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Success Stories Assistance Areas SEED Reports Contact Information Last updated: 31     1996 1996 SEED Act Report - Poland   New U.S. Strategic Approach and Problems Remaining to be Addressed under Our Three Objectives in FY 1997-2000 USAID's new mission is to strengthen sustainable institutions and systems that will remain in place to complete Poland's transition to markets, foster participatory democracy and public-private initiatives at the local level, and promote long term U.S.- Polish institutional relationships. The institutions and U.S.- Polish relationships to be developed will fall under three strategic objectives as follows: S.O. 1.3 The private sector is stimulated at the firm-level Emphasis will be placed on strengthening institutions and consultants that can support training, information and technical assistance for SMEs; and legal, regulatory and judicial reform. Efforts on ENI objectives in energy and environment (1.5), and legal and regulatory reform (2.2) will be incorporated here as intermediate results focused on stimulating private sector development at the firm-level, rather than as objectives in their own right. Long term relationships will continue between Polish and U.S. business schools (especially the Universities of Maryland, Minnesota, Connecticut and Illinois). S.O. 1.4 A competitive, market-oriented private financial sector is developed Under this objective, USAID will help strengthen the central bank inspectorate responsible for bank supervision, the Securities Exchange Commission (for regulating commodities exchanges), and the investment banking departments of Polish banks. USAID will also help establish supervisory and regulatory bodies over private pension funds, and a Credit Rating Agency. USAID will help to create a brokerage house-owned, operated, and self-regulated Over-the Counter market, and a licensed warehouse system for commodity markets. USAID will assist the Warsaw Institute of Banking and the Polish credit union movement to become self-sustaining. Long term relationships will be established between the U.S. Office of the Comptroller of the Currency, the U.S. Securities and Exchange Commission, the American Bankers' Association, the World Council of Credit Unions, and their Polish counterparts. S.O. 2.3 Local government is effective, responsive and accountable. Through the activities of the local government program, USAID will be strengthening the capacity of a wide range of Polish institutions, associations, research and academic centers, and consultants. These local institutions will be built partly through direct technical assistance and even more significantly, through their work with USAID as partners in implementing the program. Key to providing a voice for local government issues are the five national associations of Polish municipalities, each representing a different category of municipalities. Each will become stronger in their management and capacity to lobby and influence national policies. In addition, USAID will work with professional associations of city treasurers, economic development officials, and city secretaries/notaries. These associations will be linked with U.S. counterparts--national and local municipal associations (a strong relationship already exists with the Virginia Association of Mayors, for instance) and professional associations, relationships which will endure beyond USAID's presence. Academic curricula will be developed to provide training in urban planning, real estate markets, economic development, local public administration, and municipal finance. Institutions that support local governments will also be strengthened, such as the Municipal Development Agency, responsible for coordinating infrastructure investment, the nonprofit Housing Institute, and various research centers capable of working on local government problems. Increasingly, USAID will be using Polish rather than U.S. consultants in all aspects of its local government program, initially training them through formal training courses, then working side-by-side on specific projects, and eventually using only Polish personnel with strategic advice from U.S. partners. USAID's strategic emphasis and allocation of resources over the FY 96-2000 period will gradually shift towards support for local government, as national-level policy and institutional targets in private sector development and the financial sector are achieved. In FY 96, excluding Special Initiatives and the Polish-American Enterprise Fund, 43% of USAID funds will go to the private sector, 31% to the financial sector, and only 26% to local government. In FY 97, funds will be split in thirds, one-third to each objective. In FY 98-99, the last two years of expected USAID funding, approximately half of the budget will be allocated to local government assistance, with almost 25% to each of the other two objectives in FY 98, and 20% each in FY 99. In FY 99, at Embassy request, 10% of the budget will be reserved for Special Initiatives, to address bottlenecks in Poland's graduation from USAID assistance. Based on the expected schedule for Poland's progress towards EU integration, and the sustained economic growth prospects that EU membership would likely provide, the Year 1999 seems the best date to plan for as our last expected year for new USAID funding obligations. An office would need to stay open through 2000 to monitor these final funds, with additional monitoring of the close-out of activities through the Year 2001 from USAID/Washington or a regional office in the field. Strategic Objective 1.1: State owned Assets Transferred to the Private Sector Bechtel co-drafted the "White Paper on Power Sector Demonopolization and Privatization", which was approved by the GOP, a basic document providing general rules for energy sector enterprises privatization. With this approval, the Gliwice, Torun, Poznan distribution companies are being prepared for privatization. Under the Bechtel/USAID project, Arthur Andersen-Warsaw completed work on 3 preliminary privatization preparations for the Gliwice, Torun and Poznan electricity distribution companies. A similar project is underway for the Rybnik Generating Company as a precondition for a World Bank loan to rehabilitate the power station. The MOIT in September 1996, invited tenders for preparing the privatization process of Gliwice Distribution Company (GZE). The contractor will be selected sometime in November/December as a precondition for a World Bank loan to rehabilitate the power station. Arthur Anderson has assisted Torun DC in identifying company restructuring objectives to operate more efficiently. A result came on line during calendar 1996, which is attributable to pre-1996 privatization assistance. The pre-1996 assistance from USAID helped the Ministry of Privatization design the conceptual and regulatory framework for the Mass Privatization Program, negotiate the compensation agreements for National Investment Managers, and design the share distribution system. The Mass Privatization Program covers 512 enterprises. In the year since November 1995, 25,675,000 Polish citizens have collected their share certificates, a participation rate of about 95% of these eligible. The market value of shares has already appreciated by 500-700%. Strategic Objective 1.3: Private Enterprise Development at the Firm-Level Intermediate Result 1: Policies, Laws and Regulations are conducive to Broad-Based Competition and Privat Sector Growth and Efficiently Administered * Strengthening of judges association (Iustitia), preparing the Commercial Law Center to continue as an independent and sustainable center, substantial support to the Institute of Inventiveness and Protection of Intellectual Property; * collateral law about to be passed; * provision of legal information to SMEs by way of the Business Information Centers; * strengthening relevant GOP institutions to support SMEs, systematize collection and interpretation of SME data, lobby on behalf of SMEs for lower tax burden and maintenance of the preferential status inter alia of BSO, assist implementation of BGK loan facility for SMEs, begun work on drafting basic business legislation, the Industry Law; * reform of tax administration system being tested in one pilot area; * completion of research project to define areas still requiring reform as the economic transformation enters its second stage. Intermediate Result 2: Improved Profitability of SME Enterprises Bechtel help drafted and improved the final version of the Energy Law. According to the latest draft of energy law, there will be one independent regulatory body for electric, gas and heat and the Ministry of Finance will be allowed to set prices for up to two years after the law is passed, but it would be feasible for the Ministry to delegate it to the new Energy Regulatory Agency before the end of the second year period. The ERA Working Group is not in place. The law will give a third party access only for the companies that own generating assets in Poland which is a compromise not in line with the EU intentions for competition in the sector. As a result of follow-through by Bechtel in response to expressed positions of members of the American Chamber of Commerce Energy Committee, US business interests were kept before the Parliamentary Subcommission in its deliberations on key provisions of the Energy Law. Bechtel organized the first seminar on Implementing Energy Regulation in Poland. The seminar was developed for a core group of members of the Working Group for Implementation of the Energy Regulatory Authority, as set up by the ESMAP Project. Other attendees were from energy enterprises and stakeholder groups. Over 40 individuals attended the seminar. Electrotek initiated cooperation with Gliwice and Torun on integrated resource planning (IRP) and DSM training activities. Both these activities are viewed by the World Bank (WB) as essential to the introduction of modern market-based planning and management methods, as a prerequisite for WB lending. The WB has chosen these two ZEs (Gliwice and Torun) as the two initial candidates for energy distribution sector loans in Poland, for a total loan value of approximately $100 million. Electrotek signed a subcontract with two indigenous organizations (the State National Energy Conservation Agency (NAPE) and the Foundation for Energy Efficiency (FEWE) that will provide business support and training for SMEs in energy efficiency financing, auditing, project design and evaluation. * Setting up of three pollution control centers, provision of technical assistance to 43 firms giving reduction of 70,000 tons of pollution and cost savings of USD 7,200,000; * portfolio has reached 43 direct investments for USD 191 million employing 70,000 people, USD 1,5 million in micro-loans granted, lending facility to SMEs now up to 5,300 firms with value of USD 175 million; * strengthening of 17 agribusiness organizations; * 232 PVO assignments completed providing technical assistance to Polish SMEs; 86 participant trainees; * CARESBAC pre-tax rate of return on investment maintained at 30%, very impressive for the Polish SME sector; in 1996 nine new investments were made for a total of approximately USD 1.93 million; * network of six business information centers established and integrated with data bases of the SME Foundation, the prime para-governmental SME organization; * three agribusiness trade associations strengthened through publishing of trade-specific business information materials while giving technical assistance to 20 SMEs; * by completion of the artificial cattle insemination project, 575 inseminators became private to break state monopoly for this service, and fund to support private breeders has been established; * continuing support to five MBA programs; * 10 market-based, democratically organized and privately-owned housing cooperatives have become self-sustainable and another 24 are being established in the forthcoming period. Strategic Objective 1.4: A Competitive, Market-Oriented Private Financial Sector USAID's Significant Contributions to Progress under this Strategic Objective Intermediate Result A: Increased Confidence in the Financial Sector For the central bank's inspectorate, a twenty-two chapter bank inspection manual has been developed over the past three years. One-quarter of the central bank's 300 examiners have received thorough training in on-site examination procedures. In 1996, USAID advisors helped the central bank conduct its first examinations of major commercial banks. Agreement has been reached with the Polish Bankers' Association to create Poland's (and Central and Eastern Europe's) first credit rating agency. A business plan for the agency has been prepared with USAID assistance together with draft articles of incorporation. A broad array of Polish financial institutions have now joined to create the first credit rating agency in Central-Eastern Europe, staff has been recruited, and they are developing guides for creating ratings. Intermediate Result B: Improved Efficiency of Financial Markets With USAID technical assistance, forty-three brokerage houses have joined to form a corporation to own and operate an Over-The-Counter Market. Trading rules for the market have been developed and approved, and a computerized trading system has been created. Intermediate Result C: Increased Availability of Financial Services and Products The City of Gdynia's recent municipal bond was the first successful private placement. For the follow-on bond issue planned by the City of Krakow, USAID-financed advisors supported selection of an underwriter; prepared an information memorandum specifying the financing package; and prepared disclosure guidelines for the Polish Securities Commission. For Ostrowiec-Wielkopolski - USAID provided assistance has helped to develop a model information memorandum which will allow for public placement and trading of municipal bonds - for the first time since World War II. Price Waterhouse, with USAID funding, delivered training on private pension plans to the Ministry of Privatization, Ministry of Labor, Council of Ministers, Institute of Labor and Social Studies, local CASE Foundation, and private entities interested in pension fund development. As a result, these institutions have been exposed to the full range of private pension fund design issues and alternative approaches to their creation, management and supervision. Strategic Objective 2.3: Local Government is Effective, Responsive and Accountable USAID's Significant Contributions to Progress under this Strategic Objective: Intermediate Result 1: Increased influence of local government on national and regional policy. In April 1996, parliamentarians from the Committee on Local Government told USAID that the Association of Polish Cities is the strongest, most active of the five national organizations that represent cities, and that together with the Union of Polish Metropolitan Cities, it provides the most useful information to Parliament. USAID has provided technical assistance and training to this Association since 1991, resulting in doubled membership (now 190 gminas) and diversified revenues (including 40% from non-dues sources). The Association has had an impact on national legislation which increases decentralization, including amendments to the law on gmina finances, and the law granting new responsibilities for service delivery to the largest cities in Poland. USAID funding provided policy support to the Union of Polish Metropolitan Cities, as well as the Association of Polish Cities, resulting in positive change on: a) the bond law, making municipal bonds more feasible; b) the rental housing/housing allowance law, sharing the cost of housing subsidies more equitably; and c) the creation of the Municipal Development Agency, an institution that supports municipal infrastructure project preparation. Intermediate Result 2: Increased participation in local government decision-making. USAID funding stimulated the interest of NGOs in public policy- oriented activities, a concept not yet well established in Poland. Eight hundred of the 1,200 public policy-oriented NGOs have been reached by an information campaign which explained the concept and presented major areas of public policy interest. To develop the organizational and financial sustainability of public policy NGOs, USAID selected a first group of 29 NGOs, and is giving them assistance with the preparation of plans for sustainable funding, once USAID's grant for cooperation with local government and improving NGO management capability ends. A network of six Polish NGO-support organizations -- the Open Society Network -- has been established to help other NGOs to develop public policy-oriented initiatives, raise funds and develop partnerships with local government and other local partners. The network is developing standardized procedures for providing services to other NGOs. Network members in Warsaw, Gda_sk, Lublin, Pozna_ and Katowice are available to serve NGOs throughout Poland. To promote public awareness of the role of NGOs and to publicize the best examples of citizen participation in solving local problems, a USAID-financed NGO invited 800 local newspapers to submit articles reporting on NGO "best practices",and prizes for quality reporting were awarded. A working group of NGO leaders and experts successfully lobbied the Government of Poland and stopped a proposed amendment to the law on foundations that would be unfavorable to NGOs. The group is expected to continue its campaign until an amendment to the law on foundations is prepared that responds to the needs of NGOs. In order for NGOs to survive, there must be willingness on the part of individuals to take action and get involved. With USAID funding, citizens in six cities have been mobilized to help solve community problems on an ad hoc basis. The first three cities (Bia_ystok, Kielce and Opole) selected public safety as a number one priority, and partnerships between citizens, local government, the police department and private business increased public awareness and cooperation. Innovative programs were launched, such as Neighborhood Watch, which have visibly reduced crime, particularly by juvenile offenders. As a result, Bia_ystok now has a $20,000 line item in its budget to support citizen initiatives. With USAID support, a number of other cities are making strides in creating mechanisms for citizens' input. Kraków conducted a public opinion poll to determine local spending priorities and published the city budget to introduce greater transparency into its budget process. This process has been recommended in a budget manual and training curriculum for other gminas. Two cities identified environmental protection as a priority with intensive citizen involvement. The City of Lublin is now a showcase; it won a UN Habitat II "best practice" award for integrating community involvement into its planning and funding of infrastructure improvements. With USAID funding, the Foundation in Support of Local Democracy (FSLD) has developed training curricula, actively sought by gminas, on public communication and community negotiation for the siting of landfills. For the most part, these "best practices" were developed on case-by-case, as sector-specific model projects. Intermediate Result 3: Increased capacity to efficiently deliver services and manage local resources. Budgeting is the heart of municipal financial management. USAID's demonstration projects in Kraków and Lublin in program-based budgeting have become the basis for development of a manual and training curriculum. Polish local governments have to date used a budget format that does not distinguish program costs and outputs. The task-based budget enables such analysis and, therefore, more informed prioritization of expenditures. With USAID assistance, the Center for Municipal Budget Training and Research has been established as an arm of the Municipal Development Agency. The Center is testing the manual and training trainers and Polish consultants to broadly disseminate task-based budgeting and other good financial management practices to a large percentage of the 2,500 gminas nationwide. Similar work is underway in capital investment planning, with a methodology under development that will be useful to many municipalities. The Public Procurement Law has been enacted, a monitoring office established, and training guides are in circulation. The majority of municipalities appear to be correctly implementing the law, resulting in more competitive and transparent local procurement. Project preparation for infrastructure investments has greatly improved as a result of the implementation of a dozen or more demonstration projects and development of training materials. For instance, five waste water projects are in construction or already completed. Improved project preparation means that projects are more cost-effective, have adequate financial analysis to determine funding needs, and are packaged with sufficient project and gmina financial information to be underwritten by financial institutions. USAID has developed a "tool kit" to help gminas gain access to longer-term credit, including a standardized loan application package and a municipal financial analysis model. These are being tested in three municipalities and have been adopted by the Municipal Development Agency for the screening of infrastructure projects. While assisting the Securities Commission to prepare Disclosure Guidelines suitable for municipal bond issues, USAID advisors have prepared a model Information Memorandum for one city, to meet requirements of the Securities Commission, and pave the way for access to the financial markets by other cities for bond issues. These tools are influencing the development of municipal finance policy and they provide models that will be disseminated widely to other municipalities through training institutions and the growing indigenous consulting sector. In housing and health at the local level, USAID funding has also supported the development of "best practices" which can be replicated, and which influence policy-level decisions. USAID-funded advisors helped several municipalities to develop management systems and tools to analyze the costs of health service provision. Eight municipalities have been working in a partnership to develop models for better housing development, management and rehabilitation, including testing a new not-for-profit rental housing system. Jointly-funded housing NGOs are a new means for local governments to facilitate new cooperative housing development, which is being replicated. Work is underway to develop a methodology and database on service pricing and costs, so that municipalities will have standards against which to compare their own service costs. Intermediate Result 4: Improved indigenous mechanisms for support to local government. USAID played an instrumental role in the development of one of the premier institutions which supports local government in Poland. Since FY 92, USAID has invested over $3 million in the Foundation in Support of Local Democracy (FSLD). In just five years, FSLD has grown into a sustainable national network of 17 regional training centers and five schools of local government, training close to 40,000 people per year. FSLD's income has increased seven-fold from 1.5 million z_ in 1991 to 10.7 million z_ in 1995, with 46% of this income self-generated. FSLD has a core faculty of over 30, and it offered over 1500 courses in 1995. FSLD is no longer a USAID customer, but an important partner helping us to achieve IR 2, IR 3 and IR 4. The training FSLD delivers helps local governments to build the technical and managerial capacity necessary to more efficiently deliver services and manage local resources. USAID and other donors use the FSLD national network to disseminate lessons learned from donor-funded pilot activities.  S.O. 2.3-- LOCAL GOVERNMENT IS EFFECTIVE, RESPONSIVE AND ACCOUNTABLE:  PAST ACCOMPLISHMENTS Development of a Municipal Credit System in Poland o USAID activities in the Municipal Credit System have had a substantial impact in the creation and implementation of a Municipal Development Agency (MDA) and important revisions to the Local Government Finance Act. Our activities have stimulated municipalities to use long-term borrowing where appropriate and have stimulated commercial banks to lend to municipalities. o USAID activities in support of the development of municipal bonds led to an improved legislative and institutional environment enabling the City of Gdynia to execute a successful private placement for PLN 28 million ($12 million) in January 1996, and several cities are now actively preparing sizeable issues (including Kraków, Lódz, Lublin, Gda_sk, Warsaw and Ostrów Wielkopolski). Support Commercial Bank Own-Resource Lending to Municipalities o USAID has developed a proto-type standardized loan application package and a standardized municipal financial analysis and credit-worthiness analysis model. The prototypes have now been completed and are being tested in three pilot municipalities (Namys_ów, Kutno and Ostrów Wielkopolski). Based on the pilot results, the models have been accepted by the MDA as the standard tools for project/municipality financial pre-feasibility analysis for all MDA projects (including IBRD projects). Municipal Bonds Disclosure Guidelines o USAID has assisted the Securities Commission to prepare draft Disclosure Guidelines making possible the public trading of municipal bonds on the new Over-the-Counter market. Municipal Bonds Study Tour to USA o Through a U.S. study tour, senior policy makers from the Ministry of Finance, Securities Commission, MDA, Parliamentary Commission on Local Government, Polish Association of Cities as well as the Treasurer of Warsaw and the Mayor of Ostrów Wielkopolski were exposed to the policies, systems and practices currently being employed in the US municipal bond market. They identified policies and practices that may be appropriate and/or inappropriate for the development of the Polish market. Municipal Task-Oriented Budgeting o The Center for Municipal Budget Training and Research was established in Kraków, under the sponsorship of the USAID-supported Municipal Development Agency. The Center will build on the successful budgeting reform undertaken, with USAID assistance, in Lublin and Kraków. These cities reformed their budgets from accounting tools into management and policy tools by implement task-oriented budgeting--allowing program expenditures and revenues to be identified and linkages made with strategic priorities and capital investment plans. The Center is using these pilots as case studies, and with USAID assistance, developing training materials and training institutions in order to broadly disseminate Task-oriented Budgeting to a large number of the 2,465 municipalities. Lublin Neighborhood Partnership Program o USAID has supported Lublin's efforts to engage its citizens in co-sharing the cost of neighborhood rehabilitation through a participatory planning process, including applying efforts that led to improvements in the housing conditions. The results have been impressive: 137 dwelling units have been rehabilitated and 55 shops have been opened in rehabilitated buildings. The project was recently selected as one of 40 best practice examples for the upcoming Habitat II Conference. The program was selected from among 600 submissions worldwide. Management Information System for the Ministry of Construction o At the request of the Ministry of Construction (MOSEC), USAID developed a management information system. This assistance helped the Government of Poland assess the impact of the new formulas for revenue sharing, which support low income households in making their rental payments. As a result of USAID's assistance, the GOP will soon have ready access to the necessary information to ensure that housing allowance levels are fair and transparent and that the allowances are being provided to needy households. Network of Polish NGO-support organizations assisting other NGOs to prepare and implement public policy oriented projects. o Until l989, there had been a fifty year absence of NGO participation in the democratic process. USAID's Democracy Network Project fills that vacuum. Under the project, a network of Polish NGO-support organizations - the Open Society Network - has developed standardized technical assistance procedures to assist other NGOs in preparing and implementing public policy -oriented projects. In addition, 29 indigenous NGOs are receiving modest institutional strengthening grants. Selection of a second group of NGO-recipients is underway. Gmina Housing Partnership improves housing construction, management, and maintenance o Eight municipalities have agreed to work in partnership to develop demonstration models, disseminate their experiences, and work cooperatively with other municipalities and policy makers to influence the policy environment to improve the local housing stock. The issues were prioritized by the partner cities, and demonstration sites self-selected. Included in the project are: establishment of associations and improvement of maintenance in newly privatized multi-family buildings (condominium association training); development of strategic housing development and maintenance plans; neighborhood based rehabilitation; and development of not-for-profit housing and housing management systems. Special Initiatives 4.1 EPA 1992 - Krakow/Air/Water Drinking water quality for Krakow has improved. Improved chlorination equipment provides basic disinfection of drinking water for nearly two-thirds of Krakow's citizens, and provides a more reliable disinfection at a cost savings of 25%. The ozonation system helped in reducing the impact of organic contaminants in raw waters, which can influence the effectiveness of disinfection as well as cause taste, color, and odor problems. The coagulation equipment at the Myslenice wastewater treatment plant has successfully reduced phosphorus loadings to the reservoir/water intake by 70 %. Political-Party Building Program Based on needs assessment and parties' commitment to participate, five parties have been involved in training and consultation to improve their political organizing and communication skills, resulting in action plans for fund-rasing, attracting new members and working with the press. DOJ/CEELI - Criminal Justice Approximately 400 officers at police academies have heard explanations on why new limitations on police powers will not adversely effect law enforcement efforts. Dialogue with members of Poland's criminal justice community has been initiated on Poland's anonymous witness law, which fails to comply with the concept of a fair and open trial as guaranteed by the European Convention on Human Rights. Assistance to the prosecutors' offices of Warsaw, Krakow, Slupsk, Czestochowa and Radom has been initiated regarding the case management and investigative techniques required in complex fraud cases. Parliamentary and press briefings have been provided on the legal principles which underlie the implementation of laws dealing with criminal justice. Eight Members of the Parliamentary Commission on the Restructuring of the Criminal Code were exposed study tour to U.S. solutions that can be adopted in Poland.

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