UZBEKISTAN

 

	FY 1998 Actual	FY 1999 Estimate	FY 2000 Request
FREEDOM Support Act	$20,651,000	$27,610,000	$37,500,000

Introduction.

U.S. national interests in Uzbekistan reflect a combination of commercial and strategic concerns. As the largest country and market in Central Asia, Uzbekistan offers trade and investment opportunities through a diverse economic base which include agricultural, industrial and energy resources. Its oil and gas reserves also provide opportunities for U.S. investors and an option for diversifying U.S. energy sources. A prosperous Uzbekistan could be central to the commercial expansion of the region. Thus, Uzbekistan has the potential to contribute to U.S. economic prosperity. Uzbekistan aspires to regional leadership, and is increasingly seen as a key player in maintaining stability in Central Asia. It has played a role in the crises in Afghanistan and is a guarantor in the Tajik peace plan. The U.S. has a national security interest in ensuring that the region remains stable. Uzbekistan clearly contributes to that priority.

The Development Challenge.

USAID's primary goal in Uzbekistan is to promote economic growth and social stability. The reluctance of the Government of Uzbekistan (GOU) to introduce broad-based market reforms in the privatization and financial sectors has stifled economic recovery. After a significant movement in the mid-1990's toward free market reforms through pricing and trade liberalization measures and tightened short-term fiscal and monetary management policies, the government has retreated in the late 1990's by restricting convertibility and access to foreign currency. This resulted in suspension of its International Monetary Fund (IMF) Standby Arrangement. The lack of convertibility or movement towards economic or fiscal reform is having a serious debilitating effect on the Uzbekistan economy as well as a chilling effect on the international donor community. Recent IMF consultations revealed deepening financial imbalances. The GOU's tentative start at privatization, through an investment-fund based auction program for 200 medium and large-scale enterprises as of September 1998, has yet to gain momentum. The investment climate continues to suffer from onerous bureaucratic obstacles in registration, licensing, and inspection areas which increase the cost and unpredictability of private business operations.

USAID's economic reform strategy is designed to address the three key policy reform areas which are essential for a transition to a market-based economic system: fiscal policy and management; a stable market-based financial intermediation system; and a policy, legal and regulatory environment supportive of private enterprise and international investment (particularly in the energy sector). In the fiscal reform area, USAID has supported the development and passage of a comprehensive western-style tax code and has promoted tax administration procedural and automation reforms which have helped strengthen revenue inflows. In 1998, USAID initiated its accounting reform project working closely with the Ministry of Finance to introduce new international accounting standards. In 1999, USAID aims to convert at least 600 Uzbek firms to the international accounting standards, train accountants in free market accounting, and introduce a modern accounting curriculum to Uzbek universities. USAID has also supported the development of budget and treasury laws which should provide the legal basis for the development of more rational and better targeted budget planning, tracking and reporting systems.

In the financial sector, USAID is providing intensive support to improve bank supervision and the ability of the Central Bank to enforce tightened financial performance and reporting requirements for commercial banks. More recently, USAID has supported bank accounting with the goal of improving the quality of bank financial information available to both commercial bank managers and regulatory officials and thereby significantly improving the efficiency of banking services. When controls on foreign exchange and credit allocation policies and inter-bank transactions are reduced, it will be important to have the basic regulatory and accounting infrastructure for the effective operation of a commercial banking sector in place. One of the glimmers of progress is the GOU’s decision to proceed with the World Trade Organization (WTO) accession. Ultimately USAID’s goal is to use this to focus key decision-makers on the importance and benefits of adopting reforms in trade and investment policy and regulation. With USAID support, the GOU finalized and submitted its Memorandum of Foreign Trade Regime to the WTO in Geneva in late 1998.

Citizen participation in economic and political life is limited and ill-informed. Political opposition to the regime is not tolerated, and the upcoming elections are not expected to meet international standards. As a result, election-related assistance has been scaled back and reformed. While opportunities to advance government transparency and responsiveness are restricted, there are significant opportunities to increase civic participation by strengthening non-governmental organizations’ (NGOs) capabilities in management, civic education, media relations, community issues, and advocacy. In particular, there are important opportunities to support citizen involvement through NGOs at the local level as economic pressures are forcing the de-centralization of government in the country. Though the media is closely watched by the GOU, some 48 small TV stations have received USAID assistance and 18 contribute to a biweekly news magazine. Openings also exist to promote rule of law concepts. Legislative assistance by USAID has resulted in improved sections of the criminal and commercial codes and a progressive draft NGO law, which after passing its first reading, is now before the parliament for its second reading.

Currently, government-supplied social services critical to maintaining a social safety net are not financially sustainable. The GOU is committed to providing good health services and this is an area in which USAID technical assistance is very effective. In 1998, USAID began to work on health reform by focusing on new management and payment systems for improved health service delivery and financing. The results have been impressive with 13 primary health care sites already established in pilot areas. Community groups have been organized to participate in health services. The World Bank (IBRD) has provided a $30 million loan to build on the results of USAID’s pilot health reform activity and replicate it in three provinces. Responding to a resurgence of tuberculosis (TB), USAID introduced the new, more effective World Health Organization (WHO) protocols for treatment in 1998. USAID initiated-programs have made significant contributions to improved health for Uzbeks -- polio has essentially been eradicated; abortions have been reduced by about 50%; and more than 1,000 health care providers have received training in family planning. The Medical Partnership Program provides comprehensive health care for women as well as training in emergency care. USAID plans to build on these successes and expand its health assistance in 1999.

Other Donors.

USAID closely coordinates with other donors. The IMF continues to closely monitor the macroeconomic policies of the GOU even though the Standby Arrangement has lapsed. The IBRD is working on privatization and health. The European Union (EU) has the largest country program after the IBRD. This focuses on technical assistance in agriculture, private business development, and energy and includes support for accounting reform. USAID is the lead donor in fiscal policy/management reforms, commercial law, accounting reform, reproductive health care, and strengthening NGOs and the media. The United Nations (UN), the Adenauer Foundation, and the Organization for Security and Cooperation in Europe (OSCE) fund training to improve civil society. The European Bank for Reconstruction and Development (EBRD) has made loans for textile plants, energy, and small enterprise development.

FY 2000 Program.

USAID’s assistance will continue to evolve and shift to opportunities where USAID can be an effective development partner with the government and with nongovernmental groups especially in health and local community development. In the fiscal area, USAID’s assistance on fiscal reform will continue but shift from tax policy to tax administration and to focus on budget planning, banking supervision and accounting. Assistance for accounting and commercial law reform is being initiated to respond to new opportunities. Following up on the GOU’s recent submission to the WTO, USAID will provide intensive technical assistance and training to help the GOU accelerate the WTO accession process and provide a springboard for more far-reaching reforms on commercial law.

Involving Uzbekistan citizens in public affairs through an active, effective NGO community represents the most viable means of promoting a more participatory political process, closely complemented by a strong, independent media. USAID is increasing support for civic education, women’s legal rights, NGO activity, and grassroots community issues. It is also working with the more mature NGOs on policy advocacy skills, coalition building and community development. USAID assistance to commercial TV stations will help address equipment, finance, and management deficiencies and subsequently improve programming quality.

USAID assistance will also expand in the health sector where successful USAID pilot projects in health care delivery have begun to document cost effective models which reach critical populations and which have leveraged substantial additional IBRD support. USAID will continue to work with the bank to provide much needed technical assistance to support a new major IBRD health loan as well as strengthen the role of the commercial sector in the management and supply of pharmaceuticals and contraceptives. In the area of infectious disease, cost-effective ways to treat TB will be introduced. USAID will also increase activities which strengthen the ability of NGOS, including traditional groups such as community councils, to deliver social services.

UZBEKISTAN

FY 1999 PROGRAM SUMMARY*
(in Thousands of Dollars)

USAID Mission Director: Glenn Anders

Strategic Objectives	Economic Restructuring	Democratic Transition	Social Stabilization	Cross-cutting / Special Initiatives	Total
Privatization	--	--	--	--	--
Fiscal Reform	800	--	--	--	800
Private Enterprise	6,200	--	--	--	6,200
Financial Reform	1,500	--	--	--	1,500
Energy	--	--	--	--	--
Environmental Management	--	--	--	--	--
Citizens' Participation	--	2,500	--	--	2,500
Legal Systems	--	--	--	--	--
Local Government	--	--	--	--	--
Crises	--	--	--	--	--
Social Benefits	--	--	1,500	--	1,500
Environmental Health	--	--	--	--	--
Cross-cutting / Special Initiatives	--	--	--	25,000	25,000
TOTAL	8,500	2,500	1,500	25,000	37,500
*Freedom Support Act (FSA) funds

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ACTIVITY DATA SHEET

PROGRAM: UZBEKISTAN
TITLE AND NUMBER: Increased Soundness of Fiscal Policies and Fiscal Management Practices, 110-S001.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: $800,000 Freedom Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 2000

Summary: In 1994 USAID began working on this activity, the purpose of which is to increase the soundness of fiscal policies and fiscal management practices. In early 1998 USAID gauged that this activity was "on track," although implementation had been slow. While the year commenced with the introduction of the tax code and a proposed Budget System Law, neither were passed by the Majilis, even though they had been submitted to the Cabinet of Ministers in June 1998. Additional support is helping to modernize both the indirect and direct tax administration system. Modernization of the computer systems within the tax administration is the most advanced of the Central Asian Republics. USAID assistance has been responsible for three budget reform seminars and one seminar in fiscal reform. In total almost 400 local participants received training under these activities. Continued progress in these areas would cause the general government deficit as a percentage of GDP to decline to 2.6% by 2001.

This effort seeks to benefit Uzbeks at all levels by ensuring greater transparency and a more rational revenue collection and budgetary expenditure process. Potential entrepreneurs and foreign investors will benefit as more comprehensible and transparent fiscal systems are adopted. Increased government revenues and a more rational system for allocating their use should also lead to more effective governance and greater macroeconomic stability.

Key Results: For fiscal reform to be sustained it will be necessary for: 1) the government deficit as a percentage of GDP to fall to 2.6% by FY 2001; 2) the percentage of total revenue generated by local governments to rise to 59% by FY 2001; 3) continued compliance to the conditions of international financial institutions by the GOU; and 4) the average volume of all types of government securities outstanding to climb to $150 million in 2001 from $30 million in 1995.

Performance and Prospects: Although a new tax law has been passed, it has a few significant deficiencies. USAID advisors are attempting to effect corrections through implementing regulations. The new Budget Systems Law and companion Treasury Law, drafted with USAID assistance, are expected to go to Parliament by spring 1999. Progress is being made in installing a budget classification system developed with USAID assistance. The Ministry of Finance is receiving USAID-sponsored training of fiscal forecasting, and now appears committed to the development of an improved budgetary planning framework which would improve the targeting and cost-efficiency of major social expenditure programs.

Possible Adjustments to Plans: By most accounts, Uzbekistan is headed for serious fiscal problems. The change in leadership at the Ministry of Finance, while initially promising, does not look to yield the reforms anticipated. The IMF removed its Treasury Advisor from the Ministry of Finance in late 1998. Continued assistance in budget reform is high-risk at this time, and indications of additional reform are sparse. The USAID Fiscal Reform Activity represents the only current effort in this sphere. USAID can claim success in its efforts to reform tax administration, although the potential for future impacts are low. It appears as if the time for a phase-out of USAID’s assistance is approaching. Immediate termination of USAID-supported budget reform activities and activities in fiscal analysis, however, may be ill-timed. Over the near term, USAID will monitor closely events in this area.

Other Donor Programs: Ongoing work in the fiscal area is closely coordinated with the Know-How Fund of the UK in the development of a computerized risk assessment system for the State Tax Committee. USAID is also cooperating closely with the IMF in the fiscal analysis.

Principal Contractors, Grantees, or Implementing Agencies: USAID activities are implemented through KPMG/Barents, a contractor working closely with the Ministry of Finance and State Tax Committee.

Selected Performance Measures:

	Baseline	Target
Government deficit as a percentage of GDP	3.5% (1995)	2.6% (2001)
Local government revenue as a percentage of total	47% (1997)	59% (2001)
GOU maintains compliance with conditions of international financial institutions	Yes (1995)	Yes (2001)
Average volume of all types of government securities outstanding during year (millions)	$30 (1995)	$150 (2001)

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ACTIVITY DATA SHEET

PROGRAM: UZBEKISTAN
TITLE AND NUMBER: Accelerated Development and Growth of Private Enterprises, 110-S001.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: $6,200,000 Freedom Support Act
INITIAL OBLIGATION: FY 1998; ESTIMATED COMPLETION DATE: FY 2000

Summary: In 1997 USAID initiated a trade and investment program designed to educate state officials on the merits, benefits and requirements of the World Trade Organization (WTO) and to assist in the preparation and adoption of changes to the legal and regulatory framework necessary for accession to the WTO. The Accounting Reform Activity was launched in late 1998. USAID advisors are working with the Ministry of Finance to introduce a new chart of accounts that is in accord with the International Accounting Standards (IAS). Finally, USAID continues to work with local private enterprises, offering technical assistance to promising industries. If Uzbekistan would begin to make progress in privatization, the share of GDP generated by the private sector could climb to 65% by 2001.

Aspiring entrepreneurs stand to benefit from a more comprehensible and transparent business environment, including one that promotes greater trade and investment. The entire population stands to gain from a market-based economic system that supports employment, increases incomes, lowers prices and expands individual choice. Enterprises which adopt the new accounting standards will be better able to manage their business. Foreign investors will be better able to assess the value of investments.

Key Results: Indicators of the growth of private enterprises will be the following: 1) maintenance of compliance with international financial conditionality; 2) percentage share of GDP generated by private enterprises increasing to 65% by FY 2001; and 3) the dollar value of joint venture funds invested climbing to $30 million during FY 2001.

Performance and Prospects: USAID briefly supported the Uzbekistan privatization program. A lack of commitment on Uzbekistan's part to serious, wide-ranging and transparent privatization resulted in a USAID decision to curtail this involvement. New opportunities to promote private sector expansion include launching work in the legal and regulatory environment and providing an advisor to the petroleum sector. At the August 1997 session of the Parliament, a new Tariff Law and a Customs Code prepared with USAID assistance were enacted. The government recently sent its Memorandum of Foreign Trade Regime (prepared with USAID assistance) to the WTO. By December 1998, the GOU had replaced its Soviet style accounting standards with international (IFAC) based accounting standards. USAID will support enterprise conversion to international accounting standards and practices, accountant training and accounting curriculum reform in 1999.

USAID intends to continue offering technical advice in the legal and regulatory reform area, especially as it relates to Uzbekistan's accession to the WTO, simplification of the legal/regulatory regime related to business formation and operation and development of the oil and gas sector. This work will draw on largely successful reform initiatives in these areas already being carried out in neighboring Kazakhstan and Kyrgyzstan. In-country, third-country and U.S.-based training will also be undertaken to support these efforts.

To date, the private enterprise development work of USAID has been successful despite the difficult business environment. Small and medium-sized enterprises continue to want and need assistance offered by IESC and CAAEF.

Possible Adjustments to Plans: The worsening macroeconomic environment in Uzbekistan may have created the desire on the part of the Government of Uzbekistan to affect substantial progress in commercial law reform and trade and investment. USAID will monitor the situation to determine if it is the case, and will respond accordingly.

Other Donor Programs: The World Bank, EBRD and EU are all engaged in activity aimed at improving the business climate and promoting private sector growth in Uzbekistan. The EU has worked with USAID in the early stages of accounting reform. USAID's own technical assistance and training in this area is coordinated closely with these other organizations.

Principal Contractors, Grantees, or Implementing Agencies: USAID activities are implemented through U.S. commercial contractors (Booz Allen and Hamilton and Carana Corporation) as well as U.S. PVOs such as IESC. Further, CAAEF is an important grantee because of its role in providing equity and credit to the nascent private sector.

Selected Performance Measures:

	Baseline	Target
Percentage share of GDP generated by private enterprises	26% (1996)	65% (2001)
GOU maintains compliance with conditionality of international financial institutions	No (1996)	Yes (2001)
Dollar volume of joint venture funds invested (millions)	$13 (1996)	$30 (2001)

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ACTIVITY DATA SHEET

PROGRAM: UZBEKISTAN
TITLE AND NUMBER: A More Competitive and Market Responsive Private Financial Sector, 110-S001.4
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: $ 1,500,000 Freedom Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 2000

Summary: This Strategic Objective will create a more competitive and market responsive private financial sector. In early 1998 USAID gauged that progress in this area was going slower than in other Central Asian Republics where USAID was providing assistance. This was the case due to distorting foreign exchange management policies and restrictive controls on local currency denominated accounts. In the securities market area, it was judged that the Privatization Ministry continued to play the key role in securities market regulation, resulting in a clear conflict of interest situation, thereby directly impugning the integrity of the securities market regulatory framework. Progress in the financial area would be seen by growth in the ratio of bank deposits to GDP -- to 15% by 2001.

Immediate beneficiaries include professionals involved in financial development, especially targeted towards private bankers. More importantly, new entrepreneurs as well as a broad range of Uzbek citizens should benefit from a more effective and efficient banking system

Key Results: Indicators of progress in the financial arena would include the following: 1) bank deposits as a percentage of GDP climbing to 15% by 2001; 2) the number of financial services available growing to 17 by 2001; 3) a positive USAID assessment of the readiness of the Central Bank to regulate the financial sector; and 4) the percentage of the public pension system's total current obligations that are actually disbursed to beneficiaries would rise to 100% in 2001.

Performance and Prospects: The USAID banking advisors have developed an outstanding working relationship with their counterparts and have conducted practical training of bank supervisors combined with on-site bank inspections. USAID-funded technical assistance has trained accountants in commercial banks. Plus, efforts with the Central Bank has caused it to developed reporting requirements for all commercial banks. The Central Bank was assessed to have achieved an almost complete regulatory capacity during 1998 to ensure the enforcement of pertinent legislation. All commercial banks have adopted international accounting standards.

While international accounting standards have now been officially adopted by Uzbekistan’s commercial banks, there remains a significant gap between theory and practice. A great deal of training is required to bring Uzbekistan’s commercial bank accountants to a level that will permit them to truly utilize the international accounting standards.

Meanwhile, the Capital Markets Development Activity in Uzbekistan was discontinued because the government refused to allow the securities regulatory body, the Center for Coordination and Control of the Securities Market, to become and independent institution.

Possible Adjustments to Plans: As a result of the noted successes thus far, the Central Bank has requested an expansion of USAID assistance. Another Bank Supervision Advisor will focus on off-site supervision, leaving the first to focus on-site inspection. Additional advisors may assist the bank in the installation and training of staff to use the new IMF-provided chart of accounts and facilitate accounting conversion within major commercial banks. Training for Uzbek counterparts is also included as part of this initiative. USAID has provided substantial technical assistance in the area of pension reform and it is anticipated that legislation for a comprehensive pension reform program will soon be passed. Technical support to facilitate the development of the regulatory, technical and organizational infrastructure of the nascent securities market will also be provided, assuming the GOU agrees to enact key regulatory reforms required for the operation of a stable and competitive securities market. In summary, USAID is proceeding cautiously in this area, as additional reforms are enacted.

Other Donor Programs: USAID work in this area is closely coordinated with that of other donors. The EU has developed a banking training facility in Tashkent, an activity also supported by the EBRD and the Turkish Government. The World Bank has identified the financial sector as a key area and has provided some technical assistance to both the Central Bank and commercial banks.

Principal Contractors, Grantees, or Implementing Agencies: USAID activities are implemented through IBTCI. Those advisors work closely with local counterparts at the Central Bank and private commercial banks.

Selected Performance Measures:

	Baseline	Target
Private bank deposits as a percentage of GDP	4% (1995)	15% (2001)
Number of financial services available	12 (1996)	17 (2001)
Assessment of regulatory readiness of the GOU Central Bank	No (1995)	Yes (2001)
Percentage of public pension systems holding that are distributed to beneficiaries in a given year	60% (1995)	100% (2001)

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ACTIVITY DATA SHEET

PROGRAM: UZBEKISTAN
TITLE AND NUMBER: Increased Citizens' Participation in Political and Economic Decision-making, 110-SOO2.1
STATUS: Continuing
PROPOSED OBLIGATIONS AND FUNDING SOURCES: FY 2000 $2,500,000 Freedom Support Act
INITIAL OBLIGATION: FY 93; ESTIMATED COMPLETION DATE: FY 2006

Summary: When the USAID began work on this Strategic Objective, civil society was virtually non-existent, with the exception of social associations under the guise of the former communist state. There were extremely low levels of citizen participation in the decision-making process, and fledgling independent outlets were immediately suppressed. The USAID seeks to break this legacy by increasing citizen’s participation in the political process through the introduction of concepts of civil society and democratization. Technical assistance, training and grants to local organizations help disseminate information and educate local counterparts about the role of potential non-governmental players in contributing to the economic, political, and social development of the country. The Counterpart Consortium focuses on NGO training and provides small support grants. Another USAID grantee works with local TV and radio broadcasters to improve the professionalism and viability of independent media, but editorial independence is limited in the current environment.

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: NGOs are becoming stronger and more assertive in Uzbekistan, with many embracing local advocacy as a part of their program as a result of training and grants administered by USAID-funded Counterpart Consortium. One example of these civil society developments is the creation of the Bukharan Tourist Business Association which is challenging the dominance of the state-run tourist company through advocacy for government support and recognition on the local level. With the assistance of USAID-funded Internews, 26 independent television stations (not affiliated with the State TV service) in almost every large city are being strengthened through training and equipment donations. As a result, 18 of the 26 are now contributing well-produced pieces for inclusion in a biweekly news magazine program edited and distributed by Internews. With the assistance of the USAID supported International Center for Not-for-Profit Law, a new NGO law has been successfully passed in its first reading in parliament and is up for a second reading. Furthermore, over the past two years, USAID assistance has provided effective commentary on several pieces of draft legislation including the Law on Advocacy, the Law on Public Health, sections of the criminal and commercial code, and the Law on Notaries.

Democratic reforms in Uzbekistan are challenged by the GOU's continued interference in the work of NGOs and restrictive NGO legislation which may soon change. It appears that the upcoming presidential elections in Uzbekistan may not meet international standards, leading USAID to divert assistance previously intended for elections to other areas of democratic reform. Independent media may face further obstructions from the Government due to the newly created "Intergovernmental Commission on the Mass Media." Given these restrictions, USAID is focusing much of their democracy assistance in Uzbekistan over the next year on local level community development by NGOs as a grassroots impetus for citizen participation.

Possible Adjustments to Plans: USAID plans to refocus assistance from election activities toward civic education. In addition, openings at the local level with traditional leaders have presented increased opportunities to work on civil society participation in community development. Programming in Nukus, Bukhara, and Kokand is expected. In the area of independent media, The USAID intends to refocus its efforts on supporting journalists associations and discussions of their legal rights so as to give journalists a defense against increasing government harassment.

Other Donor Programs: The United States is a major donor working in the area of democratization in Uzbekistan. Programs supported by various U.S. Government agencies are closely coordinated with those of USAID. The Konrad Adenaur Foundation, the Soros Foundation, OSCE/ODIHR, and the UN Development Program (UNDP) also provide assistance in this area. In addition, UNHCR is co-funding NGO resource centers in conjunction with USAID-financed Counterpart Consortium.

Principal Contractors, Grantees or Agencies: Several USAID-funded U.S. PVOs such as the American Bar Association/CEELI, Internews, and the International Foundation for Electoral Systems (IFES), have played a role in promoting democracy in Uzbekistan. 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 in Uzbekistan. 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 (media/govt):	70/52 (1996)	275/25 (2001)
Average daily minutes of local news programming:	2 (1994)	12 (2001)
Number of Parliamentary hearings and committee meetings addressing legislative/policy issues:	0 (1994)	4 (2001)

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ACTIVITY DATA SHEET

PROGRAM: UZBEKISTAN
TITLE AND NUMBER: Improve the sustainability of social benefits and services, 110-S003.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000 $1,500,000 Freedom Support Act
INITIAL OBLIGATION: FY 1998; ESTIMATED COMPLETION DATE: FY 2003

Summary: USAID is providing the technical assistance to support the Government of Uzbekistan (GOU) in developing a program for reforming its health system. The program builds on the lessons learned from the health reform demonstration activities in both Kazakhstan and Kyrgyzstan. With USAID’s assistance, the GOU has started developing a new rural primary health care model staffed with retrained family physicians. The rural clinics will introduce new, market-based payment systems to increase efficiency. USAID-supported activities are designed to fit within the framework of a World Bank loan which will finance the construction/renovation and re-equipping of reformed rural primary health care facilities. The World Bank and GOU will replicate successfully-tested financial and management systems from the USAID demonstration site to three oblasts. The immediate beneficiaries are the health care providers while ultimately all citizens of Uzbekistan benefit, especially the segment of the population classified as vulnerable (e.g., elderly pensioners, women, children).

Key Results: This activity contributes to improved sustainability of selected social services through achievement of two intermediate results. Cost-effective health care services demonstrated in selected Oblasts and cost-effective health sector reforms adopted nationally. Establishment of primary health care centers have begun and to date 13 have been established. Intensive training of family medicine practitioners have started and the new payment systems, information systems and population enrollment have been designed and ready for implementation. The other two Selected Performance Indicators began only in 1998, therefore, results are not expected until well into 1999.

Performance and Prospects: Performance is on target, however, if the World Bank project disbursements are slow, it will affect the USAID progress. The World Bank loan for approximately $30 million has been approved to reform the health care system in three pilot Oblasts. A Memorandum of Understanding between the GOU and the Government of the United States to promote and support this project exists. Recently, the President of Uzbekistan issued a Decree that provided the legal basis for implementation of the Health Care Reform Project until the year 2005, making this project a priority for the future years. The increased efficiency and accountability of the health care system has shown some very positive results within the first year of operation, with the reduction and restructuring of hospital capacities and the development of primary health care services. Community-based NGOs have been created to increase community participation in health services. Incentive-based payment systems are being designed. In-country and U.S. training have been provided to counterparts, training for family medicine practitioners has already started. In addition to World Bank loan and the Governmental Decree, prospects of expansion are excellent in Uzbekistan. The government has taken initiative in the restructuring of their health care system by creating primary health care services in rural areas. They are making funds available from the governmental budget for these activities.

Possible Adjustments to Plans: Starting in 1999, the technical assistance and the program might be expanded to meet the request of the Government, if current progress and the commitments from the Government’s part continue to be made.

Other Donor Programs: The Ministry of Health at the national level and local health officials in the demonstration area, are the primary counterparts. However, various other GOU entities, such as the Ministries of Finance and Justice, the Cabinet of Ministers and the Presidential Apparat, are also involved. In addition to the close, collaborative relations with the World Bank, USAID’s work is closely coordinated with the British Know How Fund and the EU.

Principal Contractors, Grantees, or Implementing Agencies: Abt Associates is the principal contractor implementing this activity.

Selected Performance Measures:

	Baseline	Target
Increased number of independent primary care practices - family group practices (FGP's)	0 (1997)	50
Percentage of health care providers reimbursed by market-oriented payment systems	0 (1998)	25%
Percentage of the population enrolled in FGPs	0 (1998)	60%

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