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FY 1997 Assistance to the NIS Request: $10,000,000
Introduction.
The U.S. has three strategic interests in Belarus. First, similar to all of the New Independent States of the former Soviet Union, the U.S. Government wishes to see Belarus join the community of democratic, market oriented nations at peace with itself and its neighbors. Second, Belarus is a strategically located buffer between an increasingly assertive Russia and former states of the East bloc seeking closer ties with the West and possible NATO membership. Third, there is a continuing interest in seeing Belarus maintain its commitment to internationally supported arms agreements. However, Belarus is among the slowest of economic and democratic reformers in the NIS and the U.S. assistance request is appropriately modest.
The Development Challenge.
Belarus has been called the "assembly line" of the former Soviet Union, and despite drastic falls in output, per capita income in purchasing power parity terms remains among the highest in the NIS. However, production is patently inefficient and energy intensive while the country remains highly dependent on energy sources elsewhere in the NIS. Symptomatic of structural problems, market costs of energy imports are beginning to exceed export values. In the early years of independence the Government of Belarus (GOB) attempted to retain a soviet style administered economy in contrast to its liberalizing neighbors. Events are increasingly showing that Belarus cannot thrive in isolation from these neighbors. Uncontrolled inflation, 93% in 1991 upon independence, approached 2000% in 1992-1994. In 1993, the GOB undertook discussions with the International Monetary Fund (IMF) on a Structural Transformation Facility and with the World Bank for a Rehabilitation Loan. Inflation has more recently been constrained and the budget kept reasonably in balance. This brought the IMF back for consultations, but despite initial progress in discussions GOB adherence to agreements has been generally unsatisfactory. In the name of stability, the GOB recently has experimented with a dual exchange rate and has attempted to support an overvalued official exchange rate resulting in a critical loss of reserves. The IMF canceled the first review of a Standby Agreement over lack of performance on exchange rate policy, external payments and structural reform. These economic difficulties will postpone adjustment and conceivably spill over into the social field.
Privatization also lags. USAID has funded successful small scale privatization through the International Finance Corporation (IFC), but broader efforts have not been encouraged, re-enforcing the lack of engagement of donors. Around 15% of GNP, 10% of non agricultural output and perhaps 10% of firms and as low as five percent of the labor force is estimated to be generated entirely in the private sector, among the lowest ratios in the NIS. State owned enterprises remain largely untouched by privatization and many are insolvent. Ceilings are administered on profit margins for wholesale and retail trade.
The World Bank classified Belarus as a "Less Indebted Middle Income Country" with relatively low ratios of debt service to exports and debt per capita. This desirable position is now clearly threatened by the economic situation described above.
Progress in democratization as indicated by independent judiciaries and media also mirrors the Soviet system and lags its Eastern European and NIS neighbors. May 1995 parliamentary elections were judged less than free and fair and low voter turnout invalidated results in most districts. Observers noted lack of press freedoms, campaign restrictions and a flawed election law. A new legislature did not convene, leaving Presidential power largely unchecked. However, a relatively high voter turnout in December 1995 elections in response to President Lukashenka's efforts to discourage voting resulted in a functioning parliament.
President Lukashenka continues to advocate closer integration with Russia, to the point of reabsorption, although there is some opposition to closer integration within Belarus. Russia appears not to be willing to bear the costs of an expensive appendage.
USAID expects that Belarus will have the institutional and other resources to continue its own transition. Current plansare to phaseout Freedom Support Act (FSA) assistance within the next several years.
Other Donors.
Lack of progress with the IMF has slowed implementation of World Bank and European Union sectoral projects necessary to further reform. A European Union voucher privatization scheme for larger organizations was last reported to be stalled.
FY 1997 Program.
The development challenge continues largely unchanged from the previous year. Priorities for U.S. technical assistance, outside the Nunn-Lugar program, remain economic restructuring, democratization, and humanitarian assistance. Limited U.S. assistance will remain targeted on reform-minded elements and take advantage of opportunities to encourage progress where possible.
Strategic Goal: Economic Restructuring
Strengthening municipal ability to pursue privatization is key to building consensus and support for the process at all levels. Belarus, with the assistance of a USAID-funded IFC project, is making progress on small scale privatization (SSP). IFC has expanded the project from five cities to 10 in the last two months. The Belarus SSP showcase city, Brest, boasts a small scale privatization rate of 54%. Three other cities are between 28% and 45% privatized. They have faced a difficult political climate, including a President who made anti-market reform comments and a Parliament that was inactive for most of 1995. However, in December 1995 the President signed a 1996 Privatization Program, which is an encouraging sign. USAID had anticipated SSP to be completed (with enterprises 70% privatized) by the end of 1996. Due to political delays, USAID now envisions final funding of this activity in FY 1997.
The Western NIS Enterprise Fund plans to open an office in Minsk by June 1996 and expects to approve its first investments in Belarus in early FY 1997.
Strategic Goal: Democratic Transition
USAID assistance has served to strengthen the legal profession. Ongoing activities include support for the Union of Jurists law library, continuing education for lawyers, and legal associations. Training in legislative drafting will also continue with a focus on a labor code and, where appropriate, assistance to the newly elected parliament. Support for the Constitutional Court, which has shown encouraging signs of independence from the Executive Branch, will also continue. Although the current political environment in Belarus limits the range of potential media activities, planned activities are likely to include training of journalists in management and reporting skills, as well as support to journalist associations with a focus on improving media laws and promoting freedom of speech. USAID will also continue working with the small NGO community, which has the potential to develop into an important alternative to the State. To date, Belarussian NGOs participating in USAID training have increased their membership by 25%. Training and exchange programs are closely integrated with Democracy initiatives.
As a result of Belarus' inability to provide adequate social services during the difficult economic and political transformation, USAID is providing support to the institutional development of local non-governmental organizations (NGOs) whose efforts are critical as part of the private sector network of organizations providing social protection services. To date, USAID has trained about 125 budding NGO leaders in basic NGO management and sustainability. Consequently, the number of NGOs in Belarus has increased dramatically since independence and many of these emerging NGOs address the urgent needs of the social sector. Furthermore, in order to alleviate to the extent possible the hardships imposed on the most vulnerable populations during the country's difficult transition, USAIDcontinues to provide humanitarian assistance (medical supplies, basic living supplies and capital goods) through local NGOs and social services to meet the critical needs of these groups. To date, over $800,000 worth of DOD excess property and in-kind donations has been delivered. USAID also provides small grants to local NGOs working to provide sustainable social protection services to vulnerable populations and supports U.S. NGOs working in partnership with local NGOs, delivering needed services to vulnerable groups while working together to strengthen the local NGOs to carry-on this service.
By 1997, USAID expects to double the total number of small grants to strengthen local NGO efforts to provide sustainable social protection services. USAID will also continue to strengthen the rapidly growing NGO sector by providing advanced and more specialized training of NGO leaders.
USAID has also supported a hospital partnership program between the Children's Hospital N4 and the Pittsburgh Hospital Center which focusses on pediatrics, poison control, and hospital administration and management. Through the partnership, the Children's Hospital N4 initiated plans for development of a complete and accurate registry of childhood cancer. Consequently, physicians have been able to meet the pressing need to improve detection and treatment of an increased number of pediatric thyroid cancers resulting from Chernobyl. The partnership program has also helped to establish a contemporary poison information resource database and an intensive training program for clinical toxicologists in Minsk at the Poison Control Center of Children's Hospital N4. Currently, the Poison Control Center is staffed 24 hours a day, seven days a week.
A USAID-supported environmental program is helping reduce industrial pollution and improve the quality of drinking water through pollution reduction in the Pripyat basin.
|
Strategic Objectives |
Economic Restructuring |
Democratic Transition |
Social Stabilization | Cross-cutting / Special Initiatives | Total |
| Privatization | 1,500,000 | 1,500,000 | |||
| Fiscal Reform | |||||
| Private Enterprise | |||||
| Financial Reform | |||||
| Energy | |||||
| Citizens' Participation | 700,000 | 700,000 | |||
| Legal Systems | 1,000,000 | 1,000,000 | |||
| Local Government | 500,000 | 500,000 | |||
| Crises | |||||
| Social Benefits | |||||
| Environmental Health | |||||
| Cross-cutting / Special Initiatives | 6,300,000 | 6,300,000 | |||
| TOTAL | 1,500,000 | 2,200,000 | 6,300,000 | 10,000,000 |
USAID Mission Director, Gregory Huger
PROGRAM: BELARUS
TITLE: Privatization, 110-S001.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $1,500,000 Freedom Support Act
INITIAL OBLIGATION: FY 1994; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Increased transfer of state-owned assets to the private sector
Background: USAID provides technical assistance for small-scale privatization in Belarus because we believe that although the Government of Belarus is reluctant to promote full-fledged market reform, small-scale privatization can be one method to reform the formerly socialist economy. Support for this program is predicated on the idea that the transfer of the retail sector into private hands quickly, fairly and transparently, will encourage Belarussians to support the development of a market economy.
USAID Role and Achievements to date: USAID has funded a small-scale privatization program since May 1993. The technical assistance program began with a pilot project in Brest, which held the first open auction in Belarus in September 1993. Since then, the program has expanded to three additional cities: Grodno, Orsha and Minsk. As of October 1995, USAID-funded cities have privatized 251 enterprises, including 168 through competitive auctions.
Description: USAID's activities will include privatization seminars for privatization officials, state enterprise employees and local entrepreneurs; implementation of an incentive scheme to encourage employee-leaseholders to buy out enterprises; drafting a decree to lower action start prices for objects; working on an amendment on the process of valuation for objects; continuing public relations campaign to promote privatization programs, improve Belarusians' understanding of privatization and market reform, and to encourage private sector involvement in the privatization process; and design and implementation of government condominium privatization.
Host Country and Other Donors: No other donors are funding privatization programs specifically. In December 1995, the Belarussian President Lukashenko signed the 1996 Privatization Program Decree which would clear the way for large and medium scale privatization. However, since then the President has made statements to the detriment of the program. No promulgation of the program has taken place and no implementation has occurred.
Beneficiaries: The main beneficiaries of the small-scale privatization program are the residents of the ten cities where USAID is funding the program. These Belarusians have benefitted from lower prices for goods and greater selection of items in their local stores. In addition, officials from other oblasts who have seen for themselves the results of the privatization program have been inspired to initiate programs in their cities. This propagation of the program led to five more cities coming into the small scale privatization program since November 1995.
Principal Contractors, Grantees, or Agencies: The International Finance Corporation is implementing the USAID-
funded small scale privatization program in Belarus.
Major Results Indicators*:
Percent of business assets in state-ownership nation-wide.
Percent of GDP attributable to private sector activities.
Percent of housing privately owned in specific localities.
* 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.
PROGRAM: BELARUS
TITLE: Legal Systems, 110-S002.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997 $1,000,000 Freedom Support Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Legal systems that better support democratic processes and market reforms.
Background: International observers declared the parliamentary elections held in May and November 1995 to be less than free and fair, in large part due to government interference. A referendum in May 1995 supported Lukashenko's proposals for closer ties with Russia. A new constitution was adopted in 1994, but drafting and enforcement of laws and codes are inadequate. The ongoing political battle between the executive and legislative branches in Belarus has highlighted problems hindering legal reform in Belarus. Whereas the Constitutional Court has clearly demonstrated its independence by declaring numerous presidential decrees unconstitutional, its ability to remain independent is being challenged by President Lukashenko.
USAID Role and Achievements to date: USAID-supported activities have focused attention on legal issues and helped maintain attention on legal reform issues in Belarus. Legal professionals and legislators have access to important resources and are provided with expert advice, analysis of draft laws, legislative drafting training, ABA/CEELI advisors had a significant impact on the parliamentarians who adopted the 1994 post-Soviet constitution, and have provided assistance on drafting a new labor code.
Description: USAID-funded assistance enhances the legal profession by strengthening legal associations and developing continuing legal education programs. Assistance is also provided in areas of legislative drafting training, labor law and judicial reform.
Beneficiaries: The Union of Jurists, Supreme Economic Court, Constitutional Court, and members of parliament all benefit from ABA/CEELI assistance.
Principal Contractors, Grantees, or Agencies: ABA/CEELI is the primary provider of assistance in the legal sphere.
Major Results Indicators*:
Percent of population knowing/understanding specific rights
Targeted laws are:
- up-to-date
- published in a timely manner
- available to all judges and court officials organized in a manner that expedites research
* 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.
PROGRAM: BELARUS
TITLE AND NUMBER: Local Government, 110-S002.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $5,000,000 Freedom Support Act
INITIAL OBLIGATION: FY 1995: ESTIMATED COMPLETION DATE: FY 1999
Purpose: More effective, responsive, and accountable local government.
Background: Belarus operates under a confused Soviet-era system with central and local government. Support to strengthen local government is especially important in Belarus where the central executive branch is resisting reform. Nearly all local government officials lack knowledge and experience in public administration, e.g., human resource management and finance management. All staffing, office and administrative expenses of the finance departments in cities are financed directly by the Federal Government. Thus, municipal finance systems lack incentives for effective, cost sensitive program budgeting and monitoring. However, local governments are responsible for many municipal services, such as transportation, health, education, and housing. This highlights the need for developing a transparent, consensus-based intergovernmental system that ensures revenue-expenditure balance and an independent revenue privilege. There are therefore two considerations to address: the need for local governments to be autonomous in order to decentralize power, and the need for new local government laws to be passed and enforced in order to reinforce democratic practices at the level most accessible to citizens.
USAID Role and Achievements to date: Local governments in other NIS countries are becoming the venue for the development of democratic leaders and governance, through the introduction of a variety of mechanisms such as more open budgeting, town meetings, citizen task forces, constituency outreach and local government watchdog groups. Municipal governments are improving their financial management while becoming more transparent and accountable to their citizens. Important reforms include associations of cities, capital improvements, and more public dissemination of government activities. USAID will begin activities in FY 1997 to help bring these reforms to Belarus.
Description: The USAID role in Belarus will be consistent with our inventions in other countries. Efforts will focus on the development of an association of municipalities, planning capabilities, and more transparency in government operations.
Beneficiaries: Mayors, city administrators, local government officials and policy makers are the primary beneficiaries of these programs, and the public are the secondary beneficiaries through improved services and more responsive government.
Principal Contractors, Grantees, or Agencies: USAID's activities in local government reform are implemented by the Research Triangle Institute.
Major Results Indicators*:
Percent of communities where X percent of resources are being efficiently used for projects
Percent of national revenue flowing to local government
Passage of legal, fiscal and procurement reforms that empower local governments
Percent of local population that believes management and delivery of services at municipal level are:
--improved,
--more cost effective,
--responsive
to their needs and desires (desegregate by subgroups of population, regions of country and other relevant/important categories)
* 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.