![[ToC]](../images/cpbanner.gif)
FY 1997 Assistance to Central Europe Request: $7,000,000
Introduction.
After more than a half century of forced annexation by the Soviet Union, Lithuania regained its independence in September 1991. The United States never recognized the incorporation of Lithuania into the Soviet Union, and quickly became the largest bilateral donor in the country, playing an active leadership role within the international donor community. Economic assistance has been supported by Lithuania's close ties to the United States and through the large network of Americans of Lithuanian heritage (over 800,000). Despite these ties and generally stable relations with neighboring countries, Lithuania has been slow to attract foreign investment and generate a favorable trade balance. The successful economic and democratic transition of Lithuania and its integration into the European Community is an important U.S. foreign policy objective in the region.
The Development Challenge.
The Baltic nations were among the most developed parts of the former Soviet Union and have made the greatest advances of any of the Soviet successor states. The Government of Lithuania (GOL) has continued on the complex path of transforming its centrally-planned economy into a market-oriented system. Reforms have been geared to Western models and, in most areas, are proceeding at a satisfactory pace, although Lithuania has not had the degree of development success as in the other Baltic states. Examples of the fragility of Lithuania's democracy are persistent cases of white collar and organized crime and corruption and attacks against independent institutions, such as the media. Use of the Baltics as transit countries have increased substantially since 1994 as illegal goods are smuggled in and out of Russia and other New Independent States. Law enforcement officials recognize the problem and rely on Western law enforcement agencies, including many U.S. agencies, for training. In addition, local governments, having seen an unexpectedly large turnover in new officials after the 1995 elections, view U.S. assistance as a key factor to help decentralize and strengthen their organizational structures and intergovernmental relationships.
Historically less industrialized than its Baltic and Central European neighbors, Lithuania agreed to a slower European Union structural adjustment period than either Estonia or Latvia. Service sectors related to agriculture are particularly important and require managers, accountants and marketers trained in Western methods. A restructured agribusiness sector will reduce dependence on its neighbors and present export opportunities. Industrial output has also staged a recovery and Lithuania's economic prospects look positive. Over 50 percent of trade is now with the West. Annual inflation for 1995 was relatively low at around 25-30 percent, compared to 183 percent just two years ago. Rising economic activity has led to increased electricity, gas and water consumption. Production, particularly in state-owned enterprises, remains weak and has cost jobs in agriculture and food-related industries and raised unemployment and prices. It is estimated that the private sector now employs slightly more that half of the workforce and that the real wage rate has almost doubled since 1993, thereby helping to cushion the effects of declining state production. However, the next stages of reform, such as a sound financial system and legal base, are crucial for future economic growth. In these sectors, the United States is seen as a model donor for technical assistance and training. While a recent banking crisis dampened recovery and shook national confidence, the economy expanded 3 to 5 percent in 1995 and is expected to grow moderately in 1996 and 1997. The World Bank projects that Lithuania's external debt will grow over the medium and long term, but remain moderate and manageable. The Bank classifies Lithuania as less-indebted lower middle income country. Lithuania has canceled all claims and obligations to Russia as it does not consider itself a successor state of the USSR.
USAID expects that Lithuania will have the institutional and other resources to continue its own transition. Current plans are to phaseout Support for East European Democracy (SEED) Act assistance within the next few years.
Other Donors.
Other major donors are Denmark, Sweden, Norway, and the Netherlands. USAID technical assistance to the Bankof Lithuania in the area of bank supervision is provided in close collaboration with the World Bank, International Monetary Fund, and the European Union's (EU) PHARE program. The development of a unified banker training program represents a substantial combined effort initiated by USAID with the EU PHARE Program and British Know-
How Fund. In collaboration with the World Bank, SEED-funded advisors have made improvements in tax collection procedures. USAID has also worked closely with the World Bank, the EU PHARE program, and other governments on the reform of the electric power sector. Monitoring and safety information regarding the Ignalina nuclear power plant is regularly exchanged among the Government of Sweden and other cooperating donors. USAID is currently the only major donor in this field, and consequently there is no notable coordination. USAID and the U.S. Environmental Protection Agency's (EPA) monitoring and policy advice to strengthen the Ministry's knowledge base complements work by the EU PHARE program in its development of a national environmental strategy, including environmental law. U.S. assistance for protection of the environment has included cooperation with the World Bank to support the drafting of environmental action plans; these plans now serve as a framework for country-level discussions.
FY 1997 Program.
Consolidation of reforms to create an effective market economy and a secure democracy remain the overriding objective of U.S. assistance. Setbacks experienced in the financial sector, including the banking crisis, underscore the need for a focus on support to private businesses. The FY 1997 program will help enterprises implement western management and accounting practices. Complementary attention to financial policy changes, such as bank reform and capital market reform will improve the environment in which business operates. USAID's program will also focus on geographic areas in Lithuania that have not received assistance in the past. In the area of democratic initiatives, USAID, in collaboration with the U.S. Information Agency, sees an opportunity to be responsive in strengthening the media by increasing media training and gradually decreasing emphasis on language training, to reflect changed needs of the country. The FY 1997 program will also strive for approximately $200,000 in small grants to Lithuanian nongovernmental organizations (NGOs) to raise their public visibility and empowerment capabilities. The U.S. will also continue training officials in applying law enforcement and legal reform methods. In addition, political party and campaign building on the national level will be emphasized in view of the fall 1996 parliamentary elections.
Strategic Goal: Economic Restructuring.
USAID economic efforts in Lithuania focus on strengthening the growth of the nascent private sector and promoting a viable financial sector that provides the stability and capital for an expanding market economy. Though most private dwellings and agricultural entities have been privatized, well over half of all state-owned enterprises has not yet been sold. In 1995, the GOL created a privatization agency but privatization of large scale enterprises remains slow.
USAID is working to improve the business functions of new and post-privatized enterprises and the financial sector, including agribusinesses, by (a) promoting market-driven pricing and investment promotion; (b) improving institutional support services to agriculture and other sectors; (c) improving private sector credit delivery services; and (d) assisting banks through a long-term loan guarantee program.
In collaboration with other U.S.G. agencies, USAID has strengthened the capacity of over 100 selected firms and businesses to operate efficiently in the market. New and newly privatized enterprises receive a wide range of technical assistance, varying from basic western-style bookkeeping to training in computerized accounting and database systems, implementing budget controls, and marketing guidance and training on foreign exchange operations. USAID participated with other donors in drafting a comprehensive banker training program for Lithuanian commercial banks. These efforts are critical in prompting a sound market-oriented banking sector; for example, initial results catalyzed the decision to create a national bank training center.
In conjunction with the U.S. Departments of Commerce and Justice, USAID assisted Lithuanian reformers draft financial sector legislation and policy reform, and investment and trade policies that are steadily improving Lithuania's business environment. Assistance in commercial law has enabled judicial and professional legal associations to enhance trade, judicial ethics, and establish the first-ever commercial law center. U.S. Treasury Department advisors helped the Ministry of Finance formulate tax policy and regulations, design tax training, and develop a national treasury function and cash management system.
The Baltic-American Enterprise Fund helps address capital requirements for fledgling Lithuanian enterprises. In FY1995, it provided loans totaling almost $500,000 for small and medium sized enterprises. The Fund is actively reviewing 96 proposals for small loans and expects to establish a banker's acceptance program that will make available letters of credit through financially reliable banks.
In agriculture, the slow pace of land tenuring remains a concern. Through two major grants with U.S. nongovernmental organizations (NGOs), USAID is providing technical assistance in management, production and marketing to Lithuania's farmers, agribusinesses, and cooperatives. Responding to GOL requests, USAID is placing special emphasis on the country's dairy industry by advising on the quality and regulation of milk production, herd range and disease control, and in establishing a milk pricing structure.
For the past three years, the GOL has stressed supervision of commercial banks by the Central Bank as a top financial sector priority. USAID assisted the Central Bank in reformulating a bank supervision strategy. As a result of U.S. assistance in bank examination training, the Central Bank closed seven problem banks (out of a total of 23 commercial banks) in 1995. USAID institutional and policy strengthening efforts are helping the GOL address the serious banking crisis which arose in 1995. This crisis resulted in a changeover of Central Bank leadership, including the bank supervision department. The level of expertise of the Central Bank's new management team may set back progress already achieved in bank examination and liquidation procedures.
Strategic Goal: Democratic Transition.
USAID plans to focus increased attention on strengthening the network of fledgling, indigenous nongovernmental organizations, especially those striving to improve or constructively influence public policy, the environment, economic growth, and the social sector. USAID has established a resident interagency democracy commission to oversee this emerging priority. Another responsibility of the democracy commission is to provide grant funding of up to $24,000 to qualified Lithuanian organizations or individuals whose work demonstrates progress in democratic transition. The range and diversity of issues they advocate is broad, but they operate with extremely limited resources and largely inexperienced staff.
Advanced legal reform (to complement the pace of commercial law reform) and law enforcement to support the GOL's fight against economic and organized crime and corruption are also USAID priorities in Lithuania. USAID has structured a rule of law project which serves the collective needs of Lithuanian judges, prosecutors, and attorneys through conferences, discussion groups, and the provision of specialized legal libraries. To strengthen public and private democratic institutions, USAID assistance is applied to legal analysis of draft legislation and judicial reform and promoting judicial training, training of journalists, parliamentary training, and political party development.
A newly-launched program in public administration will enable U.S. advisors to work in two cities on budget and finance issues, citizen and intergovernmental relations, and media outreach, in order to build a model local government structure for other municipalities.
Grass-roots training for local political parties throughout Lithuania has helped build organizational, communication and legislative skills. A USAID-sponsored political party development program has been instrumental in the evolution of independent political parties. In 1994-1995, ten regional training seminars were attended by over 500 local party activists from 64 cities, town and villages. Twenty-one percent of those participating were municipal mayors and councilors. Workshops covered topics including party organization, political communication, general campaign strategy, and voter contact programs. Training manuals in Lithuanian were distributed to local party activities and national party leaders. As a result, door-to-door polling and distribution of brochures and hand-outs promoting the platforms of regional political parties were used in advance of the election. Regional and national party slogans and issue-based campaigns were created to shift voters' attention way from personalities and toward the political differences, resulting in the first political platform-based election since Lithuanian independence. Unlike the last parliamentary elections which saw two political forces contending against one another, the next elections will see a number of issue-based parties participating.
Cross-cutting/Special Initiatives.
Under Soviet rule, Lithuania was completely dependent on other regions (particularly Russia) for its primary energy supply. This situation remains largely the case today. Although Lithuania now owns the Ignalina Nuclear Power Plant and other electricity supply and distribution plants, the country remains virtually 100 percent dependent on oil, natural gas and nuclear fuel rods imported from Russia. This vulnerability was turned to significant advantage by Russia shortly after the Baltics regained independence, namely by controlling the energy supply pipelines. In today's more stable environment, USAID has shifted its assistance from emergency power delivery to improving electric energy efficiency and pricing, modernizing the electricity and gas delivery sectors and promoting nuclear safety. The program also supports regional electricity cooperation among the three Baltic republics with the long- term goal of integration into the Nordic and European power grids.
USAID energy programs seek to improve the production capacity, financial and personnel management, and power distribution methods of the Lithuanian national utility company. In addition, USAID is collaborating with the national utility company on upgrading plans for a modern energy dispatch center, the construction of which will be proposed for inclusion in a planned World Bank power sector loan. A USAID-initiated utility partnership with the Alabama Power Company promotes improved power management and organization, information technical system and cost-benefit techniques. USAID also promotes regional energy cooperation among the three Baltic republics and with Belarus.
Building on the successful implementation of a pilot industrial energy efficiency program, USAID-funded contractors designed an expanded plan for a demand-side electricity management program in Kaunas, Lithuania's second largest city. Progress in enterprise development through programs in waste minimization and institutional strengthening has significantly cut production costs by as much as 20% for some model enterprises.
The U.S. Department of Energy has continued to implement its project of nuclear safety training with plant managers at the Ignalina nuclear power plant and related institutions. Provision of specialized computer equipment in 1994 by the U.S. Environmental Protection Agency (EPA) to augment a comprehensive national environmental monitoring database was the first step toward applied regional research and protection. The EPA has also completed field work for a long-term plan to evaluate air quality, emissions, waste water treatment and groundwater contamination of a strategically important oil refinery in the city of Mazeikiai. The full extent of environmental degradation in some areas, especially at former Soviet military installations, is not yet known. More international attention is needed to ensure longer-term assistance in this sector.
USAID has also recently initiated activities in Lithuania under its regional environmental action program to provide advice and training to enterprises that are currently sources of public health hazards, thereby making them significantly more attractive for international investors. USAID-funded NGOs implement specially designed waste minimization, and industrial pollution prevention activities, in connection with money-saving efficiency programs. Successful methods are then demonstrated in regional workshops to associations and enterprises wishing to replicate them.
|
Strategic Objectives |
Economic Restructuring |
Democratic Transition |
Social Stabilization | Cross-cutting / Special Initiatives | Total |
| Privatization | |||||
| Fiscal Reform | |||||
| Private Enterprise | 2,400,000 | 2,400,000 | |||
| Financial Reform | 2,750,000 | 2,750,000 | |||
| Energy | |||||
| Citizens' Participation | 600,000 | 600,000 | |||
| Legal Systems | 450,000 | 450,000 | |||
| Local Government | |||||
| Crises | |||||
| Social Benefits | |||||
| Environmental Health | |||||
| Cross-cutting / Special Initiatives | 800,000 | 800,000 | |||
| TOTAL | 5,150,000 | 1,050,000 | 800,000 | 7,000,000 |
USAID Representative: Ronald J. Greenberg
Purpose: Accelerated development and growth of private enterprises.
Background: Laws on business and economics in Lithuania are undeveloped and disorganized and progress in reform is slow. The Government of Lithuania (GOL) does not have a clear vision for the creation of an economic policy framework. Some of the GOL's steps promote free market development include passing the Law on Tax Administration, the Law on Foreign Investment, and the Law on Free Economic Zones. The GOL is also establishing an Investment Agency and the Small-Medium Enterprise Agency to accelerate private sector development. At the same time, other actions impede growth, e.g., granting privileges and exemptions in order to support the weak players in the economy, or result in undermining the market further (e.g. government subsidies to state enterprises, unfair regulation of private business, restrictions on land ownership, rules for foreign investors). Environmental pollution continues to be a major problem, primarily as a consequence of private sector inefficiencies, the lack of treatment facilities at enterprises, lack of environmental management experience and lack of appropriate GOL policy. The energy sector does not have a local and regional strategic planning approach and needs a more effective pricing mechanism. These problems have detrimentally affected business development. An Energy Pricing Council has been created, but it is still in its developmental stages. Energy prices are approaching actual costs of generation. Progress at the macroeconomic level as well as direct assistance to private enterprises is essential in order to stimulate development of private sector enterprises, create new employment and expand trade and economic growth.
USAID Role and Achievements to Date: The Lithuanian Free Market Institute made major contributions to a number of draft and existing laws on economic issues, such as the Law on Foreign Investment, Law on Free Economic Zones, Law on Chamber of Commerce and others. Also, 92 articles and interviews on economic issues appeared in three newspapers with an average daily circulation of 80,000. On the enterprise side, USAID-funded advisors assisted private enterprises in a number of key issues, including financial management, reorganization, marketing, and technology improvements. Fifteen companies assisted by IESC volunteers improved cost and operations control and six companies assisted by MBA Enterprise Corps increased their quality of services. VOCA's assistance to two mushroom producers increased yields by over 100% per square meter, assistance to a dairy processor resulted in increased sales by $125,000 a month, and assistance to poultry producers will result in anticipated annual savings of over $600,000 per producer. Thirty entrepreneurs have increased investments and profits in their companies upon return from their U.S. training. The World Environmental Center (WEC) worked with seven enterprises for joint environmental investments on technical assistance and equipment for a value of $174,000. This has led to annual savings of over $475,000 for the plants. WEC has also established the Pollution Prevention Center to promote sustainable development, pollution prevention and waste minimization in Lithuanian industry.
Description: Assistance to enterprises will focus on the most prospective industrial and service sectors for private enterprise development, such as agriculture, light industry, wood processing, chemical industry, building materials and tourism in order to have a greater impact to these particular sectors. USAID-funded experts will work with private companies to develop and implement changes needed for survival in a free market system, including greater productivity, improved energy efficiency, and increased investment as well as low-cost waste minimization improvements. Development of bankable private sector investment proposals to obtain funding from the European Bank of Reconstruction and Development (EBRD), commercial banks and provision of capital resources through the Baltic American Enterprise Fund will be a higher priority over the next year. These activities will be supported by in-
country training and U.S.-based training. At the macro-level, legal assistance will be provided to amend business and economic laws, especially the Commercial Code, and drafting new ones that lead to greater macro-economic stability and policy assistance to develop an effective energy pricing system.
Host Country and Other Donors: Lithuania was slow in creating favorable conditions for private sector development. However, the newly appointed Prime Minister has emphasized that the main priority for the new Government will bethe creation of favorable conditions for private business development, such as establishing equal opportunities for all types of businesses and creation of a transparent and fair tax system. Waste minimization project recipients have cost-shared (20 percent) for technological improvements. Ongoing USAID efforts in private sector development are coordinated with the European Union (EU) PHARE as well as other donors including EBRD, the World Bank and the German Assistance program. USAID and other donors have shared information on sectors and companies being assisted. The U.S. program has been particularly effective in providing assistance outside of the main cities and implementing the changes.
Beneficiaries: Through an improved legal structure, this effort seeks to create a better environment for private sector development and investment. Private manufacturing and service companies will be able to expand their operations and create employment opportunities, thus benefitting individual employees and the economy as a whole. The environmental investments not only improve profits, but also create a healthier environment for Lithuanian and neighboring countries' citizens permit the more efficient use of energy resources.
Principal Contractors, Grantees, or Agencies: USAID activities are implemented through grantees MBA Enterprise Corps, Volunteers in Overseas Cooperative Assistance (VOCA), Lithuanian Free Market Institute (LFMI), World Environmental Center (WEC), Chemonics International, International Executive Service Corps (IESC), Central and East European Law Initiative (CEELI), U.S. Energy Agency, and Texas A & M; contractors: Bechtel, Electrotek, Entrepreneurial Management and Executive Development (EMED) program through Partners for International Education and Training (PIET).
Major Results Indicators*:
20-25 expanded private sector businesses operating and generating employment
National environment strategy passed by Parliament
Competitive pricing for efficient use of energy resources
Three Baltic utilities will use least-cost planning for the Baltic region
10 enterprises will attract investments by a total of $5 million
3-7 laws implemented to expand private sector
Commercial tax system revisions leading to increased efficiency and transparency.
ACTIVITY DATA SHEET
Purpose: A more competitive and market-responsive private financial sector.
Background: The Soviet Union centralized all economic decision making in Moscow, such that Lithuania was only an implementor of financial decisions. An independent financial sector had to be created from the systems left behind and in some cases created anew. These systems are needed for the whole country to operate - manufacturing, retail, trade, etc. Lithuanians view the U.S. as a model for competitive banking, sound bank regulation, efficient capital markets, and financing of specific sectors (credit unions, environment funds.) Efforts to reform the financial sector are hindered by the lack of financial knowledge, criminal and fraudulent activity, lack of transparency, lack of accurate financial disclosure per International Accounting Standards (IAS) and lack of capital. Also, the legal base continues to need improvements to safeguard the rights of creditors and investors.
USAID Role and Achievements to Date: USAID assistance has been instrumental in improving regulation of the banking sector, creating the Lithuanian bank training center, improving private financial sector services, improving the operations of the Stock Exchange, and developing an environmental investment fund. The bank supervision department has improved the quality of its inspections and reduced examination report completion times by 50 percent. Through the department's improved examinations and increased regulation, six banks were closed in 1995, two were placed under a moratorium, and information was prepared for a prosecution case. These actions reduced the number of capital insufficient banks whose continued existence decreased market effectiveness and level of quality. A draft bank examiners manual is two-thirds completed through an iterative process of chapter preparation and field testing. During the 1996 banking crisis, poor, piecemeal legislation was prevented from going to Parliament, a structure for dealing with problem loans was created, and two problem banks were prevented from reopening. USAID advisors have assisted the drafting of the recently passed Securities Law, the creating a Stock Exchange Index, and preparing the implementation of the Investment Company Law.
Description: Banking assistance will focus on improved regulation, improved skills within a smaller group of banks, closure of banks, and prevention of financial criminal activity. Further technical assistance will be provided to the Central Bank bank supervision department for on-site training in examinations of banks, completion of an examiner's manual, closing the twelve failed banks, completing their liquidation, freeing up assets, and repaying creditors. Private bankers will be trained to improve credit management, asset-liability management, internal audit skills, and in bank mergers. Money laundering prevention and detection will be targeted and corporate governance of banks with majority state ownership will be improved. All of these activities support a stronger, more transparent and more competitive private commercial banking sector. USAID seeks to improve the regulation of the market, to increase liquidity and interest, and make the stock exchange a viable supplement to the banks for raising capital and attracting investments. Support will be given to the further development of the Lithuanian Environmental Investment Fund (LEIF) to provide loans having environmental benefits with a positive economic payback.
Host Country and Other Donors: USAID is the only donor working in the capital markets sector. The activities are building upon the foundation set by the French program in 1993-94. Activities in the banking sector are coordinated among USAID, European Union (EU) PHARE, the World Bank, Great Britain, Denmark and Sweden. USAID has taken the lead in bank training and bank supervision activities, with close coordination with other donors, especially EU PHARE. USAID and Great Britain provided complementary courses and materials for the establishment of the Lithuanian bank training center. USAID and EU PHARE have developed a common approach in assisting in Lithuania's banking crisis. The two organizations are also working closely together to develop the Lithuanian Environmental Investment Fund (LEIF) with USAID assistance on the Fund's mechanism and structure and EU PHARE providing capitalization. The Government of Lithuania will support LEIF with revenues from environmental charges and pollution fines. Future cooperation with the European Bank of Reconstruction and Development (EBRD) is expected.
Beneficiaries: The immediate beneficiaries of USAID assistance are the main players in the financial services sector such as the Lithuanian Stock Exchange, the Securities Commission, the Central Bank, the commercial banking sector, and private enterprises through LEIF. The final beneficiaries will be people and enterprises with accounts in commercial banks and people investing in the stock exchange.
Principal Contractors, Grantees, or Agencies: USAID activities are implemented through a combination of contracts, grants and Interagency Agreements: Barents Group (KPMG), International Business and Technical Consultants Inc. and U.S. Treasury on banking sector reform, World Council of Credit Unions on credit union development, Department of Justice/American Bar Association's Central and East European Law Initiative on money laundering, Price Waterhouse and Financial Services Volunteer Corps on capital markets, Chemonics and the Harvard Institute for International Development for environmental investments, and Partners for International Education and Training on training support.
Major Results Indicators*:
Through improved supervision, six insolvent banks will be closed in 1996.
Five additional credit unions will receive licenses in 1996.
The Lithuanian Environmental Investment Fund is designed and will be capitalized by 1997.
ACTIVITY DATA SHEET
Purpose: Increased, better-informed citizens' participation in political and economic decision-making.
Background: During the Soviet occupation, the only legal party was the Communist Party and decision-making was conducted only at the highest level of the Central Government. Individual initiatives and public participation outside of the Soviet system were not tolerated. The only way for special interest groups to have their concerns heard was to voice them in the Communist apparatus. In effect, groups had to function as instruments of the Communist Party. Efforts are now needed to encourage the public to take part in local politics and government decision-making and to help the government to respond to citizens' concerns in its decision-making process.
USAID Role and Achievements to Date: USAID programming assisted in the development of diverse, issue-based political parties in Lithuania. Many of the 18 political parties which benefitted from campaign and platform assistance provided by USAID training participated in the March 1995 municipal elections. In FY 1995, $100,000 in grants was dispersed through the interagency Democracy Commission to indigenous NGOs for one-time activities in areas which promoted democracy in Lithuania. NGO initiatives only began in the last quarter of FY 1995 and program impacts are expected in 1996.
Description: USAID is promoting the development of NGOs through policy grants and training to strengthen capacity building skills. Assistance to the Government of Lithuania is building the legal framework surrounding NGOs. USAID advisors are improving the ability of three municipalities to responsively govern through the introduction of public hearings, a program of public education, improvement of the general operations management of the municipalities, and introduction of strategic planning processes undertaken in conjunction with the public. Further funding will be available to send up to four individuals to the United States for training in the area of local government. A resident advisor is currently helping regional political parties prepare for the 1996 Parliamentary elections.
Host Country and Other Donors: USAID is coordinating its efforts with key donors in these areas, including the United Nations Development Program (UNDP), which supported the creation of an NGO Support Center. In anticipation of further decentralization of power from the central government, the Danish Ministry of the Interior, which has dedicated $1.8 million to a public administration reform program, and European Union PHARE are providing broad-based assistance to strengthen the capacity of local governments to govern responsibly.
Beneficiaries: USAID programs are targeted to benefit the citizens of Lithuania through the empowerment of the over-
650 currently registered Lithuanian NGOs to enable them to successfully lobby the government on behalf of special interest groups, and through the training of local governments to incorporate citizens' concerns in its decision-making process. It is estimated that over 700,000 citizens (almost 20 percent of the country's population) will benefit from current programming in three cities. USAID's political party development program provides assistance to all registered, democratically-committed political parties.
Principal Contractors, Grantees, or Agencies: Activities in this area are being implemented through grants with the U.S.-Baltic Foundation, the National Democratic Institute, the International Republican Institute and a contract with Development Associates.
Major Results Indicators*:
Two cities develop a municipal strategic plan by September 1997.
10 public hearings are held in three cities by January 1997.
50 NGOs present their interests before the government through a variety of public fora (e.g. direct lobbying, public hearings and debates, media events, conferences and seminars,) resulting in increased visibility to governmentofficials by September 1998.
Purpose: Legal systems that better support democratic processes and market reforms.
Background: The Soviet legal system imposed communist economic principles and served to ensure that the state controlled the citizens. Lithuania's commitment to economic reform and democratic rule necessitated major legal reform to allow for the introduction and success of a free-market economy and to foster the establishment of democratic institutions. Lithuania must now develop basic key legislation, modernize its commercial code, establish a qualified, experienced legal bar and judiciary and develop a code of judicial ethics. In the absence of operational laws, organized crime has taken advantage of the period of transition and has increased operations that have been detrimental to the development of democracy and thwarted the development of a free market economy.
Under Soviet rule, the press and media were heavily regulated sectors. After independence, the Government of Lithuania (GOL) loosened its hold on media to some extent, but remains wary of independent media. As a result, the GOL restricts independent media development and supports state-owned media in unfair competition with the private media. Attitudinal and legal changes are necessary to allow for the development and sustainability of an independent, private media in Lithuania.
USAID Role and Achievements to Date: USAID programming was responsible for the creation of an independent Commercial Law Center. Resident advisors in the areas of Commercial Law and the Rule of Law have worked over the past four years to help draft legislation (including a commercial code, judicial ethics, media law, and collateral law) and to train lawyers in these new fields. A program to fight organized crime was initiated in the fall of 1995. For the past three years, USAID has funded programs to train journalists through USIA. USAID will launch a new media program in FY 1996 to directly address the challenges of appropriate government control.
Description: USAID advisors have assisted the drafting of legislation and have helped create and train the Lithuanian bar. In FY 1996, an additional USAID advisor will focus on organized crime and money laundering activities. Assistance will also be provided to Lithuanian press and media associations to overcome governmental bottlenecks to a private, independent media. Funding will be available to send media representatives to the United States for short-term USAID training projects.
Host Country and Other Donors: USAID works directly with the Ministry of Justice, the Constitutional Court, the Court of Appeals, and the independent Commercial Law Center. USAID is working in cooperation with the United Nations Development Program's Judicial Training Center and with European Union PHARE to ensure that new legislation is consistent with EU accession requirements. USAID's organized crime specialist is working with the Prosecutor's Office and the Ministry of the Interior. USAID plans to implement its new media program through the Association of Independent Television and Radio Stations. No major assistance is being given in either of these areas from other donors.
Beneficiaries: USAID's activities in this field will ultimately influence the four million citizens of Lithuania, as legislation and legal processes are revised and the population is empowered to embrace democratic practices and a free-
market economy. Furthermore, eradication of organized crime will ultimately serve to stabilize the economy, as the shadow economy caused by the activities of organized crime are brought in to check. USAID's efforts in the field of media will strengthen the capacity for independent stations and press houses to operate successfully. As the restrictions surrounding the media are lifted, the public will benefit from improved, objective dissemination of information and increased government accountability.
Principal Contractors, Grantees, or Agencies: USAID's efforts in legal reform are being conducted by advisors provided under a grant to the American Bar Association's Central and East European Legal Initiative. Efforts toimprove the conditions surrounding the media will be undertaken through an interagency agreement with USIA.
Major Results Indicators*:
Ability to detect and stop money laundering abilities improved, as evidenced by a 20 percent increase in the crackdown of money launderers, by January 1997.
National government supports independent media and press, as evidenced by a 15 percent increase in the number of sustainable private publications and broadcast stations operating by June 1997.
Transparent, trained judiciary in place by June 1999 and able to efficiently try 25 percent more cases than in 1995.