of legislation. While most of these laws were widely welcomed, a revised electoral law and a revision in the Central Bank law have both been criticized as unconstitutional. The Constitutional Court has been asked to scrutinize the first law on the grounds that it disadvantages the smaller parties. The second law, which the Chamber of Deputies is expected to re-approve over a Presidential veto, attempts to change the manner in which the Central Bank's governors are appointed.
In the first-ever elections for new regional parliaments held in November 2000, the ODS came out on top, winning a plurality of seats in six of the 13 regions. The Quad Coalition -- a center-right grouping of three small parliamentary parties and one non-parliamentary party -- placed second, gaining a plurality of seats in five regions and tying the ODS in a sixth region. The only partially reconstructed Communist Party of Bohemia and Moravia (KSCM), which ranked briefly as the most popular party in the country in late 1999, placed third, winning a plurality in Usti nad Labem, the region with the nation's highest unemployment. The governing Social Democrats won no regions, but are likely to be present in a few regional coalitions because none of the other parties wants to cooperate with the KSCM. In the Senate races, also in November 2000, the Quad Coalition was the big winner. The ODS lost two seats, the CSSD won a single race, and the Communists failed to gain a single seat. With the help of two independents, the Quad Coalition will now hold a simple majority in the Senate and can block any attempts by the "opposition agreement" parties to change the Constitution. Elections for the Chamber of Deputies are due by June 2002.
U.S.-Czech relations are excellent, reflecting strong historical ties. A NATO ally since March 1999, the Czech Republic has contributed to NATO actions in Kosovo and the NATO-led Stabilization Force in Bosnia. The U.S. and the Czech Republic also cooperate closely in other international fora, including the UN and the Organization for Security and Cooperation in Europe (OSCE). The U.S. MET and FMF programs are designed to help produce a highly trained, Western-style force capable of working side-by-side with the U.S. and NATO. The U.S. also provides training in defense planning, military doctrine, peacekeeping operations, and English as the key language of NATO.
SEED ASSISTANCE SUMMARY
During FY 2000, USAID provided funding to ABA/CEELI to conduct two training courses in the Czech Republic for judges from several countries in Eastern Europe/Eurasia. The funding for these inaugural judicial training programs, which covered such areas as judging in a democratic society and justice in a market economy, represented an initial investment in the new CEELI Institute in Prague, to which USAID will provide $3 million over the next five years. The CEELI Institute will function as a post-graduate judicial training facility for judges and lawyers throughout the region, provide legal technical assistance, and serve as a center for legal policy reform.
Under the Partners for Financial Stability (PFS) program, a regional USAID activity described in the Regional Activities Section of this report, the Czech Securities Commission is receiving technical assistance in developing and implementing international accounting standards and legal assistance on investment companies and funds.
During FY 2000, five quick-response grants (under $5,000 per grant) were made to U.S. and Czech companies to promote environmental trade and investments under the Ecolinks program, which is described in the Regional Programs Section.
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