FEDERAL REPUBLIC OF YUGOSLAVIA
(Serbia, including Kosovo, and Montenegro)

	FY 1998 Actual	FY 1999 Estimate	FY 2000 Request
Support for East European Democracy	$15,300,000	$24,300,000	$55,000,000
Child Survival and Disease	500,000	---	---
P.L. 480 Title II	9,853,000	16,551,000	---

Introduction.

The present regime of the Federal Republic of Yugoslavia (FRY) represents a significant challenge to efforts to develop the Balkans into a stable democratic region that can be integrated into post-Cold War Europe. Yugoslavia continues to be a bastion of authoritarian rule that resists political and economic reform. A major civil conflict that erupted in March, 1998, in the southern Serbian province of Kosovo after years of repression of the ethnic Albanian community there, rising tensions between the Republics of Serbia and Montenegro -- which together form the FRY-- and a persistent economic crisis threaten domestic stability. In the region, Yugoslavia has been a difficult partner in efforts to implement the terms and principles of the Dayton Accords. The importance of the FRY to regional stability and the realistic potential for exerting a strong positive influence in favor of systemic change constitute the rationale for U.S. engagement to address key democratic and economic transition issues. The direction Serbia and Montenegro takes over the next several years, particularly toward establishing a more open democratic society, will be a major determinant of the nature of politics and economic development in the region for many years to come. Prospects for long-term peace and stability in the region would be greatly enhanced by the successful establishment of an open, democratic society with a high standard of respect for the rule of law and protection of human and civil rights in Serbia and Montenegro.

Development Challenge.

FY 1998 was the start-up year for USAID field presence in the FRY. USAID operates within the framework of the sanctions environment, particularly the Lautenberg Amendment to the 1998 Foreign Assistance Act that restricts the scope of bilateral assistance and the U.S. imposed-"outer wall" sanctions that constrain Serbia’s economic access to the international community. The "outer wall" sanctions have effectively prevented traditional policy reform advice and technical assistance and potentially large transfers of policy-conditioned capital from the World Bank [International Bank for Reconstruction and Development (IBRD)] and the International Monetary Fund (IMF) required to attract new investment and re-start the national economy. Accordingly, neither the World Bank nor the IMF maintains formal contacts with the country, though each does track political and economic developments. Defining program strategy and implementation specifics within the unique FRY circumstances of a sanctions environment and regional differences among the FRY’s two republics and the Serbian province of Kosovo are major challenges. Other constraints include the government’s continued lack of cooperation and good faith commitment to the terms and principles of the Dayton Accords which are essential to establishing a democratic society and free market economy.

The ongoing Serb persecution of ethnic Albanians in Kosovo so outraged the international community that in July, 1998, the UN passed resolution 1160 condemning FRY activities in Kosovo. In September, 1998, resolution 1199 demanded that the FRY cease hostilities toward the ethnic Albanians or face NATO intervention. As this deadline approached, all non-emergency US government personnel, and all family members, were forced to evacuate from the FRY. The curtailment of USAID’s operations, even for this brief period, had a negative impact on the program. The government of FRY used the threat of NATO air strikes as a rationale to implement a series of repressive laws in the name of national security, setting back efforts to encourage democratic growth and independent media.

USAID recognizes the political and socioeconomic diversity among geographic regions of the country, and has tailored its program to address these varied circumstances and the realities of each implementing environment. Interventions differ for each of the three geographic and sociopolitical areas--Central Serbia/Vojvodina, Kosovo and Montenegro--in order to achieve the highest impact while serving the particular needs of each region. The program is implemented primarily through US NGOs working as partners with indigenous NGOs and other local organizations.

Of FY 1999 SEED funding totaling $24,300,000, $13,500,000 was allocated to USAID programs, $10,000,000 was transferred to the U.S. Department of State and $800,000 was transferred to USIA for USIS activities complementing USAID programs in the areas of independent media, political and social process and civil society development. In addition, the non-SEED funded, Office of Transition Initiatives small grants program (over $1.0 million in 1998), supporting independent media and local NGO development, was an important component of USAID efforts, particularly in Kosovo. Other non-SEED funded activities included Office of Foreign Disaster Assistance (OFDA) activities (over $14.0 million) and a PL-480 Title II program for emergency food assistance.

Other Donors.

At this time, other bilateral donors in the region have very limited assistance programs in Serbia and Montenegro. The humanitarian aid multilateral organizations, principally war related--United Nations High Commission for Refugees (UNHCR), World Food Program (WFP), World Health Organization (WHO), and UNICEF--plus the Soros Foundation have made significant commitments. The European Union (EU) has recently announced programs for Montenegro and Kosovo. As a result, USAID, even in its short period of on-the-ground presence, has become a high visibility agency within the donor community and to the public at large. International donor coordination is excellent.

FY 2000 Program.

The USAID program strategy is aimed at encouraging political and economic change in an effort to help lead the country into transition status. USAID concentrates its democratic resources on empowering change agents. These include information providers such as media and educational institutions, political organizations, professional and trade groups; reform minded individuals and organizations; democratic institutions, human rights organizations and economic reform entities. At the same time, economic reform assistance is provided to Montenegro, supporting the program of President Djukanovic and, in part, rewarding it for taking major steps in democratic reform. In addition, USAID has community building programs in Kosovo aimed at ethnic reconciliation between the Serbian and Albanian populations.

The U.S. assistance program for Serbia and Montenegro is structured around achievement of two strategic objectives: increased, better-informed citizens' participation in political and economic decision-making; and recovery from crisis, mainly in Montenegro and Kosovo. The program is focused primarily on seeking the FRY’s democratic transformation through building a democratic foundation from the bottom up. The framework of this focus consists of interrelated activities in the areas of an improved political process, more participatory and effective civil society organizations, a more independent and responsive media, legal systems that better support democratic processes and market reforms and more effective, responsive and accountable local government. Recovery from crisis includes responses that support democratic and market reforms in Montenegro and several new initiatives directed at community building which includes rehabilitation of social and small infrastructure, social stabilization, humanitarian concerns and improved developmental and quality of life prospects in Kosovo. Participant training, using USAID and United States Information Agency (USIA) training programs, is a cross-cutting activity supporting USG democracy objectives throughout the country, the Government of Montenegro’s reform agenda and the variety of special stabilization and developmental initiatives being undertaken in Kosovo.

Plans are being developed for a possible expansion of USAID democracy activities in Kosovo, including funding to prepare for and carry out elections. Specific democracy area objectives and activities being planned for Kosovo are interrelated components of comprehensive program which addresses the development of the institutions and processes necessary to make local government more effective and representative and, as may be determined in anticipated political agreements, directly support an enhanced degree of autonomy for the province. Economic restructuring activities and social sector activities associated with USAID responses and management of the humanitarian crisis in Kosovo and increased attention to improved sustainability of health and social benefits and services are intended to accomplish changes in conditions that very significantly affect people's lives. Accordingly, USAID is considering developing formal core strategic objectives and corresponding results frameworks for these program areas. USAID's near term strategy to help the people of Kosovo recover from the economic and social destruction caused by the past year of fighting and conflict includes several new initiatives in community building, small and micro lending, enterprise recovery and development, agribusiness development and small infrastructure reconstruction.

FEDERAL REPUBLIC OF YUGOSLAVIA (FRY)

FY 2000 PROGRAM SUMMARY*
(in thousands of dollars)

USAID Director: Richard Hough

Strategic Objectives	Economic Restructuring	Democratic Transition	Social Stabilization	Cross-cutting / Special Initiatives	Total
Privatization	--	--	--	--	--
Fiscal Reform	--	--	--	--	--
Private Enterprise	--	--	--	--	--
Financial Reform	--	--	--	--	--
Energy	--	--	--	--	--
Environmental Management	--	--	--	--	--
Citizens' Participation	--	23,000	--	--	23,000
Legal Systems	--	--	--	--	--
Local Government	--	--	--	--	--
Crises	--	--	25,000	--	25,000
Social Benefits	--	--	--	--	--
Environmental Health	--	--	--	--	--
Cross-cutting/Special Initiatives	--	--	--	7,000	7,000
TOTAL	--	23,000	25,000	7,000	55,000
*Support for East European Democracy (SEED) Act funds

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ACTIVITY DATA SHEET

PROGRAM: FEDERAL REPUBLIC OF YUGOSLAVIA (FRY)
TITLE AND NUMBER: Increased, Better Informed Citizens’ Participation in Political and Economic Decision-making, 180-SO02.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000: $23,000,000 SEED
INITIAL OBLIGATION: FY 1997 ESTIMATED COMPLETION DATE: FY 2004

Summary: The USAID democracy portfolio in the Federal Republic of Yugoslavia (FRY) works in the areas of increasing citizen participation in the political process and public decision making. This includes: directing social stabilization activities in Kosovo; supporting judicial and local government reform in Serbia, Montenegro and hopefully Kosovo; encouraging indigenous NGO and trade union development in all areas of the FRY; assisting political party development; advocating election reform in Montenegro; creating a more objective and viable independent media; and development of legal systems that better support democratic processes and market reforms. Progress on the FRY’s democratic transformation was constrained during 1998 due to the Government’s limited progress on adhering to the agreements set forth in the Dayton Accords and the disruptions in activities caused by the hostilities in Kosovo.

Key Results: USAID activities focus on the FRY’s democratic transformation through building a democratic foundation from the bottom up. Although the program is changing rapidly as new imperatives and opportunities arise, activities are at present focused on the following intermediate results considered necessary to accomplish this objective: improved political process as indicated by increased citizen involvement in political parties and increased voter participation in elections; more effective civil society as indicated by a growing number of NGOs and other civil society organizations active in the country; a more independent media as indicated by increased numbers of citizens who listen to, watch, read and have access to independent media and have informed opinions regarding government actions; legal systems that better support democratic processes and market reforms as indicated by how well the rule of law is institutionalized in terms of fairness, objectivity and consistency in application; and more effective, responsive and accountable local government. USIS and OTI programs have significant impacts on progress in the areas of independent media, political and social process and civil society development.

Performance and Prospects: Progress on the FRY’s democratic transformation was constrained during 1998 due to the Government’s limited progress on adhering to the agreements set forth in the Dayton accords and the disruptions in activities caused by the hostilities in Kosovo. Significant achievements included a successful program of technical assistance and other activities for parliamentary elections in Montenegro (including voter education and election monitoring), initiation of activities related to political party development, and the development of a larger, more effective network of civil society organizations, particularly NGOs. Improved planning and program execution by NGOs were very important. Increased communication and collaboration by NGOs were critical elements of improved effectiveness. USAID supported the strengthening of indigenous NGOs and creation of local institutions to foster independent self-determination. Human rights organizations were assisted in promoting dialogue and conflict resolution. Humanitarian relief organizations received extremely significant and life-saving assistance to support displaced persons and other vulnerable groups. Training was conducted for citizens groups and labor unions in the democratization process and related organizational development. Local government elected officials and staff were provided training and technical assistance to more effectively represent their constituents. USAID provided technical assistance for review of Federal legislation and practices concerning the operations of international NGOs in the country. A program of technical assistance activities to promote the development of more transparent, participatory, responsive and effective local government was initiated in two municipalities in Central Serbia in the areas of fostering local economic development, municipal finance and budget, management information systems and improved services management through competitive contracting. USAID was the motivating donor for a new ANEM television network. ANEM has been the most vocal, articulate and outspoken voice against the current FRY government crackdown on the media. USAID/FRY offered journalism and media management training to radio and print professionals with the objective of stimulating more interesting and thought provoking news presentations. USAID also provided business management assistance to print media outlets. Transfers to USIA provided funding for Democracy Commission grants, internships and important study visits to the U.S. and other countries.

Possible Adjustments to plans: Plans are being developed for a significant expansion of USAID democracy area activities in Kosovo, including funding to prepare for and carry out elections. Specific democracy area objectives and activities being planned for Kosovo during FY 1999 and FY 2000 are interrelated components of a comprehensive program which addresses the development of the institutions and processes necessary to make local government more effective and representative and, as may be determined in anticipated political agreements, directly support an enhanced degree of autonomy for the province. A key element of USAID support to an eventual political agreement on increased autonomy for Kosovo may involve assistance in developing new structures for elected local and county governments. This would include technical assistance and training in various public administration areas for the thirty county-level and many more local government institutions and elected representatives. A critical component of USAID's strategy for helping to establish democratic practices and institutions in Kosovo is assistance to new, community based and supported judicial systems and personnel. A significant rule of law initiative is a necessary complement to USG and other assistance to the establishment of new community based police authorities. A media program to facilitate a more open and complete flow of accurate information within Kosovo and between Kosovo and the rest of the country is essential. The NGO community in Kosovo has shown itself to be both courageous and effective in delivering services to and representing the interests of many groups in the province. These groups are essential partners to international NGOs operating in Kosovo. Local NGO effectiveness in the implementation of relief, recovery and reconstruction programs requires institutional development assistance commensurate with the programmatic responsibilities these organizations are being asked to fulfill. Party politics in Kosovo is at a very basic stage of development. The success of new self-governance systems and more autonomous institutions may depend greatly on the parties' ability to serve their constituencies and on their parallel willingness and ability to compromise and collaborate within coalition arrangements. USAID may provide technical assistance and training to party personnel to facilitate the effective functioning of the parties expected to be in a more direct position of governing responsibility. At every level in Kosovo, new institutions of governance will require new elections to select representatives. USAID will increase its support of OSCE to take the lead and assume responsibility for preparing and organizing expected elections in Kosovo by funding selected aspects of the electoral support program. New activities in the areas of judicial reform and local government are being developed for Montenegro during FY 1999.

Other Donor Programs: Other donor participation in democracy area activities increased significantly during 1998, as did USAID’s interaction with other donors, particularly in the area of independent media in Montenegro and responses to the humanitarian crisis in Kosovo. The principal international donors with programs in the Federal Republic of Yugoslavia include several European governments, the United Nations, the European Union, Soros Foundation and British Know How Fund.

Principal Contractors, Grantees or Agencies: USAID implements its democracy area activities primarily through U.S. based NGOs and contractors.

Selected Performance Measures: Appropriate results frameworks and indicators are under development.

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ACTIVITY DATA SHEET

PROGRAM: FEDERAL REPUBLIC OF YUGOSLAVIA (FRY)(Serbia, including Kosovo, and Montenegro)
TITLE AND NUMBER: Recovery from Crisis, 180-SO03.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000: $25,000,000 SEED
INITIAL OBLIGATION: FY 1997 ESTIMATED COMPLETION DATE: 2004

Summary: Recovery from Crisis includes activities developed to provide an effective response to and management of the humanitarian crisis resulting from hostilities in Kosovo and several new economic restructuring activities developed in response to requests from the Government of Montenegro for assistance in developing and implementing critical components of Montenegro’s reform program.

Key Results: USAID economic restructuring activities are at present mainly focused on accelerated development and growth of private enterprises in Montenegro, with a view to the impact this focus may have on the level of income and employment. The basic structure of these objectives would also be relevant in Kosovo and Central Serbia, were there to be justification and approvals to extend the program to these areas. The intermediate results considered necessary for realizing significant acceleration in the development and growth of private enterprises in Montenegro include: increased transfer of state-owned assets to the private sector, an improved policy and regulatory environment; improved small and medium enterprise policies and practices; increased access to capital resources; and increased access to information resources. Funding is being provided to structure and carry out a mass privatization program, including assistance in drafting appropriate legislation and setting up a secure system of share registration and secondary trading, combined with a special public education program needed to explain the objectives and benefits of privatization and to inform people on how they can participate. Funding is also being provided to stimulate the development of entrepreneurship and small business by means of creating a network of business centers and support to the Center for Entrepreneurship which offers open enrollment courses to assist small entrepreneurs in developing basic skills in the areas of planning, management and finance. Economic restructuring activities and social sector activities associated with USAID responses and management of the humanitarian crisis in Kosovo and increased attention to improved sustainability of health and social benefits and services are intended to accomplish changes in conditions that very significantly affect people's lives. Accordingly, USAID is considering developing formal core strategic objectives and corresponding results frameworks for these program areas. USAID's near term strategy to help the people of Kosovo recover from the economic and social destruction caused by the past year of fighting and conflict includes several new initiatives in community building, small and micro lending, enterprise recovery and development, agribusiness development and small infrastructure reconstruction. Community and civil society assistance includes: a parents-school-partnership program for Montenegro and Kosovo that targets upgrading of school conditions and curriculum in 25 communities; an ongoing maternal and infant health care activity that works with medical professionals to build capacity and encourage the use of public hospitals by all ethnic groups in Kosovo; and a community development activity focused on the development and delivery of clean, potable water to communities in Kosovo. Complementary activities include a Title II emergency food assistance program in Kosovo and OFDA emergency health interventions that seek, for example, to reduce the incidence of tuberculosis in Kosovo.

Performance and Prospects: Most of the activities under this objective are in a start-up phase. The overall privatization program in Montenegro anticipated privatization by early 1999 of 20 large companies by tender and an additional 260 small to medium sized companies through mass privatization vouchers. By end-1998, only a large aluminum company had initiated a pre-privatization restructuring program (by means of a management contract, not the sale of shares). The reason for slow progress on privatization was inability to secure enabling legislation, although USAID provided technical assistance for drafting appropriate legislation.

Possible Adjustments to plans: A new activity to promote integrations in the Montenegrin dairy industry to improve efficiency and the adoption of cost effective production techniques is planned during FY 1999. Plans are being developed to expand USG support of Montenegro's reform efforts and humanitarian assistance activities in Kosovo. USAID's ongoing community organization and development programs, through the establishment of additional or expanded NGO programs with such an organization, will permit more effective "partnering" of technical or infrastructure focused activities such as water system repair or clinic reconstruction. Political, social and economic recovery in Kosovo must involve some level of reconstruction. Support infrastructure may require a significant amount of repair and reconstruction that cannot be self-financed by families rebuilding shelter and small businesses. USAID may provide some support for investments in repairing water and sanitation systems, electricity transmission lines, health clinics and schools. These kinds of investments are essential to support the return of displaced persons to their communities, and may be critical to timely revitalization of household and community level economic activity. Enterprise support services, agribusiness development and small and micro lending activities are being developed for possible implementation in Kosovo. These efforts would focus on rebuilding local businesses that directly result in increasing employment and household incomes. USAID is developing an integrated set of programs which will deal with trauma and the psychosocial and related impacts of the war on the children of Kosovo.

Other Donor Programs: The humanitarian aid multilateral organizations, principally war related--United Nations High Commission for Refugees (UNHCR), World Food Program (WFP), World Health Organization (WHO), and UNICEF--plus the Soros Foundation have made significant commitments. The European Union (EU) has recently announced programs for Montenegro and Kosovo. The British Know How Fund has ongoing programs in several areas.

Principal Contractors, Grantees or Agencies: USAID implements these activities primarily through U.S. based NGOs and contractors.

Selected Performance Measures: Appropriate results frameworks and indicators are under development.

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