TAJIKISTAN

	FY 1998 Actual	FY 1999 Estimate	FY 2000 Request
FREEDOM Support Act	$12,150,000	$11,870,000	$12,000,000
P.L. 480 Title II	4,049	--	--

Introduction.

Tajikistan is a small, but unstable, new state in the center of Asia that is emerging from five years of civil war between regional and ideological factions. The United States is the largest bilateral donor, and a key supporter of the 1997 Peace Accord and an independent and stable Tajikistan. The fragile peace and potential disintegration of Tajikistan threatens regional stability and deflects attention within the region from critical economic and political reforms. The humanitarian situation is dire.

The Development Challenge.

Tajikistan is the poorest of the new Central Asian states and the only one in which underlying ethnic, regional, economic and ideological strains led to open warfare and major population displacements. The June 27, 1997 Peace Accord opened a new phase in Tajikistan's short history, formally ending a civil war begun in 1992 which left at least 50,000 dead and 700,000 displaced and a legacy of hatred and suspicion which makes reconstruction tenuous and difficult.

The most important task for Tajikistan is to carry out the Peace Accord. USAID's role is to provide support for the reconciliation process and to rebuild institutional capacity. However, in the fall of 1998, relocation of the U.S. Ambassador and all U.S. employees from Dushanbe to Almaty, Kazakhstan limited USAID’s capacity to support the Peace Accord and development change. The security situation had deteriorated to the point where it was unsafe to continue a U.S. physical presence. Official travel was severely curtailed. Neither USAID officers nor contractors have easy access to development partners or clients. USAID must now find ways to provide effective assistance from its regional office in Almaty, Kazakhstan.

By the end of FY 1998, progress had slowed and little if any prospects were on the horizon for improvement. While most of the Tajik refugees who fled to Afghanistan had returned by early 1998, the government and opposition groups continued to face internal obstacles to a sustained peace settlement. On the more positive side, however, proposals for amendments to the constitution are under review and parliamentary elections tentatively planned for mid-1999. These may well be the most important elections within the region.

Likewise, progress on economic reform faltered in 1998. Macroeconomic stability suffered, and the Tajik ruble continued its decline, albeit at a slower pace. By October 1998, the Government of Tajikistan (GOT) was implementing International Monetary Fund (IMF) fiscal austerity policies, and the macroeconomic situation had made up some lost ground. Whereas progress in privatization remained slow, there have been some hopeful signs, such as changes proposed to the antiquated Russian tax laws.

The focus for U.S. assistance remains humanitarian in nature. Private voluntary organizations (PVOs), such as the World Food Program, Mercy Corps, CARE, Save the Children, and the Aga Khan Foundation (AKF), have been innovative in using U.S. assistance and the transition from strictly humanitarian relief to humanitarian-focused economic development which lays a foundation for sustainable development. USAID assistance to other international organizations (e.g., United Nations Mission of Observers in Tajikistan (UNMOT), UNDP, and IBRD is anticipated in order to secure a favorable environment for USAID intervention and to maximize impact. Assistance to the Tajikistan Social Investment Fund's poverty alleviation program provides an opportunity for USAID to support community mobilization around water use issues, institute measures to prevent water-borne diseases, and address policy issues related to water charges and consumer use.

USAID increased its support for the peace process through reconstruction, assistance to civil society development, and constitutional and electoral reform. USAID also continued to provide advice and training on privatization and bank supervision with plans to expand this modest effort, the security situation permitting. Some short-term technical assistance and training is underway in economic restructuring, democratization, and health and family planning. USAID participant training programs both expose Tajik citizens to alternative approaches and systems for managing their country and develop the human resources needed for development once there is greater political stability.

Other Donors.

While the U.S. had taken the lead in responding to the humanitarian crises following the civil war, the IMF and the World Bank (IBRD) provided substantial resources to support macroeconomic stability and reform. Thus far, $22 million has been received from the IMF and $60 million from the IBRD. Their assistance has dropped in recent years, with IBRD currently financing only a $12 million Poverty Alleviation Project. However, at the end of FY 1998, each organization came forward with $10 million to support the peace process. United Nations High Commission of Refugees (UNHCR) has provided significant assistance during the refugee repatriation period, with the United Nations Development Program (UNDP) moving into the field with increasingly significant resources beginning in FY 1995. The European Union (EU), individual EU countries, Turkey, Russia and Iran have also assisted Tajikistan, as has the International Red Cross, supported in part by U.S. Government contributions. Large numbers of Private Voluntary Organizations, including several from the United States, are active and effectively managing their programs in Tajikistan.

FY 2000 Program.

USAID's involvement in Tajikistan assumes continued progress in the inter-Tajik peace process, which is essential for achieving national reconciliation and holding elections that meet international standards. Under economic restructuring, USAID will focus on two objectives: growth and development of private enterprise and evolution of a commercial legal and regulatory structure. There may also be some assistance to build the private banking sector. Tajikistan is one of the lowest rated countries in the region in terms of macroeconomic policy, and economic growth will be limited until they move forward on reforms. The size and nature of USAID's programs will be determined by the political and security situation of Tajikistan. USAID will continue to support the development of non-governmental organizations (NGOs), with a focus on those that contribute to the peace process through reconciliation and local community development. USAID is combining humanitarian and economic development efforts by moving forward with a competitive grant process to identify and support the most cost-effective local government activities in communities where there are also opportunities to build reconciliation in the post war period. These grants will be implemented by private voluntary and international organizations.

USAID will continue to support independent electronic media, focussing on how media stations can contribute to public understanding of the peace initiatives, upcoming elections, and proposed constitutional changes. After the election of the new parliament, USAID expects to direct assistance toward building the institutional capacity of the parliament. These elections, scheduled for mid-1999, are considered to be among the most significant and competitive in the region. USAID intends to increase support for this important undertaking. In the social sector, USAID will continue to work closely with other donors, PVOs and NGOs. Special initiatives in reproductive health, infectious disease, and health partnerships will be programmed in a manner which promotes citizen and community involvement as well as achieves needed improvements in health.

TAJIKISTAN

FY 1999 PROGRAM SUMMARY*
(in Thousand of Dollars)

USAID Mission Director: Glenn Anders

Strategic Objectives	Economic Restructuring	Democratic Transition	Social Stabilization	Cross-cutting / Special Initiatives	Total
Privatization	--	--	--	--	--
Fiscal Reform	--	--	--	--	--
Private Enterprise	1,650	--	--	--	1,650
Financial Reform	1,150	--	--	--	1,150
Energy	--	--	--	--	--
Environmental Management	--	--	--	--	--
Citizens' Participation	--	1,800	--	--	1,800
Legal Systems	--	--	--	--	--
Local Government	--	--	--	--	--
Crises	--	--	1,400	--	1,400
Social Benefits	--	--	--	--	--
Environmental Health	--	--	--	--	--
Cross-cutting / Special Initiatives	--	--	--	6,000	6,000
TOTAL	2,800	1,800	1,400	6,000	12,000
*Freedom Support Act (FSA) funds

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ACTIVITY DATA SHEET

PROGRAM: TAJIKISTAN
TITLE AND NUMBER: Accelerated Development and Growth of Private Enterprises, 110-S001.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: $1,650,000 Freedom Support Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2002

Summary: Prior to 1996, the policy environment was not conducive to concentrated technical assistance in the area of economic restructuring. In the wake of the ongoing civil war, training and exchange were the best mechanisms for Tajiks to observe developments elsewhere and to gain international experience. To encourage reform, USAID engaged Tajik counterparts in necessary private sector reforms through training courses and modest, targeted technical assistance. The objective of this activity is to achieve accelerated development and growth of private enterprises. USAID has sent hundreds of Tajiks to U.S. and other Central Asian countries for short-term training in a variety of economic reform areas. Specialized in-country training has also been effective. Tajiks trained under these programs now form a professional cadre of reform-minded officials who are taking the lead in crafting long-term economic stabilization and structural adjustment programs.

An area of USAID training support that has been well received in Tajikistan is commercial law reform. As in the other countries of Central Asia, the Government of Tajikistan (GOT) has indicated its support for the development of a core set of commercial legislation that will serve as the legal backbone for the nation’s emerging private sector. USAID has already demonstrated its capacity to provide expertise in this area through its comprehensive commercial law assistance activities in Kazakhstan and Kyrgyzstan. Although continued political instability led to the suspension of USAID activity at the end of the year, the security situation permitting, new technical assistance is planned that will constitute a critical element of the peace process. Success in this area will be achieved with an increase in the share of GDP being generated by private enterprises to 75% in 2001.

Entrepreneurs and those involved in private sector development stand to benefit from this initiative. More broadly, the citizens of Tajikistan would benefit from economic reform that leads to sustainable economic growth.

Key Results: Accelerated development and growth of private enterprise hinge on progress toward the following: 1) continued GOT adherence to conditionality of international financial institutions; 2) the dollar volume of joint venture funds invested increasing to $11 million in FY 2001; 3) the share of GDP generated by private enterprise growing to 50% by FY 2001; and 4) the percentage of total capital investment in the private sector also growing to 75% by FY 2001.

Performance & Prospects: During FY 1998, the Central Asian-American Enterprise Fund (CAAEF) made eight loans totaling $730,468 to private businesses in Tajikistan. Winrock Farmer-to-Farmer and USAID-funded International Executive Service Corps advisors have assisted Tajik enterprises in preparing business plans and loan/equity proposals for CAAEF and have acted as consultants on post-investment management.

Subject to continued commitment by the Government of Tajikistan to economic reforms, as well as increased security and political stability in the country, USAID plans to undertake a modest commercial law assistance initiative in FY 1999 and FY 2000 to help the GOT develop a market-oriented commercial infrastructure, including key reforms in the law. The program will initially focus on drafting the following laws: bankruptcy; collateral law; banking; and foreign investment; areas designed to promote the transfer of productive assets to the private sector and strengthen the rights of private investors. Practical constraints to business formation and operation (e.g., licensing and registration procedures) will also be addressed. In addition to commercial law reform, the activity will provide in-country training to key officials involved with the implementation of a market-friendly regulatory regime, i.e., judges, lawyers, and prosecutors. Work under this strategic objective will promote the rule of law and thereby the solidification of the peace process.

Possible Adjustments to Plans: The most immediate concern is the direction that the country takes with regard to the civil war and violence. USAID closely monitors this issue and will adjust the program accordingly. USAID is interested in restarting efforts in commercial law.

One of the key foci in the coming years will be the Fergana Valley, for it is one of the most dynamic regions for private enterprise growth in Central Asia. Plus, parts of the Valley have been untouched by the civil war. If the opportunity presents itself, USAID will strengthen the IESC activities in this region.

Other Donors Programs: USAID will continue to work closely with the various governmental entities involved in private sector development and economic restructuring issues. The World Bank and IMF are also directly engaged in this effort. USAID coordinates closely with these two institutions on their activities and in some instances, such as in the recent placement of a privatization advisor in Dushanbe, directly supports their programs. Activities are also coordinated with those of other donors such as the European Union and UNDP, as they are interested in economic reform issues.

Principal Contractors/Grantees/Implementing Agencies: USAID assistance activities are implemented through private U.S. firms, such as ARD/Checchi, and U.S. PVOs, IESC and CAAEF.

Selected Performance Measures:

	Baseline	Target
GOT adherence to conditions of international financial institutions	Yes (1997)	Yes (1997)
Dollar value of joint venture funds invested (millions)	$3 (1997)	$11 (2001)
Share of GDP generated by private enterprise	20% (1996)	50% (2001)
Percentage of total capital investment in the private sector	20% (1997)	75% (2001)

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ACTIVITY DATA SHEET

PROGRAM: TAJIKISTAN
TITLE AND NUMBER: A More Competitive and Market Responsive Private Financial Sector, 110-S001.4
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: $1,150,000 Freedom Support Act
INITIAL OBLIGATION: FY 1998; ESTIMATED COMPLETION DATE: FY 2000

Summary: Before 1996, the policy environment was not conducive to concentrated technical assistance in the area of economic restructuring. In the wake of the civil war, training and exchanges were the best mechanisms for Tajiks to observe developments elsewhere and to gain international experience. To encourage reform, USAID engaged Tajik counterparts in necessary private sector reforms through training courses and modest, targeted technical assistance. The objective of this activity is to create a more competitive and market responsive private financial sector. USAID has sent hundreds of Tajiks to the U.S. and other Central Asian countries for short-term training in a variety of economic reform areas. Specialized in-country training has also been effective. Tajiks trained under these programs now form a cadre of reform-minded officials who are taking the lead in crafting long-term economic stabilization and structural adjustment programs.

USAID's targeted training and technical support has sought to maximize its impact on key economic reforms. For example, in early FY 1997, a USAID privatization advisor played a crucial role in initiating privatization reforms that are now being undertaken as part of a comprehensive World Bank program. In early 1998, a USAID bank supervision consultant began an assignment with the Tajik Central Bank. The activity was designed to help the Central Bank establish the capability to effectively supervise the commercial banking sector in Tajikistan through design and training of a modern bank supervision unit. The project appeared to get off to a very rapid start, with the resident advisor quickly establishing credibility with his counterparts. After only a few weeks, the advisor had already undertaken an on-site commercial bank examination. In addition, the Chairman of the Central Bank requested weekly meetings with the USAID advisor to review progress in implementing the advisor's ambitious work plan. Although continued political instability led to the suspension of USAID activity at the end of FY 1998, further technical assistance is planned for 1999 and beyond and will constitute a critical element of the peace process. Despite problems related to ongoing political instability in Tajikistan, during the 1996-1998 period, the Government of Tajikistan showed increased commitment to economic reforms. Success in this activity will be achieved if there are increases in the ratio of private sector deposits in Tajikistan’s banking system to GDP. To date, however, baseline data have not been gathered.

The direct beneficiary of this activity would be the Central Bank of Tajikistan. More importantly, the citizens of Tajikistan would benefit from economic reform that leads to sustainable economic growth, a critical element of the peace process.

Key Results: This was a new activity in FY 1998. Baseline data and targets will have to be completed. Achievement of financial sector reform will depend upon progress as measured by the following indicators: 1) increases in private sector deposits in Tajikistan’s banking system as a percentage of GDP; 2) a positive USAID assessment of regulatory readiness of the Central Bank of Tajikistan; 3) increases in the number of banks converted to international accounting standards by FY 2001; and 4) consideration/adoption of appropriate official laws and regulations.

Performance and Prospects: The political and security situation permitting, USAID’s efforts in FY 2000 will continue to be targeted at achieving key results in the legal/regulatory structure of the commercial banking sector, increasing the number and quality of financial services available, and improving Central Bank access to information about the banking system and its capability to enforce prudent norms in the banking sector. These core efforts will likely be complemented by a progressive emphasis on use and strengthening of international accounting standards in the banking sector. USAID will coordinate its Central Bank assistance closely with the IMF and with the advisory assistance from the World Bank. USAID’s successful work in banking system development in Kazakhstan and Kyrgyzstan provides a significant advantage in continuation of the program in Tajikistan.

Possible Adjustments to Plans: The most immediate concern is the direction that the country takes with regard to the civil war and violence. USAID closely monitors this issue and will adjust the program accordingly. Based upon an expressed need, USAID may begin to work in the area of accounting conversion for private enterprise, with limited training and technical assistance. This would complement an existing privatization program of the World Bank.

Other Donor Programs: USAID will continue to work closely with the various governmental entities involved in private sector development and economic restructuring issues. The World Bank and IMF are also directly engaged in this effort. USAID has coordinated closely with these two institutions on their activities. Activities are also coordinated with those of other donors such as EU and UNDP, which are interested in economic reform issues.

Principal Contractors, Grantees, or Implementing Agencies: The private U.S. firm of Arthur Andersen has been the primary implementing agency.

Selected Performance Measures: This was a new activity in FY 1998. Baseline data and targets will have to be completed. The indicators to be tracked are listed below:

	Baseline	Target
Private sector deposits in banking system as a percentage of GDP	NA (1997)	NA
USAID assessment of regulatory readiness of Central Bank	NA (1997)	NA
Number of banks converted to international accounting standards	NA (1997)	NA
Consideration/adoption of appropriate official laws and regulations	NA (1997)	NA

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ACTIVITY DATA SHEET

PROGRAM: TAJIKISTAN
TITLE AND NUMBER: Increased Citizen’s Participation in Political and Economic Decision-making, 110-SOO2.1
STATUS: Continuing
PROPOSED OBLIGATIONS AND FUNDING SOURCES: FY 2000: $1,800,000 Freedom Support Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2002

Summary: Efforts to bring about political consensus in Tajikistan have proven to be long, arduous and fragile. Nonetheless, provided that the security situation permits international organizations to operate in Tajikistan, opportunities do exist to promote reconciliation through assistance to the election process, enhancement of information flows about the peace process and the upcoming elections, and assistance in increasing the participation of Tajik citizens in the rehabilitation process. The aftermath of civil war and the economic decline have, in a number of instances, left vacuums that can be filled in part by local community groups working together to help in rehabilitating the country. In FY 1999, USAID initiated substantial assistance for the upcoming parliamentary elections. In addition, modest NGO, judicial and media support activities will continue, but with more emphasis on the peace process.

Key Results: Three key intermediate results were concluded to be necessary to achieve the Strategic Objective. NGO participation in civil society must be strengthened, information on domestic economic policies and politics must become more widely available and the Government must become more responsive and accountable to citizens and citizens' organizations.

Performance and Prospects: To date, over 1072 NGOs and local community group representatives have participated in USAID training courses, and USAID has made some 90 small NGO seed grants totaling approximately $239,370 (through Counterpart Consortium and ISAR). USAID assistance through the International Center for Not-for-profit Law (ICNL) helped to facilitate the drafting of revisions to the Public Association Law which was passed by the parliament over this past year. The judicial association of Tajikistan, with the assistance of ABA/CEELI, has played an active role in promoting an independent judiciary as the Council for National Reconciliation considers constitutional amendments. The association adopted an ethics code to which all judges must adhere -- an important step toward transparency and accountability. ABA/CEELI recently convened a successful workshop with Tajik officials on corruption law and intends to follow-up in the near future. Assistance to independent media continues to be required given the government's use of the media law against media outlets and given future demands of the peace process. USAID is supporting the Internews production of Pairachi Zindagi ("The Path of Life"), a first step in supporting more independent media outlets, critical to fostering greater citizen participation.

USAID is looking to continue these successes with the eventual return of American staff to our partner offices (i.e., Internews and ABA). In addition, the upcoming elections in the summer of 1999 in Tajikistan challenge the GOT and our partners to support electoral reforms necessary to convene fraud-free elections. USAID and its partners are working closely with GOT (through legislation reform, election administration training, and voter registration system development) to develop conditions conducive for elections that meet international standards.

Possible Adjustments to Plans: In addition to an increase in election-related assistance this year, USAID anticipates a more intensive strategic focus on conflict/crisis management and the peace process in the upcoming years. In particular, USAID intends to work more closely with other donor partners on cross-sectoral integration and synergies in our programming.

Other Donor Programs: USAID is working closely with UNMOT and the OSCE on coordinating election-related assistance, as well as on specific joint projects. The international community, including USAID, is paying particular attention the country's all-important first post-conflict elections. Joint activities include co-sponsoring a constitutional reform workshop and an upcoming election law seminar. The OSCE and UNMOT have indicated an interest in providing additional commodities to support USAID's voter registration system development activity. Other donors, including the EU and various UN agencies, are also involved in a variety of activities that promote democracy and the peace efforts. Donors meet regularly to discuss areas of common concern, and this coordination will continue.

Principal Contractors, Grantees or Agencies: Several USAID-funded American NGOs, such as the American Bar Association/CEELI, Internews, and the International Foundation for Electoral Systems (IFES), are playing a role in promoting democracy and the peace effort in Tajikistan. The Counterpart International, Aid to Artisans, and the International Center for Not-for-profit Law, which together form the Counterpart Consortium, also participate in local NGO development. Initiative for Social Action and Renewal in Eurasia (ISAR) will also participate in the development of local environmental NGOs.

Selected Performance Measures:

	Baseline	Target
Number of NGOs involved in advocacy	9/9 (1997)	60/40 (2001)
Average daily minutes of local news programming	5 (1996)	14 (2001)
Number of Parliamentary hearings and committee meetings addressing legislative/policy issues	0 (1994)	5 (2001)

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ACTIVITY DATA SHEET

PROGRAM: TAJIKISTAN
TITLE AND NUMBER: Improved Response to and Management of Humanitarian Crises, 110-S003.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000 $1,400,000 Freedom Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 2000

Summary: The U.S. has been a lead donor in providing humanitarian assistance following the 1992 civil war. In FY 1996 and FY 1997, there was a marked shift away from strictly humanitarian assistance toward a program emphasizing economic growth. However, events in 1998, including the worsening of the already fragile political situation, a number of serious security incidents, and set-backs in implementation of the 1997 peace accords, have now required that programming needs to take into account the relative instability of the domestic situation. The closing of the U.S. Embassy in Dushanbe and the withdrawal of USG employees has reinforced this view. Therefore, support for the peace process has assumed a greater priority for USAID in Tajikistan. Seventy-five percent of the available development resources in 1998 were directed towards this end. USAID expects that the program emphasis on reinforcing the peace process will continue through FY 2000. USAID has therefore chosen to target social development activities that involve members of the local community, contribute to the development of indigenous organizations, encourage sustainability, and provide a strong link to longer-term development within an environment of peace and social harmony.

Key Results: In 1998, USAID's Tajikistan Social Investment Fund (TASIF) started to implement micro projects. The major participants involved in implementing micro projects are: a) the community or group that benefits directly from the micro project in terms of increased job opportunities and income and improved access to services; b) the sponsoring agency, that is, the local government, NGO or community group; and c) the implementing agency. The implementing agency is an NGO, local government or other community group. More than 40 micro-projects have been implemented already. USAID is also supporting activities that have proven successful in increasing employment and income in the agricultural and agro-processing sector through community participation. USAID supports activities to increase community access to primary health care. USAID actively supported citizen-sponsored government action to meet the challenges facing Tajikistan and coordinated with the Ministries of Health, Education, Agriculture, Finance and the State Committee for Emergencies; helped pass a decree to prohibit the reconstruction of houses in flood plains working closely with flood-affected populations and local and international NGOs; and integrated a peace component into a rehabilitation project for war-affected schools.

Performance & Prospects: Development-oriented humanitarian programs introduced since 1996 have achieved increasingly noteworthy results. A USAID-supported small loan program for farmers permits loan repayment in kind directly to local institutions such as hospitals and orphanages, thereby benefitting not only farmers but vulnerable groups. Other programs have improved access to basic health services for 260,000 people, and established 62 village health committees covering approximately 85,000 beneficiaries. A revolving pharmaceutical fund established with USAID support has enabled 17,000 patients to purchase or receive needed medications. USAID has provided critically needed funding to the United Nations Mission of Observers in Tajikistan (UNMOT) as a key contribution to maintaining personnel and peacekeeping activities at a critical time in the implementation of the peace process. USAID also provided support for UNDP/UNOPS activities, particularly a UNDP rural reconstruction project for war affected areas. In 1998, USAID initiated assistance to a project of the Aga Khan Foundation (AKF) to support establishment of private farmers in a war-affected area, to promote community-based peace and confidence-building measures in the Gharm region, and supported World Bank assistance to their Poverty Alleviation Project to improve access to social and economic services.

Possible Adjustments: It is expected that assistance through the year 2000 will continue to focus on economic and social development activities which support the peace process.

Other Donor Programs: Donor coordination in Tajikistan is excellent and is regarded as among the most effective in the former Soviet Union. Various donor groups meet weekly to discuss programs and exchange information on important developmental and security issues affecting Tajikistan. Lead organizations include the United Nations (UNDP/UNOPS, UNICEF, WHO, etc.), bilateral donors including various European organizations, and a variety of American and international PVOs. Both the World Bank and the UNDP support initiatives that rely largely on local and foreign non-governmental organizations to deliver badly needed goods and services to many areas of Tajikistan.

Principal Contractors, Grantees, or Implementing Agencies: Groups that have received USAID funds include Save the Children, Relief International, CARE, World Food Program, Mercy Corps International, and AKF.

Selected Performance Measures:

	Baseline	Target
Humanitarian/crises activities	50% (1997)	10% (2000)
Reconciliation/development programs	50% (1997)	90% (2000)

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