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Russia
>> Regional Overview >> Russia Overview
Program Summary
Previous Years' Activities
2001, 2000, 1999, 1998, 1997
Last updated: 04
Introduction
The overarching foreign policy goal of the U.S. Government in Russia is to support Russia's peaceful transition to a democratic market-led economy and thus enable this incredibly diverse and complex nation to actively participate in the global economy. The USAID program is a key player in this effort. Specifically, USAID assists Russia in its transition by creating opportunities for all Russians - private entrepreneurs, non-governmental organization leaders, health professionals, environmentalists, judges and other vital members of the modern state - to participate fully in the transformation of their nation into a more open democratic society with a vigorous market economy.
USAID activities in the economic arena promote the development of a market economy where all Russian citizens have greater opportunities to improve their standard of living. USAID activities in environment work to preserve Russia's rich natural heritage. USAID activities in democracy help build institutional mechanisms for citizen participation in civil society, particularly through non-governmental organizations. USAID democracy activities also strengthen rule of law and respect for human rights. Finally, USAID activities focussing on improving social services and benefits aim to reach the truly needy with improved health and other essential community-level services.
Development Challenge
Russia has witnessed an upbeat year of solid economic performance strengthened by a productive working relationship between the Parliament and new President that has allowed key initiatives to move forward on the reform agenda. This vast country now offers important opportunities for USAID to build upon its considerable investments, which are the programs and relationships forged by the Mission over the past eight years. USAID will use this experience to focus its interventions, particularly policy applications, on the regional and sub-national levels. This overall situation constitutes the development challenge to which USAID is responding with vigor. Many of the recent opportunities existed before, but an important confluence of economic and political factors have created the possibility to realize strong progress on the economic front and, to a lesser extent, in the democratic arena.
Both rising oil prices and good government economic policy, including a strong commitment to macroeconomic management, have played a role in creating a positive environment for economic growth. More specifically, the continuing effects of the 1998 devaluation of the ruble combined with sharp increases in average oil export prices boosted the GDP growth rate to an estimated 7% during 2000. This figure compares favorably to the GDP growth rate of 3.2% in 1999. Inflation fell to approximately 20% during 2000, representing a substantial decline from 36.5% in 1999. Against this backdrop, the Putin Government launched an ambitious reform program, as reflected in the highly regarded Gref Plan. This Plan focuses on structural reforms across the economy, including budget, pension, and protection of property rights. Fully implemented, the Gref Plan would represent a leap forward for economic reform in Russia. Overall, successes have already been realized. For instance, Russia established a flat income tax rate of only 13% and improved value-added, excise, and the payroll taxes in 2000.
Russian debt remains an issue for private and official creditors. Total Russian external debt constituted approximately $140 billion as of the end of 2000. Roughly $100 billion was Soviet-era debt. During 2000, some progress was realized in negotiations on the Russian external debt payment schedule with the London Club of private creditors. As a result, Russian total debt was reduced by $14 billion. Negotiations with the Paris Club of official creditors were less successful due to the absence of a Government Monetary Program approved by the International Monetary Fund (IMF). In 2000, Russia repaid approximately $9.7 billion of its external debt, of which $4 billion went to the IMF and the World Bank. In 2001, Russia is scheduled to repay approximately $12.5 billion, including $2.3 billion to the IMF and the World Bank, of which $6.6 billion is Russian debt and the rest is Soviet-era debt.
The fairly positive economic scenario painted above does not reflect the crime and corruption prevalent throughout the economy, an under performing banking system, weak rule of law, and poor social service systems. Most troubling for Russia's economic and democratic future is the appearance of increasing centralization of power, which has raised questions regarding the Russian Government's commitment to democracy. Specifically, greater authority vested in the President instead of increased checks and balances on political power underscores a disturbing trend at the Federal level. Also of note, concerns have been voiced that the Federal Government is exerting greater control over the media and NGOs. In addition, health risks have seriously affected Russia's human resource base. The spread of drug-resistant tuberculosis and the alarming HIV/AIDS growth rate threaten to further decrease Russia's already-dwindling population. Other problems such as domestic violence, the state of Russia's orphans, and environmental concerns also negatively impact human resources.
In the environment described above, USAID initiatives support market-led economic growth to benefit ordinary Russians and promote democratic principles to ensure that all Russian citizens are empowered to actively improve their daily lives. USAID programs in private enterprise development enhanced the ability of small and medium-size businesses (SMEs) to obtain external financing, with sharp increases in loans from other sources by SME clients of USAID's business support centers. USAID microcredit activities lent over $7 million in 2000 with repayment rates exceeding 97%, helping create and sustain employment in Russia. Of equal note, the Russian Government's interest in business development enabled USAID to realize substantial progress in policy dialogue on small business development with Ministry counterparts. High-level government officials have called for tax relief for small business and an increase in government-funded micro-credit throughout Russia. In addition, USAID activities have had a positive impact on fiscal reform. USAID's local Russian grantee devised several legislative provisions that were incorporated into the Federal Budget Code pertaining to inter-budgetary finances and the transfer of revenue from the central government to the regions to better rationalize funding for service delivery at the sub-national level. Finally, USAID has realized important progress in environmental preservation through assistance in environmental management in many regions.
USAID initiatives also supported empowerment of Russian citizens to actively participate in civil society. USAID assistance in this area strengthened independent media across Russia's regions, helping make regional independent TV stations a source of local news for 60% of the Russian population in 2000, from 0% in 1991. More NGOs than ever before provided input in USAID's target regions to legislative processes that affect their interests, with a total of 231 NGOs advocating for their members' needs in 2000. USAID's support for 14 women's crisis centers allowed them to expand access to psychological and legal services, reaching 22,300 women through 2000. USAID assistance also led NGOs from all 89 regions, almost a 50% increase over 1999, to contribute to a national human rights report. In rule of law, USAID provided training for Russian legal professionals in such key areas as commercial law.
Social sector activities remained a USAID focus to improve life for Russian citizens. USAID's health program enjoys the strong support of local officials in regions where the Mission implements its health projects. Hence, pilot programs have demonstrated significant impact. For instance, tuberculosis treatment success rates reached 75%, which is the world standard cure rate. To leverage Mission experience, USAID assisted in facilitating a World Bank loan for $150 million for infectious diseases, including $100 million for tuberculosis. Many of the Mission's treatment recommendations for tuberculosis will be used when the loan is soon signed. The remaining $50 million of loan funds will be devoted to HIV/AIDS as Russia has the highest rate of increase of HIV positive cases in the world. USAID assistance helped four communities, up from zero in 1999, improve their social assistance programs, particularly by introducing means-tested social services provided by competitively selected private sector organizations. These successes and others like them underscore the necessity of transforming the pilot projects into a comprehensive national social services program.
Other Donors
Overall, the United States has been the largest single bilateral donor in Russia, followed by the European Community, Germany, and the United Kingdom. This ranking includes all programs, not just USAID-funded activities. Financing from international financial institutions such as the World Bank and the International Monetary Fund has also been very significant in Russia. As the lead donor in the small business sector, USAID works closely with the European Union (EU). USAID also coordinates its business development activities with other donors, including the United Nations Development Program and the British Department for International Development. A key player in economic reform, USAID collaborates with the World Bank, the EU, the European Bank for Reconstruction and Development (EBRD), the U.S. Treasury, the British Know-How Fund and the IMF on banking and accounting reform. USAID coordinates its environmental activities with other donor governments, NGOs, and international financial institutions, particularly the World Bank and the EBRD. Close partners in NGO development are the Canadian International Development Agency, the EU, the Mott Foundation, the McArthur Foundation, the Ford Foundation, the Open Society Institute, and the British Know How Fund. Regular rule-of-law discussions involve USAID, the World Bank, the European Union, various embassies, and private foundations. A top health donor, USAID cooperates with the World Bank and the World Health Organization to strengthen the Mission's infectious disease programs. The World Bank, the Open Society Institute, and other donors with USAID implement complementary social safety net activities.
FY 2002 Program
In FY 2002, USAID will support the development of a democratic market economy to improve the lives of Russian citizens. To do so most effectively, USAID will continue its emphasis on grassroots activities, geographic regions outside Moscow and St. Petersburg, the non-governmental sector, including private enterprise, and increasing work through Russian partners and NGOs to implement the USAID program. Selected assistance to the Central Government will occur, as it is critical to remain engaged with the Government of Russia to advance key policy and regulatory reforms. The Regional Initiative will also remain a key element of USAID's strategy to improve the investment climate, enhance social services, and encourage democratic institutions in selected reform-minded regions. The Regional Initiative is currently being implemented in the Russian Far East, Samara, and Tomsk.
These program principles underscore USAID activities in economic, democratic, and health and social sector reform. Economic reform activities will include ongoing development of micro-credit facilities; support to SMEs by Russian-run business development centers; extensive needs-driven SME training for Russian entrepreneurs; close cooperation with Russian partners on environmental activities; support for Russian think tanks to produce practical policy research on economic issues; intergovernmental fiscal reform through a Russian NGO; and banking support, particularly for commercial banks in the regions. In democratic reform, activities will support civil society development by strengthening NGOs, including women's crisis centers, independent media, political processes, rule of law and U.S.-Russian partnerships. Additionally, USAID will promote human rights, including anti-trafficking, and anti-corruption. Under health and social sector reform, USAID will increase women's reproductive health, support Russian orphans, and fight against the spread of tuberculosis and HIV/AIDS. USAID will also focus its urban economic development activities on the Regional Initiative and Volga regions.
Activity Data Sheets
- 118-013 Accelerated Development and Growth of Private Enterprise
- 118-014 Improved Economic Infrastructure to Support Economic Growth
- 118-015 A More Economically and Environmentally Sustainable Energy Sector
- 118-021 Increased Better Informed Citizens' Participation in Political and Economic Decision Making
- 118-022 Strengthened Rule of Law and Respect for Human Rights
- 118-031 Human Suffering Reduced
- 118-041 Special Initiatives
- 118-042 Cross-Cutting Programs
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Last Updated on: May 29, 2002 |
