BULGARIA

	FY 1998 Actual	FY 1999 Estimate	FY 2000 Request
Support for East European Democracy	$33,675,000	$28,200,000	$28,000,000
P.L. 480 Title II	5,685,000	--	--

Introduction.

National Security is the overwhelming U.S. national interest in Bulgaria. A peaceful, democratic and economically prosperous Bulgaria will help to ensure a stable Balkan region, parts of which remain dogged by ethnic tension and social unrest. Consequently, the U.S. priority in Bulgaria is to help the country stay on the path of economic reform, democratic consolidation and regional cooperation which it embarked on in February 1997. The consolidation of democracy and a market economy in Bulgaria, and the country's accession to the European Union (EU), including increasing participation in western institutions, is consistent with the U.S. objective of building security and stability throughout Europe. Bulgaria is in good position to assist with regional efforts to combat terrorism, arms proliferation and narcotics trafficking.

The Development Challenge.

The reform-minded government of the Union of Democratic Forces (UDF), which took power in mid-1997, renewed Bulgaria's commitment to fundamental economic reforms, and established accession to the EU and NATO as national policy priorities. Negotiations with the International Monetary Fund (IMF) were resumed and led to the introduction of a currency board on July 1. The currency board strictly links the domestic money supply to the level of foreign currency reserves, and fixes the exchange rate at 1,000 lev to the D-mark. The effects have been dramatic: the economy has stabilized; inflation and interest rates have been slashed. Reported inflation in 1998 was 1% for the year, down massively from the 565% annual rate racked up in 1997. GDP growth has resumed and is forecast to be 4.5% in 1998. Key economic achievements realized in the past eighteen months include: (1) A three-year $864 million Extended Fund Facility loan signed with the IMF on September 25, 1998, with an additional $800 million to be provided by the World Bank, EU and G-24; (2) A modest budget surplus in 1998 and foreign currency reserves approaching $2.5 billion amounting to more than six months import cover; (3) Substantial progress in negotiating outstanding Paris Club debts, including the settlement of obligations to Germany ($359 million), Spain ($30 million), Poland ($76 million); (4) Bulgaria is now signatory to Central European Free Trade Agreement (CEFTA) with its membership effective on January 1, 1999. As a result of CEFTA membership, trade within the region will increase as duties on industrial goods and selected agricultural products will be reduced or eliminated through 2002.

The Government of Bulgaria has successfully implemented the first phase of its economic reform program and now faces the difficult task of economic restructuring, which includes the privatization and possible liquidation of state-owned enterprises, utilities and banks. In addition, the Government faces a number of other difficult tasks in the continuation of legislative, judicial and administrative reforms, and in the ongoing effort to combat crime and corruption. Sufficient progress was made in these priority areas, however, to lead the EU to conclude in its November 1998 assessment of Bulgaria's accession preparedness that the country had fulfilled "the Copenhagen political criteria."

Responding to the challenges presented by Bulgaria's reform effort, USAID adopted a new country strategy in late 1997 designed to accelerate the country's transition, and help it to meet the essential Maastricht and Copenhagen criteria which are preconditions to opening accession negotiations around 2002, which is coincident with Bulgaria's graduation from U.S. assistance.

Other Donors.

International donor support to Bulgaria is substantial, with total donor assistance projected at well-over $1 billion in both 1998 and 1999, with the IMF, EU and World Bank providing the lion's share of this amount. Among bilateral donors, the U.S. manages the largest technical assistance program, which is closely coordinated with multilateral and other bilateral programs. The World Bank and IMF often prepare the policy and legislative environment for USAID programs to be effective, and USAID reciprocally provides targeted technical support assisting Bulgaria to meet multilateral conditionalities. Bulgaria's commitment to EU accession is bolstered by significant EU assistance totaling $100 million in both 1998 and 1999. This level is expected to double to more than $200 million a year thereafter. The EU assistance program targets judicial legislative, regulatory and administrative "gaps" in Bulgaria's preparation for accession. U.S. coordination with the EU is strong and the potential for ongoing cooperation continues to grow. The EBRD program is comprised principally of equity and debt investments, but also includes a $55 million post-privatization fund for long-term support to small and medium enterprises (SMEs), where USAID has long-standing and very successful investment and technical assistance programs. The United Nations Development Program (UNDP) has projects focused on SME development and also on government decentralization, both of which are closely coordinated with relevant USAID efforts. USAID's work with judicial and administrative reform is closely coordinated with the U.S. Embassy in Bulgaria, and is supported by EU and other donors' assistance in criminal law enforcement, notably from the German and Italian Governments. The Dutch, United Kingdom and Swiss provide support to local government capacity building.

FY 2000 Program.

Under the economic restructuring goal, USAID will help Bulgaria modernize and strengthen its financial system, particularly key banking and capital markets institutions. USAID will assist a network of private business associations and organizations; further improve the policy, legal, and regulatory framework for business development; and support public-private dialogue on strategies for private enterprise growth. Strategic objectives in this area include: accelerated development and growth of private firms in a competitive environment, and a more competitive and market-responsive private financial sector.

As a result of the GOB's responsiveness, assistance has intensified in key areas of legislative and judicial reform in an effort to advance the basic tenets of a civil society governed by a rule of law. Efforts promoting a rule of law support both democracy and economic programs, with related activities supporting the government's efforts to combat crime and corruption. Under the democratic transition goal, USAID supports three strategic objectives: Increased, better-informed citizens' participation in public policy decision-making; an improved judicial system that better supports democratic processes and market reforms; and more effective, responsive, and accountable local governments.

USAID will continue assistance in building local institutions and grass-roots democratic structures that contribute to Bulgaria's transition to a stable and democratic political system. Efforts will increase citizens' participation in decision-making and governance through projects improving municipal administration and thereby increasing access to local policy-makers. Efforts will also promote a free press and media. Finally, USAID programs in FY 2000 and thereafter will focus on judicial reform and court administration, and rule of law, including efforts to combat crime and corruption, which is essential to protecting individual political and civil rights.

In FY 2000, modest funding will support cross-cutting activities including support to labor organizations and free-trade unions, and to valuable U.S.-based and regional training.

BULGARIA

FY 2000 PROGRAM SUMMARY*
(in Thousands of Dollars)

Acting USAID Mission Director: William S. Foerderer

Strategic Objectives	Economic Restructuring	Democratic Transition	Social Stabilization	Cross-cutting / Special Initiatives	Total
Privatization	--	--	--	--	--
Fiscal Reform	--	--	--	--	--
Private Enterprise	5,950	--	--	--	5,950
Financial Reform	5,400	--	--	--	5,400
Energy	--	--	--	--	--
Environmental Management	--	--	--	--	--
Citizens' Participation	--	6,300	--	--	6,300
Legal Systems	--	2,650	--	--	2,650
Local Government	--	5,100	--	--	5,100
Crises	--	--	--	--	--
Social Benefits	--	--	--	--	--
Environmental Health	--	--	--	--	--
Cross-cutting / Special Initiatives	--	--	--	2,600	2,600
TOTAL	11,350	14,050	--	2,600	28,000
*Support for East European Democracy (SEED) Act funds

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ACTIVITY DATA SHEET

PROGRAM: BULGARIA
TITLE: Accelerated Development and Growth of Private Enterprise, 180-S001.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: $5,950,000 SEED Act
INITIAL OBLIGATION: FY 1992; ESTIMATED COMPLETION DATE: FY 2001

Summary: This strategic objective promotes the accelerated development and growth of private firms in a competitive environment. The direct and primary beneficiary is the private sector. All citizens are, in effect, secondary beneficiaries, as a result of the overall improvements in the economy, the increased availability of jobs, and the increased quality, quantity and availability of consumer goods.

Key Results: The results being sought in support by this objective include: (1) improved private business performance of target firms; (2) strengthened private sector business support associations and institutions; and (3) establishment of the legal, policy and regulatory framework for competition and private sector growth.

A cornerstone to USAID's strategy under this objective is to strengthen prominent business associations and organizations, consulting firms, think-tanks, and other business support institutions that will broaden the base for sustainable private enterprise growth. In response to the current government's structural reforms, the Firm Level Assistance Group (FLAG), the principal instrument through which USAID enterprise-level assistance is delivered. has focused training and advisory assistance on exporters and foreign-exchange earners, although the preponderance of assisted firms remain in agribusiness, light manufacturing, and tourism.

As credit remains a significant constraint to enterprise growth, USAID will continue to support efforts which increase private sector access to loans and equity. This includes ongoing equity programs, such as the Small Enterprise Assistance Fund (SEAF) which invests a maximum of $250,000 for up to 49% of an enterprise. Sectoral activities will focus on the nationwide extension of the highly successful warehouse receipts program launched in 1998, and under which short-term loans are extended against grain held as collateral. Other initiatives will include the introduction of credit guarantee facilities supporting the introduction of energy efficiency technology in municipal and regional hospitals. Already, pilot projects in three hospitals have produced significant energy cost savings and simultaneously improved internal air quality. Future efforts in this area will extend this extremely successful program which has been closely tied to other USAID programs related to fiscal decentralization and strengthened municipal administration.

Activities also seek to institutionalize the means by which the private sector influences and contributes to policy, legal, and regulatory reform. USAID advisors will help in defining a long-term enterprise reform agenda which will include land titling/ownership, competition, customs and taxation. USAID will also seek to strengthen the Government's own policy-making capabilities by improving its economic forecasting and modeling. In conjunction with this latter initiative, a limited-scope advisory/training effort targeting macro-economic policy formulation will be implemented under the Ron Brown Fellowship Program, which is closely coordinated with the U.S. Information Service, Under the Ron Brown Program key economic policy-makers, particularly fast-rising government professionals, will receive one-year of U.S.-based training.

Performance and Prospects: USAID reformulated its private enterprise strategy in 1998, and laid a new foundation comprised of more active assistance to business associations such as trade and professional organizations and chambers of commerce. These institutions are now at the core of all USAID/Bulgaria's private sector initiatives, and will serve as a conduit for technical assistance and training, and will be the voice representing enterprises' interests in policy and legislative advocacy. Working directly with business associations, USAID is helping them to improve and introduce new member-services, and to increase revenues and thereby promote sustainability. Assistance efforts helped increase fee-paying membership in these associations by 20%. Under the FLAG, USAID has assisted more than 50 associations representing hundreds of enterprises across all sectors, and close to 100,000 workers.

This new framework underscores the shift from specific enterprise-level assistance to strengthening the institutions that will remain after Bulgaria has graduated from U.S. assistance. To this end, USAID has worked to foster improved relations between private sector associations and government. For example, a group of associations together with the newly-formed Bulgarian Agency for Small and Medium Enterprises (SME) developed a National Strategy for SMEs, which was approved and adopted by the government in 1998. As an addendum to the strategy, the SME Agency, with association input, drafted a SME Law which will substantially improve the business climate for small and medium-sized firms once ratified. As testament to the dramatically improved relations between government and business, business associations also influenced a long list of key legislation which was ratified in 1998, notably the Foreign Investment Act, a new Grain Law which establishes a Grain Warehouse Receipts System, and the Privatization Law.

Although increasing emphasis is now dedicated to association-building, USAID continues to provide technical assistance to Bulgarian enterprises through the FLAG. This assistance focuses on key sectors such as consulting, light manufacturing, agribusiness and tourism, with increasing emphasis on exporters and foreign exchange earners. Among FLAG-assisted firms, revenues increased more than 15% in 1998, more than 4,000 new jobs were created in two years, and business linkages generated nearly $6 million in transactions.

Lack of capital remains a significant constraint for small and medium-sized business growth. Two U.S. programs assist in financing business: CARESBAC and the congressionally-funded Bulgarian American Enterprise Fund (BAEF). CARESBAC and BAEF made more than $10 million in equity investments in 1998, with BAEF providing more than $25 million in debt finance. CARESBAC works closely with the FLAG program to increase the productivity of Bulgarian enterprises and create employment. The BAEF is pioneering new areas of consumer finance including mortgage and retirement finance.

Possible Adjustments to Plans: None at this time.

Other Donors Programs: Among donors, USAID has the most significant assistance program targeting private enterprise growth and development. Multilateral agencies have not played an important role at the enterprise level, although their support for growth-oriented macro-economic policies is crucial. EU assistance to management training, and support for a new SME Agency are among the most complementary of the ongoing donor programs. In addition, the British Know-How Fund, the Dutch and the Swiss have provided limited assistance to SMEs.

Principal Contractors, Grantees, or Agencies: USAID implements activities through numerous intermediaries; GOB ministries and courts; the International Executive Services Corps (IESC); University of Delaware; World Learning, Agriculture Cooperative Development International/Volunteers Oversees Cooperative Assistance (ACDI/VOCA); Management Systems International (MSI); ABA/CEELI

Selected Performance Measures:

	Baseline	Target
Percentage of GDP provided by the private sector	45 (1996)	60 (2000)
Percentage increase in non-energy exports1	-0.6 (1997)	4 (2000)
1 This statistic measures the performance of only the private sector portion of the economy

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ACTIVITY DATA SHEET

PROGRAM: BULGARIA
TITLE: A More Competitive and Market-Responsive Private Financial Reform, 180-S001.4
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: $5,400,000 SEED Act
INITIAL OBLIGATION: FY 1997; ESTIMATED COMPLETION DATE: FY 2001

Summary: In early 1997, when depositor confidence deteriorated and a run on Bulgarian banks threatened the financial system as a whole, urgent U.S. assistance was requested by the government in an effort to contain the crisis. Former Senior U.S. FDIC Officials with long-experience in crisis banking arrived in April 1997, and began work with the Bulgarian Bank Consolidation Company (BCC) to stabilize, and ultimately privatize six of the remaining seven state-owned banks. In conjunction with the U.S. Mission to Bulgaria, the IMF and World Bank, the government forged a bank privatization strategy by mid-1997. U.S. advisors have played critical roles in advising the Executive Director of the BCC who is charged with implementing the bank privatization strategy updated in February 1998. The purpose of this strategic objective is to help develop a more competitive and market responsive private financial sector. Whereas the Bulgarian banking system, will directly benefit from this assistance, the Bulgarian population at large will have access to a financial system, in which they can place greater confidence and which will provide normal banking services, not yet available in Bulgaria.

Key Results: The two primary results sought in support of this objective are: (1) establishment of a stable, regulated and efficient banking system; and (2) development of a regulated, transparent and liquid securities market.

USAID's strategy for the banking system relies on a three-pronged approach: stabilizing the banking system including privatization of state-owned banks; strengthening banking supervision and the supporting legal/regulatory framework; and improving commercial bank operations and training bankers. In this way, the strategy works from top-down and bottom-up to promote systemic change. These mutually-reinforcing technical assistance elements will remedy past errors and develop the regulatory institutions and community of professional bankers necessary to future stability. All are key in restoring public confidence in the banking system and in accelerating the development of a sound, functioning banking sector.

U.S. assistance was requested this past year to establish and strengthen the principal capital markets institutions In an effort to bolster the government's privatization efforts and to provide Bulgarian business with an alternative source of finance. In late 1998, USAID launched two new initiatives, one providing assistance to the Bulgarian Securities and Stock Exchange Commission (BSSEC), the other focused on the non-regulatory institutions including the Bulgarian Stock Exchange (BSE), the Central Depository and the Bulgarian Association of Licensed Investment Intermediaries (BALII). The larger of the capital markets initiatives is designed to increase the number of companies listed and traded on the BSE, and to assure that transactions occur transparently and efficiently.

Bulgaria's public pension system is increasingly ill-equipped to support a growing number of retirees. In conjunction with other donors, and in response to a request from the GOB, USAID launched its Pension Reform Program in August 1998. The program will assist Bulgaria to develop a private pension system which seeks to secure and preserve retirement income for pensioners, and which will contribute to the comprehensive reform of the Bulgarian pension system. The project supports the development of the enabling legislation and the regulations that will govern a private pension system, and will also provide training for regulators and fund managers.

Performance and Prospects: Progress to date has been significant. Over the past 18 months, all state Bulgarian banks have been stabilized, of which two have been sold, one is being tendered currently, and two are being prepared for sale in 1999. The sixth bank, Commercial Bank Biochim, is the most distressed, and resolution plans are being implemented, isolating the bank pending its restructuring for sale or liquidation. The most recent achievement of the privatization program was the sale of the Bulgarian Post Bank in November 1998. As a result of the combined efforts of the U.S. Embassy and the USAID-supported advisors, the Bulgarian Post Bank was sold to a consortium led by U.S.-owned American International Group (AIG) and Consolidated Eurofinance Holding, a subsidiary of a Greek-owned banking group. The $38 million Post Bank privatization was sealed in less than one year, confirming the GOB's commitment to bank privatization and setting a record as one of the fastest transactions concluded in the region.

U.S. assistance to the Bank Supervision Department of the Bulgarian National Bank (BNB/BSD) is dedicated to improving the Central Bank's ability to oversee and regulate all licensed banks. Efforts focus on the institutional development of the on-site supervision/ examination functions performed by the Supervision Department. This effort is closely coordinated with the assistance provided by the IMF resident advisor on bank supervision policy and the EU-supported assistance in strengthening off-site and special supervision. USAID-supported advisors have been instrumental in developing and implementing an internal bank rating system known as the CAMELS system, which rates the major risk factors of a bank - Capital, Assets, Management, Earnings, Liquidity and System Risk, and is the standard bank-rating system used in the U.S. and in an increasing number of countries worldwide.

A principal reason for the 1996-1997 banking crisis was the lack of well-trained bankers experienced with credit analysis, collections, and basic operations and management. The Commercial Banker Training program was launched in early 1998 with the primary objective of institutionalizing a training program within a host country association. To this extent, USAID has been working with the International Banking Institute, a majority shareholder in which is the Association of Commercial Banks. Nine courses have been held with more than 200 participants since the initiation of the program. Interest in the courses is ever-increasing.

Possible Adjustments to Plans: With the addition of the new capital markets initiative, no further adjustments are planned at this time.

Other Donors Programs: The World Bank's Financial and Enterprise Sector Adjustment Loan (FESAL) reinforces USAID's efforts through conditionality related to an improved banking/credit legal and regulatory framework, bank supervision, and bank privatization. Early start-up of USAID assistance in these areas has advanced Bulgaria's progress on FESAL conditionality. The EU is mobilizing assistance to the financial sector which is linked specifically to EU accession criteria. EU assistance to off-site bank supervision which was launched in late-1998, complements the USAID's ongoing work on prudential regulations and on-site supervision. The EU is also provided limited assistance to Bulgaria in implementing "International Accounting Standards," which are critical to transparency and to attracting significant foreign investment and trade.

Principal Contractors, Grantees or Agencies: Barents Group, CARANA Inc., Institutional reform of the Informal Sector (IRIS), U.S. Securities and Exchange Commission.

Selected Performance Measures:

	Baseline	Target
Private bank assets as % of total bank assets	32.7 (1997)	85 (2000)
Market capitalization as % of GDP	0 (1997)	15 (2000)

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ACTIVITY DATA SHEET

PROGRAM: BULGARIA
TITLE: Increased, Better-Informed Citizens' Participation in Political and Economic Decision-Making, 180-S002.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: $6,300,000 SEED Act
INITIAL OBLIGATION: FY 1992; ESTIMATED COMPLETION DATE: FY 2001

Summary: This strategic objective will foster citizens' participation in public policy decision-making. Indigenous grass roots organizations and, more generally, the Bulgarian populace will benefit from these activities at the community level.

Key Results: USAID seeks to build the capacity of non-governmental organizations (NGOs) which play a key role in facilitating broad public participation in policy and decision-making. The strategy is to develop grassroots organizations and the enabling legal/regulatory environment for them, as well as promote information sharing and improve the credibility of information available through the media. Anti-corruption activities undertaken by indigenous NGOs are further contributing to the achievement of this objective. Activities are focused on achievement of the following results: (1) institutionalization within Bulgarian civil society organizations capabilities to obtain political access, services, and funds; (2) improved professional capacity of independent broadcast media; (3) expanded public awareness about the impact of corruption on the economic well-being of individuals and the need to focus public disapproval on corruption; and (4) enhanced institutional capacity of the Parliament, including increased public dialog on policy and legal issues.

Performance and Prospects: Through the Democracy Network and Democracy Commission small grants, more than 111 NGOs received assistance to strengthen their organizational skills and program activities. All have attended NGO training courses and continue to have in-house training scheduled upon request. Additional outreach was made to more than 40 NGOs to participate in the training program, even though they did not qualify for financial assistance. A total of 94 group-training modules were delivered to 900 representatives from 133 organizations.

In September 1998 the Democracy Network Program entered its second phase. The purpose of Phase II of the program is to institutionalize, through Intermediary Support Organizations (ISOs), within Bulgarian organizations the capability to provide the civil society sector with political access, services, and funds. ISOs are here defined as organizations that provide support to the non-for-profit organization community to strengthen its capacity to serve its constituency--multi or single serviced ISOs such as ISOs specializing in the areas of grant making, training and technical assistance, advocacy, networking, minority issues, social issues, women's issues, etc. Rather than providing services to individual organizations, as was done in Phase I, Phase II will deliver support to civil society organizations solely through and in partnership with ISOs.

ProMedia program has focused mainly on strengthening relevant legislation and the associations most closely involved. ProMedia seeks to train professional and trade associations and non-governmental organizations helping them to protect free speech and advocate on behalf of journalists and the media. These associations will also serve as the future providers of in-service training to journalists and managers. ProMedia has worked with the Association of Bulgarian Broadcasters (ABBRO) since early 1997, helping the Association to provide training and other member-services. As a result, ABBRO has more than doubled its membership from 21 to 66.

In 1998, ProMedia worked with the Free Speech Civic Forum and the Group for European Media Legislation to develop a draft Broadcast Media Law which was subsequently introduced into Parliament. This law was finally ratified by the Parliament in November 1998, though some concerns about possible political control over the electronic media remain.

In March 1998 seven indigenous NGOs formed "Coalition 2000" to support the government's efforts in fighting crime and corruption. The initiative is supported by USAID through a grant to the Rome-based International Development Law Institute. Coalition 2000 has developed an Action Plan which in November was endorsed by government representatives and civil society leaders, and is recognized as "a most comprehensive document" by partner institutions including the World Bank, UNDP and Open Society Foundation.

Possible Adjustments to Plans: With a new program strategy approved in late 1997, all plans reflect current needs.

Other Donors Programs: There are numerous foreign donors in the NGO sector. A few work to some degree through networks of intermediaries which they have helped to create (e.g., Soros Open Society Fund and Open Society Clubs), while other donors provide funding and assistance to individual NGOs (e.g. the EU Democracy-funded Civil Society Development Foundation). EU's support for public administration reform will provide critical reinforcement to USAID-financed NGO efforts to reduce public tolerance of corruption and press for corrective action. Among other things, civil service reform will seek to overcome poor working conditions and low salaries which contribute to corruption of government officials and strengthen oversight mechanisms such as the Government Accounting Office and inspector general functions.

The variety of players in the country and diversified nature of the NGO sector have led many donors and NGOs to conclude that closer coordination and information sharing is needed. However, while this problem is recognized and meetings have taken place, there is no consensus on an appropriate mechanism for pulling the NGOs and donors together to discuss their activities, share experiences and develop a sense of community needed to work together on common problems. The mission anticipates that the Democracy Network Program will continue to act as a facilitator for improved in-country donor coordination in the not-for-profit sector.

Principal Contractors, Grantees, or Agencies: USAID implements activities through U.S NGOs including The Institute for Sustainable Communities, Freedom House, and the International Center for Not-For-Profit Law; International Development Law Institute; the Bulgarian Parliament; and the Bulgarian local government.

Selected Performance Measures:

	Baseline	Target
NGO Sustainability Index (7 point scale, with 7 indicating a low or poor level of development,and 1 indicating a very advanced NGO sector)	4 (1997)	31 (2000)
NGO legal framework adopted/implemented	No (1997)	Yes (2000)
Code of Ethics adopted by all Broadcast Media	Drafted (1997)	Adopted (2000)

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ACTIVITY DATA SHEET

PROGRAM: BULGARIA
TITLE: Legal Systems that Better Support Democratic processes and Market Reforms, 180-S002.2
STATUS: New
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: $2,650,000 SEED Act
INITIAL OBLIGATION: FY 1999; ESTIMATED COMPLETION DATE: FY 2001

Summary: An improved judicial system is critical to advancing the government's declared campaign against corruption, to promoting integrity within the judiciary, and to more expeditiously prosecute all proceedings, including corrupt practices. Uncurbed corruption threatens to stunt economic growth by draining away limited state resources, e.g., state enterprises that operate in an environment of corrupt practices or by providing incentives to investment ranging from excessive/unclear regulations for "doing business" to payment of protection money. In part, corruption has become pervasive because of the lack of professional esteem within the civil service, including the judiciary, reinforced by low pay and limited career development opportunities. Judges will be the primary customers of this program. The purpose of this strategic objective is an improved judicial system that better supports democratic processes and market reforms. The direct beneficiaries of these activities are a significant percentage of the Bulgarian judiciary, including judges, prosecutors, investigators and law students, and indirectly every member of the public who comes in contact with the legal system.

Key Results: Together with the Association of Bulgarian Judges and the Ministry of Justice, USAID will help establish the curriculum and training activities of a Judicial Training Institute to provide continuing education for judges. Major results being sought include: 1) improved professionalism of the judiciary; 2) judicial training institute established; and 3) improved court administration. Continuing education will serve both to elevate professional standards and provide an incentive for judges to work for extended periods in the system and pursue their own self-improvement. USAID will also provide assistance to improve curricula and teaching methods at Bulgarian law schools to further enhance the educational preparation of prospective judges.

Performance and Prospects: In support of the Government-initiated judicial reform, USAID is working with the Ministry of Justice (MOJ) and the Association of Judges to identify priority needs and to design a program to improve administrative procedures, case and docket handling, and information management. In October 1998, USAID supported an initial assessment that examined needs in areas such as administrative training, recording/accessing court proceedings and case information, court filing systems, improving law student court apprenticeship programs, publication/indexing of court opinions, and reformed civil procedure and criminal procedure codes. Based upon the results of the assessment, a new four-year program will be initiated in FY 1999.

Possible Adjustments to Plans: This is a new program beginning in FY 1999.

Other Donors Programs: At present, donors' interest on the judiciary is high. Although the GOB requested the World Bank to provide assistance to the judicial system, no plans have been developed. The EU program has listed judiciary reform as a high priority within its public administration reform agenda. USAID anticipates that once a framework for continuing education and career development of judges has been established with USAID's support, other donors will help fund the continued strengthening effort.

The Government of Bulgaria is actively pursuing accession to the EU, which requires demonstrated commitment to reducing and eliminating public sector corruption. Bulgaria is also a participant in the Council of Europe's regional Octopus program which is developing strategies to combat crime and corruption. Council of Europe experts have helped Bulgaria develop guidelines for legislative initiatives which have led to amendments in the penal code.

USAID's work with judicial reform is complemented by other U.S. Government agencies, and other donors which are assisting with criminal law enforcement. The EU, and the governments of Germany and Italy have provided considerable assistance in enforcement. In addition, joint efforts are contributing to the drafting of anti-crime legislation, and are providing technical assistance, training, and equipment for law enforcement activities conducted by the Interior Ministry, the Customs Administration, and to a lesser extent, the Prosecutor's Office and National Investigative Service.

Principal Contractors, Grantees, or Agencies: Since this a new strategic objective for FY 1999, principal contractors and grantees have not been determined.

Selected Performance Measures:

	Baseline	Target*
Percentage of cases brought to trial and completed	10 (1997)	TBD (2000)
Average experience of judges	3 years in court (1997)	TBD (2000)
* This is a new Strategic objective and targets are still being formulated.

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ACTIVITY DATA SHEET

PROGRAM: BULGARIA
TITLE: More Effective, Responsive, and Accountable Local Government, 180-S002.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: $5,100,000 SEED Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2001

Summary: This strategic objective envisions Bulgarian local governments that make choices responding to citizen expectations; act on those choices effectively, and increase accountability for their choices and actions. Local governments that exercise well-informed choice in partnership with citizens and community-based organizations can solve problems, identify and maximize opportunities, narrow the gap between resources and responsibilities, and successfully engage the central government on policies and laws to encourage local initiative. This local government initiative (LGI) will directly benefit the people and local officials of the majority of municipalities. Replication of successful models developed in target municipalities and the public policy work and dissemination efforts of national and local associations will strengthen democracy at the local level.

Key Results: Bulgaria’s administration is still highly centralized and local governments lack both the authority and experience to adequately serve their constituents. USAID/Bulgaria launched the LGI in 1995 to: (1) Increase capacity of the local government to govern effectively and promote necessary democratic reforms; (2) Promote decentralization and improve intergovernmental relations; (3) Assist in reinforcing the principles of local self governing.

Performance and Prospects: Local government partners (municipal organizations, mayors, municipal staff) have been actively involved in the planning and implementation of the LGI. There are 3 areas where substantial progress has been achieved. First, there is a vital network of municipal associations to advocate and help improve local services. Second, reform legislation is moving forward in a positive direction. The National Association of Municipalities in the Republic of Bulgaria (NAMRB) now represents 86% of all municipal governments, and has presented more than 25 statements and proposals on various pieces of national legislation. Representatives have advocated on behalf of the association membership, and have participated in drafting amendments of key legislation, including the Municipal Property Act, the State Property Act, and the Act on Tourism. New laws have been passed on local governance, municipal property, local taxes and fees, and municipal budgets. Third, the non-profit Foundation for Local Government Reform (FLGR), established in 1995 by a reform-minded former woman mayor, is already an important force in advocating local government reform, strengthening a network of associations, and establishing public-private partnerships.

Through a small grants program, the LGI has helped ten target cities put in place numerous reform practices designed to improve service delivery, strengthen governance, and facilitate the local government role in economic development. Examples such as a local economic development agency are now being replicated in other municipalities without USAID assistance. New processes to facilitate citizen participation in local government also are being replicated in other municipalities.

In addition, USAID helped foster a twinning program with U.S. cities. To date, 22 Bulgarians have participated in exchange visits with three U.S. cities, and one result is the development of an economic plan and the creation of a coalition of NGOs to work with the local government in Haskovo in partnership with Abington, PA. Another twinning with Duluth, MN has helped Rousse in encouraging citizens’ participation in efforts to improve social, economic and environmental conditions.

A new Partners in Economic Development and Government Effectiveness (PLEDGE) program was initiated in September 1998. It is aimed at local/regional economic growth, job creation, and worker retraining, with labor organizations full participants in planning and development. These activities will fortify municipal/regional partnerships by helping municipalities address problems of economic stagnation on a regional basis.

Despite this progress, most local governments still lack the knowledge and skills to apply improved management and service delivery techniques. Further, the instruments for disseminating the most successful practices are still being developed. Increasing public participation in local government affairs remains a challenge because of local government inexperience with genuine public involvement, coupled with only partially developed NGO advocacy skills. On the other hand, the LGI has many assets to build on: (1) budding political will to examine and act on complex issues of fiscal decentralization; (2) increasingly competent and professional municipal leadership and front line workers; (3) slowly strengthening local government systems, practices, and structures; (4) clear, albeit lengthy, local government reform agenda, and (5) most importantly, an increasingly able set of institutions committed to advocacy, training, technical assistance and dissemination of best practices.

USAID is already implementing the second phase of LGI that works towards sustainability of the local government reform effort by placing major emphasis on building up local support capabilities and progressively shifting the lead role in upgrading local government operations to indigenous institutions.

Possible Adjustments to Plans: None at this time.

Other Donors Programs: Several bilateral donors and EU provide assistance to various associations and municipalities in ways that complement USAID's efforts. The Dutch provide capacity building assistance to the National Association of Municipalities through the Foundation for Local Government Reform. The Swiss helped establish a regional municipal association in central Bulgaria and support community action projects through this association. The British Know How Fund provides technical assistance to four Bulgarian municipalities and supports twinning relationships between Bulgarian and UK municipalities. EU's Local Democracy Program supports citizens' participation in community partnerships and sustainable regional development.

Currently USAID is the only donor organization carrying out a comprehensive program of local government improvement. However, EU contemplates a major support program for regional development, and the World Bank is considering a community-level job creation fund. USAID will coordinate closely with these development partners to enhance prospects for replication of successful LGI approaches to regional planning.

Principal Contractors, Grantees, or Agencies: USAID implements activities through U.S. and local organizations, including the International City Managers' Association, Management Systems International, U.S. Department of Labor, and other private firms and NGOs.

Selected Performance Measures:

	Baseline	Target
Number of policy positions local government groups advocate before central government	6 (1997)	10 (2000)
Growth of own source revenues generated	30% (1997)	45% (2000)
Achievement of business plan targets identified by municipal organizations	5% (1997)	35.5% (2000)

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