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Introduction.
After the fall of the Soviet Union, Azerbaijan found itself with a deteriorating economic base, a sharply declining GDP, lack of foreign currency, and serious national budget constraints. This was further exacerbated by Azerbaijan's territorial conflict with Armenia over Nagorno-Karabakh, and the resultant burden of dealing with approximately a million refugees and internally displaced persons (IDPs) within the country. However, Azerbaijan is endowed with fertile agricultural land and is rich in natural resources, especially oil, and has the potential to become a prosperous nation capable of meeting its own economic and social development needs. Azerbajian's oil and natural gas resources make it attractive to U.S. investors. Although U.S. assistance is primarily aimed at relieving suffering of vulnerable segments of the population, the potential for market development and trade expansion provide other avenues for United States private support of Azerbaijan's peaceful transition to sustainable economic and democratic governance.
The Development Challenge.
Azerbaijan, as the largest country in the Caucasus with a population of 7.2 million, is a natural link between Asia and Europe. Since gaining its independence in 1991, Azerbaijan has suffered dramatically as a result of the disruptions in traditional trade and financial links stemming from the disintegration of Soviet systems. In addition, military conflict over the Nagorno-Karabakh region and domestic political instability have added to its economic difficulties. However, several factors recently have contributed to the emergence of more favorable prospects for the economy. First, a cease fire in the Nagorno-Karabakh conflict has been holding since May 1994 and negotiations on a permanent settlement are under way. Second, an agreement was reached with an international oil consortium for the development of offshore oil in the Caspian Sea. This agreement is expected to lead to a multi-billion dollar foreign investment.
With the military and political situations more stabilized, the Government of Azerbaijan (GOA) has strengthened its determination to accelerate comprehensive economic reforms and its transition to a market-oriented society. In recent months, inflation rates have dropped from 24% a month in 1994 to approximately 5% per month in 1995. Azerbaijan has a low level of indebtedness estimated at $15 per capita at the end of 1994. With the exception of energy, all prices have been liberalized and an accelerated program of privatization is underway. Additionally, Azerbaijan has recently concluded an agreement with the IMF on a Systemic Transformation Facility (STF) which aims to: (1) unify the exchange rate; (2) make fiscal adjustments to decrease the budget deficit by 50%; and (3) develop a monetary program compatible with these fiscal objectives.
The Nagorno-Karabakh conflict, however, remains the biggest obstacle for development. Though peace negotiations continue, a final peace settlement has not materialized. Since U.S. Government assistance to the Government of Azerbaijan (GOA) is prohibited by Section 907 of the Freedom Support Act (FSA) until Azerbaijan takes steps to cease the offensive use of force and lift its embargoes against Armenia, all U.S. assistance continues to be targeted to organizations and individuals not associated with the Azerbaijani government. The focus of this assistance is primarily humanitarian provision of clothing, food and medicines - which are channeled through U.S. private voluntary organizations (PVOs) to Azerbaijan's refugees and internally displaced persons (IDPs). In addition to distributing clothing, food and medicines, PVOs work on projects to construct shelters, to build water-supply and sanitation systems, and to provide basic medical services to remote refugee/IDP camps.
In FY 1995, the U.S. Government provided over $25 million in assistance to Azerbaijan. Humanitarian assistance accounted for 92% of this total ($23 million), and was distributed as follows: 34% through the U.S. private voluntary organization, Save the Children, 44% through the U.S. Department of Agriculture, 15% through United Nations agencies, and five percent through U.S. government training and exchange programs. Section 907 of the Freedom Support Act precludes much-needed assistance to the GOA in the areas of health-care, education, political and economic reforms and environmental clean-up.
In the event of a peaceful resolution of Nagorno-Karabakh and subsequent repeal of Section 907, U.S. economic assistance will likely shift from humanitarian provision of food and medicines to more developmentally-oriented assistance. Technical assistance could be provided to help Azerbaijan initiate economic reform and restructuring activities to promote the growth of the private sector through the newly established Trans-Caucasus Enterprise Fund. However, until full peace is negotiated, and full scale extensive well-targeted activities are implemented, Azerbaijan probably will not be able to engage in a comprehensive transition to a democratic market-based society.
USAID expects that Azerbaijan will have the institutional and other resources to continue its own transition. Current plans are to phaseout FSA assistance within the next few years.
Other Donors.
Major donors and lending institutions include the International Monetary Fund, the International Bank for Reconstruction and Development (IBRD--World Bank) and the European Union. In August 1995, the World Bank approved a $65 million Rehabilitation credit to support critical reforms in enterprise and economic restructuring. Two earlier World Bank credits were approved to finance technical assistance in petroleum, and privatization reforms. The Bank has also provided a loan for rehabilitation of the power plant and modernization of the water supply system in Baku. Under an International Monetary Fund Systematic Transformation Facility, the GOA has begun a comprehensive program for economic stabilization and structural reforms.
The U. N. High Commissioner for Refugees (UNHCR) plays a major role in coordinating humanitarian response systems with the European Community and other bilateral donors. Humanitarian assistance is also provided by U. N. Development Program, UNICEF, World Food Program (WFP) and the World Health Organization. Overseas Development Assistance was $146 million in 1994, with the US contributing about nine percent of that sum.
FY 1997 Program.
USAID's strategy in Azerbaijan has two major objectives: (1) continue to address the humanitarian crises while strengthening the capacity of the country to manage its own social services; and (2) expand efforts to support Azerbaijan's transition to a transparent and accountable governance through the empowerment of citizens in the political processes. If peace does become a reality in the region, the focus of USAID's humanitarian assistance will shift from food, clothing and medicines to housing, and relocation costs for refugees and displaced persons. Additionally, greater assistance will be provided to ensure Azerbaijan's transition to a stable and viable democracy.
Strategic Goal: Democratic Transition
The purpose of this assistance is to encourage and support Azerbaijan's successful transition to open democratic political and economic systems. To date, 36 Azerbaijanis have received US-based training in the areas of journalism, commercial law, and political party strengthening. In June 1995, the GOA requested USAID assistance for its parliamentary elections. This was viewed as a positive move towards achieving political and economic stability in the country. With Congressional approval, USAID provided approximately $400,000 through the International Federation for Electoral Systems, the National Democratic Institute and INTERNEWS for pre-election assistance activities. Additional funding will enable these grantees to continue training in such areas as voter education, political-
party building, media development, and independent journalism.
After the parliamentary elections in November 1995, a need for the development of an independent civil society, particularly with regard to labor, became more apparent. In FY 1996, $140,000 was obligated to the Free Trade Union Institute (FTUI) for trade union organization activities. Continual funding to FTUI will enable it to expand activities to include training and seminars in health and safety, conflict resolution and negotiation skills.
With peace on the horizon, increased assistance in this area is viewed as the critical step in the country's transition. Primary areas for FY 1997 democracy building assistance include: (a) training in public administration, independent media; (b) establishment of rule of law that protects individual rights; and (c) strengthening non-governmental institutions through which citizens can organize and express their opinions.
Strategic Goal: Social Stabilization
The primary aim of this assistance is to build humanitarian response systems for those most disposed by conflict and vulnerable to change. Even in the event of peace in the region, humanitarian assistance to Azerbaijan's refugees, IDPs and vulnerable population will be essential at least through 1997. In FY 1995, more than $8 million in U.S. Government humanitarian assistance was distributed through a USAID umbrella grant to Save the Children which funded the following programs:
- CARE distributed 219 metric tons of food to 47,000 beneficiaries in IDP camps and adjacent districts in Southern Azerbaijan.
- The International Red Cross distributed clothing to 25,000 needy people and successfully launched a cost-effective self-built mud brick shelter and sanitation project for 7,500 beneficiaries in six regions.
- Relief International mobil health units provided basic medical services to 25,000 people per month and distributed other humanitarian assistance to 200,000 people in ten provinces.
- World Vision provided food to 126,000 people, constructed basic sanitation facilities for 27,000 people and distributed winter clothing to 10,000 people.
- The American Red Cross distributed food and shelter materials to 20,000 vulnerable people and started a new border-relief program in conjunction with the International Committee for the Red Cross.
USAID also contributed $1.3 million to the United Nations World Food Program's humanitarian activities in Azerbaijan and $1.2 million to UNICEF to help control Azerbaijan's diphtheria epidemic.
In FY 1997, U.S. humanitarian assistance will continue to be needed in the following areas:
Medicines: Within the IDP population, illnesses associated with poor sanitation and hygiene are on the rise. FY 1997 USAID assistance will focus on provision of additional medicines and medical supplies, better targeting of supplies and closer monitoring of the usage of medicines.
Food Aid: The U.N. estimates that almost 450,000 people in Azerbaijan are in need of regular food aid. The population includes the most needy refugees and displaced persons, disabled and handicapped people in welfare institutions, and pensioners living alone as well as those whose income is below the minimum state level. While good coordination has been maintained in the geographical areas where targeted beneficiaries reside, FY 1997 assistance will focus on better and closer coordination among the humanitarian community to enhance the efficiency of aid allocation.
Shelter: Only 10% of the refugee and IDP population are living in organized camps. The rest are housed either in public buildings or government-provided shelters or with relatives and host families. The magnitude of this displacement is such that social improvement and economic recovery will largely depend upon solutions found through upgrading existing shelters for refugees or the safe return and repatriation of IDPs to areas of origin. FY 1997 assistance will target efforts to improve both the quality and quantity of shelter to IDPs and refugees, including pre-
fabricated shelters for temporary housing and schools.
|
Strategic Objectives |
Economic Restructuring |
Democratic Transition |
Social Stabilization | Cross-cutting / Special Initiatives | Total |
| Privatization | |||||
| Fiscal Reform | |||||
| Private Enterprise | |||||
| Financial Reform | |||||
| Energy | |||||
| Citizens' Participation | 5,500,000 | 5,500,000 | |||
| Legal Systems | |||||
| Local Government | |||||
| Crises | 16,500,000 | 16,500,000 | |||
| Social Benefits | |||||
| Environmental Health | |||||
| Cross-cutting / Special Initiatives | |||||
| TOTAL | 5,500,000 | 16,500,000 | 22,000,000 |
USAID Representative: Fred Winch
Purpose: Reduced human suffering and crisis impact.
Background: There are almost a million refugees and displaced persons within Azerbaijan as a result of the Nagorno-
Karabakh conflict. Many of these refugees live in abysmal conditions by the sides of roads, in decrepit public buildings and in rail cars. The more fortunate live in camps where they receive some but inadequate assistance. Most of these people are passing their third winter in such conditions and continue to need food, shelter and clothing. Although considerable financial and administrative resources are being devoted to this situation, it is likely that Azerbaijan will continue to absorb massive humanitarian assistance in the near future.
USAID Role and Achievements to Date: Through USAID funded NGOs and contributions to international organizations, the U.S. government has been providing humanitarian assistance to the people of Azerbaijan since 1992. USAID-funded grants to PVOs have provided food , clothing, shelter, medical assistance and other commodities to more than 650,000 internally displaced persons. USAID donations to the UN's World Food Program have helped IDPs throughout the country and contributions to UNICEF resulted in the immunization of the entire population against diphtheria.
Description: Given Section 907 restrictions on assistance to the GOA, the USAID program remains predominately humanitarian. However, if the conflict over Nagorno-Karabakh is resolved and Section 907 is subsequently repealed, USAID programs will shift focus from providing primarily food and medicines to assistance with housing and relocation services; and restoration of infrastructure (water, sewage, and electricity). In addition, technical assistance will be provided to help Azerbaijan play a more decisive role in planning, implementation and management of its social services.
Host Country and Other Donors: For the past two years, the European Union (EU) and USAID have successfully coordinated shipment and delivery of humanitarian assistance to the Caucasus.
In addition the U.S., the EU, Japan and other bilateral donors have provided millions of dollars worth of fuel, food, medical and other humanitarian supplies. UNHCR plays a major role in coordinating humanitarian assistance provided by the EU and other bilateral donors.
Beneficiaries: Priority targets for humanitarian assistance continue to be approximately 800,000 refugees and internally displaced persons residing throughout the country.
Principal Contractors, Grantees, or Agencies: The main U.S. private voluntary organizations (PVOs) operating in Azerbaijan are Save the Children, CARE, ADRA, World Vision, International Rescue Committee, Relief International, and the American Red Cross.
Major Results Indicators:*
Amount of temporary assistance appropriately targeted
Number of people with reduced suffering because of access to: (1) food (2) shelter and (3) clean water, etc.
Restoration/reconstruction of basic infrastructure on which future economic development depends
*These are illustrative indicators. ENI missions are in the midst of the complex process of developing measurable country-specific indicators and targets, which will be completed by June 1996.
Purpose: Increased, better-informed citizen's participation in political and economic decision-making.
Background: Azerbaijan's progress towards democracy was slowed following the emergence of a new Azerbaijani Government in June 1993. This was further exacerbated by the Nagorno-Karabakh conflict which has hampered the development of democratic reforms and state and regional institutions. While President Aliyev has stated his commitment to democracy, more needs to be done to implement democratic reforms.
USAID Role and Achievements to Date: USAID-sponsored programs have been instrumental in promoting the slow, albeit continuing evolution of democratic and participatory governance. USAID provided $400,000 for election related activities for the November 1995 presidential and parliamentary elections. Leaders of 12 independent parties, selected by the US Embassy in Baku, received training in political party strengthening and governance, and 36 Azerbaijanis received USAID sponsored training in electronic media, journalism, commercial law, and political party development. A joint program sponsored by USAID and USIA for journalists representing each of the Caucasus, served as an opportunity to promote cooperation within the region.
Description: Within the parameters of Section 907, USAID assistance is channeled to the National Democratic Institute (NDI) and the International Foundation for Election Support (IFES), for training in electoral reform, political party strengthening and civic education. Multiple free and competent information sources are being promoted through USAID grants to INTERNEWS and NDI. USAID sponsored activities also support Free Trade Union Institute (FTUI) programs in labor and trade union development, conflict resolution, and negotiation and collective bargaining issues.
Host Country and Other Donors: Ongoing efforts in the democracy sector are coordinated with the U.N., OSCE and the EU. Technical and financial resources are also provided by USIA for training and exchange programs in journalism and mass media.
Beneficiaries: Attempts are made to reach citizens representing a wide spectrum of skills and occupations who are able to successfully promote and pursue democratic initiatives, such as political leaders, non-government organizations (NGOs), human rights groups, and women's advocacy groups.
Principal Contractors, Grantees, or Agencies: USAID sponsored activities are implemented by non-government organizations such as Internews, FTUI, IFES and NDI.
Major Results Indicators:*
Number of changes made to government policy as a result of citizen participation
Percent of citizens who believe they are being represented by their legislators
Existence of laws protecting freedom of association, assembly and speech
Percent of news coverage expressing opposing views
Percent of public with opinion that elections are free, fair and transparent
Rating of elections as free and fair by local and international monitors
*These are illustrative indicators. ENI missions are in the midst of the complex process of developing measurable country-specific indicators and targets, which will be completed by June 1996.