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FY 1997 Assistance to the NIS Request: $173,000,000
Introduction.
Since 1992, the U.S. has actively engaged in the development of a democratic and market-oriented Russia. In so doing, the U.S. seeks to build and consolidate new relationships with Russia, first as a constructive partner on a wide range of global issues, ranging from the maintenance of regional and world peace to the reduction of environmental threats, and second, as an active partner in a trade and investment relationship. A democratic and market-oriented Russia will continue to draw American exports and pose little or no threat to U.S. security.
To date, the Government of Russia has pursued a course which has permitted these relationships to take root. Both public and private energies have been mobilized to: transfer a substantial volume of formerly state-owned assets to private individuals and companies; establish the outlines of a legal and regulatory framework which will allow private individuals and firms to operate in a competitive, market environment; provide investment and income incentives to thousands of small entrepreneurs and managers and employees of newly-privatized firms both directly and by encouraging the growth of sound financial and training institutions; address the macroeconomic imbalances which led to debilitating inflation and budget deficits and develop new banking and budgetary mechanisms which will foster macroeconomic stability in the future; give Russian citizens the rights to participate in free elections as well as in other fora through which they can express their opinions and to make up their own minds about issues based upon independent sources of information; and begin to address the deterioration of health and housing services available to the population and to reverse the environmental pollution which affects the quality of life in Russia.
USAID has contributed significantly to the pursuit of this lengthy agenda of change and innovation. USAID has mobilized technical expertise which has helped Russians in both private and public sectors to think through problems and devise solutions. Cooperative "pilot" activities have been worked out by Russian-American teams in a variety of sectors; the lessons of these pilots have been "rolled out" to the larger population of Russians attempting to address similar problems. Thousands and thousands of Russians have been personally exposed to American ways of working, doing business, and addressing issues characteristic of a democratic, market-oriented society.
U.S. budgetary realities mean that program priorities must be more and more focussed in the coming months and years with special attention to fostering the sustainability of the important reforms already launched. Final funding for technical assistance programs will be provided in FY 1998 At the same time, some degree of flexibility will be maintained to respond to changing circumstances. Political realities in Russia demand this. It is certain that the political situation in Russia will evolve as the country moves through its first democratic presidential elections, but it remains in our national interest to help the reform-oriented relationships which have just begun to develop to grow and thrive. During the technical assistance phase-down period, USAID will place increasing emphasis on strengthening people-to-people linkages outside the capital.
The next year or two will be critical for the Russian economy. To qualify for $6.5 billion in IMF financing in 1995, Russia had to meet tough macroeconomic targets on a monthly basis. Inflation and the budget deficit were brought down. Industrial production at year's end was poised on the verge of real growth for the first time since the collapse of the Soviet Union. In early 1996, agreement was reached with the IMF on a new three-year, $10.2 billion fund facility. This should provide the needed discipline to achieve financial stabilization and pursue much-needed structural reform in the economy. Russia met each monthly target in 1995; the IMF arrangement will provide a further boost to the Russian economy and an incentive for deeper integration with the global markets.
USAID expects that Russia will have the institutional and other resources to continue its own transition. Current plans are to phaseout Freedom Support Act (FSA) assistance within the next several years.
The Development Challenge.
While Russia can look with satisfaction at progress already achieved, the tasks ahead continue to pose enormous challenges. Although the privatization process progressed much more rapidly than was anticipated in early 1992, many of the privatized enterprises have not yet developed successful restructuring plans. The continued threat of growing unemployment has contributed to a widespread skepticism about the benefits of privatization and fueled a political debate about renationalization. Infrastructure and investment needed to facilitate industrial restructuring are not yet in place. Domestic investment capital has been slow to mobilize, in part because of high inflation (under control only in 1995 and related to a persistent deficit in government financing) and in part because of the high risks associated with the rapidly evolving economic and legal environment.
Little progress has been made in increasing the productivity of farms and agricultural enterprises, inhibited in part by lack of agreement on whether and how to privatize farmland. While foreign investors are exploring the Russian market, actual investment levels remain relatively low as potential investors display caution in the face of uncertainties about Russia's political future, its poor credit rating, and the perverse economic incentives created by certain taxes, regulations and policies governing economic activity and foreign participation.
Corruption and organized crime have emerged as major political and economic concerns, reflecting a lack of functioning systems to maintain the rule of law under open and democratic principles. The success of the Communists in the December 1995 Duma elections and the exit of key reformers from the Yeltsin government in early 1996 have created uncertainty about Russia's resolve to continue reforms, especially if the Communists capture the Presidency in the June 1996 elections.
Although the tasks remaining are significant, U.S. assistance via the USAID budget, especially to central government entities, has already begun phasing out. Commitments in FY 1996 will be less than half of the level proposed in the Congressional Presentation for 1996. The last year of new obligations for most types of technical assistance is now planned for 1998, with resources declining rapidly over the 1997 to 1999 period. USAID has undertaken the development of exit strategies which will plan for the completion of specific assistance activities, look toward how they will be sustained by Russian institutions, or prepare them for transition to support from other donors.
According to the World Bank, Russia's debt to the West at the end of 1994 was $94 billion. Over $4 billion in debt service was paid in 1994. Russia has assumed the external debt of the USSR under the "zero option" agreement with former Soviet republics. Its total external debt when liabilities to former CMEA partners are included was estimated to be about $122 billion at the end of 1994. Russian debts to official creditors have been rescheduled for the last three years in the Paris Club. As part of the 1995 rescheduling, the Paris Club agreed to consider a comprehensive rescheduling, provided Russia stayed on track with its IMF program and met other conditions. They also agreed a new deal would come into force when Russia entered into an Extended Fund Facility or other appropriate IMF arrangement. This is a top Russian priority. The first round of discussions between Russians and the Paris Club creditors took place in November. Russia reached agreement in principle with private (London Club) creditors on November 16 to reschedule $32.5 billion, including $7 billion in arrears over a 25-year period. The agreement will be "closed" (i.e., all details agreed and signed) following a process of reconciliation, which parties hope can be concluded within six months. The agreement reschedules Russia's debt for 25 years, with a seven-year grace period. Payments drop off sharply in year 20.
Other Donors.
USAID coordinates closely with other donors on a sectoral basis, with particular emphasis on work collaboration in the energy, housing, land market development, agriculture, new business, and environment sectors. Perhaps the most fruitful coordination to date has been in the urban development area, where US support for the development of a World Bank loan to Russia for transformation of the housing sector and the construction materials industry directly contributed to the signature of a $400 million loan in July, 1995. USAID's ability to provide upfront grant funding for research and development or "pilot" work has provided the opportunity for both Russians and the World Bank to work out the feasibility of a loan prior to finalizing the design of the loan package. USAID's ability to mobilize technical consultants with world-class expertise and business experience has also contributed to the development of World Bank loan packages which involve the private sector; completion of a feasibility study for an electric power generating plant in Krasnodar is one concrete example in this area.
USAID-funded activities in various cities in Russia are also encouraged to coordinate with activities funded by other donors. Examples of such profitable collaboration can be seen in the small business sector where training and business support programs financed by USAID have provided clients -- and immediate start-up -- for EBRD business financing loans.
USAID has also developed coordination relationships with the British Know-How Fund, EU/TACIS, and Canadian International Development Agency.
A key factor in the success of USAID's exit or transition strategy will be the follow-on activities of other donors, especially the World Bank, which will permit the Russians to continue draw upon western experience and expertise as well as to tap into sources of external financing. USAID technical assistance funds are being used to finance and/or accelerate development of several new World Bank loans, and that approach will continue in FY 1997. USAID is currently assisting with the design of World Bank loans in the environment sector, energy sector, legal reform, the housing and urban development sector, the private sector, the agriculture and rural sector, the health sector, and the social sector. Additional loans to sustain USAID-initiated activities are under discussion with the World Bank, the IBRD, and others.
FY 1997 Program.
Strategic Goal: Economic Restructuring
It is in the U.S. national interest that Russia -- and millions of private Russians -- become active partners in a trade and investment relationship with the U.S. and other countries in the global marketplace. Russia has vast untapped mineral reserves and other natural resources, an underutilized industrial sector in search of new technology and new methods, a highly-educated and creative labor force, and 150 million consumers eager for products and services not yet available in Russia. As a trading partner for the U.S., however, Russia's potential is still limited by the relatively low levels of buying power and by the relative unfamiliarity of U.S. products. U.S.-Russian trade volumes increased by about 70 percent between 1992 and 1995, but remain relatively small in absolute terms with an estimate total turnover of about $6 billion in 1995.
As an investment partner for the U.S., Russia's potential has been constrained by several factors which, together, mean high investor risk: the macroeconomic situation (inflation, monetary instability, etc.); a perception of runaway crime and corruption in the Russian business sector; a variety of infrastructural inadequacies (telecommunications, transport, etc.); and, perhaps most importantly, the quality of the enterprises in which there is a possibility to invest.
As much as 60 percent of industrial resources in Russia were, for decades, dedicated entirely to military production; virtually all industries operated on the basis of state orders rather than responding to market forces. While peaceful relations between Russia and the U.S. have spurred a massive effort to convert defense industries to civilian uses, progress to date has been slow. The demands of a market economy are significantly different from the demands of a militaristic, state-controlled economy. New ideas, skills, products, distribution channels, accounting systems, and financing methods must all be developed, tested, and put in place before a company is ready to compete in the world or domestic economy for market share or new investment capital.
With the essential completion of the mass privatization process, the U.S. assistance effort is focusing on regulatory reform and other measures to stimulate commerce, trade and investment. Building on the effort initiated in 1996 to assisting a comprehensive reform of the Russian tax system, U.S. assistance programs will continue to highlight implementation of tax reform at all levels, especially tax administration and collection. Assuming receptivity to further assistance, the U.S will continue to give priority to helping Russia build the legal and institutional infrastructure needed to permit the mobilization of savings for investment. USAID will complete the assistance programs in capital markets development, including support for an independent regulatory body, independent share registries, clearance and settlement organizations, recognized accounting, reporting and auditing standards and ethical codes for corporate officers, dealers and brokers to protect shareholder rights. In addition, U.S. programs will finish improvements in the Central Bank's capabilities for bank supervision and payments clearance. This assistance is closely linked to major World Bank funding.
Concluding programs begun in FY 1995 and FY 1996, emphasis on the energy sector will be on electric power restructuring, particularly extending support to the emergence of a viable, competitive non-nuclear electric power generation industry at the regional level. In addition, final support will be provided to partnerships between U.S and Russian energy organizations that have the potential to evolve into independently-financed partnerships in the future. Limited U.S. environmental assistance will support pilot projects at the regional level to help Russia gain experience in countering the most severe health risks from industrial pollution, reducing urban pollution and managing natural resources such as the Lake Baikal watershed and the Far Eastern forests in ways to promote environmentally friendly development and support long-term biodiversity. These programs emphasize the economic benefits of sound environmental practices and encourage community participation. Local demonstration of such practices will lead to models that can be replicated in other regions.
USAID has played a key role, along with other USG agencies, in working with Russian enterprise managers, policymakers, and financiers to bring about the needed transformations. Realization that there are mutual benefits to be realized from a Russian-American investment relationship are beginning to grow as Russian managers find, often through the face-to-face contacts fostered by the U.S. assistance program, that Americans have more to offer than straight financing. Recently, polls have begun to reflect this realization and the prospects for a true partnership in trade and investment are brighter.
Specific Results to Date
After a hectic four years' of work in Russia, USAID and our implementing partners are able to point with some pride to its contributions in an enormous range of areas which are critical to Russia's transition to a market economy. Only a few key results can be cited here; a more complete report is available upon request.
As part of the mass privatization program, in August and December, 1992, Presidential Decrees 922 and 933 created a private electric power joint stock company, RAO EES Rossii, to provide reliable electric power and manage the 210,000 megawatt unified power utility. The company was given three years to develop a program for electric power sector restructuring. USAID supported the basic analytical work needed to develop proposals for alternative structures for the power sector. In July, 1995, the RAO EES Rossii management board approved a "Recommended Plan for the Continued Restructuring and Privatization of the Russian Power Industry" which emphasizes the growth of non-nuclear capacity and the safe operation of nuclear facilities where appropriate as well as opening the power generation sector to competition and international investment.
-- Laws and regulations appropriate for a market environment have been designed and implemented.
On March 1, 1996, the new Russian Civil Code became effective after four years in the making. This broad set of laws is perhaps the most important Russian document to be passed since the disintegration of the former Soviet Union. For the first time, the Code clearly establishes, among other things, the legal right to buy and sell private property, borrow money, contract, and for non-governmental organizations to operate. It includes sections on corporations, property rights, contracts, and secured transactions. This modern Civil Code is a major advance in reform efforts, as it makes a fundamental break with past Soviet and Russian legislation by effectively guaranteeing both freedom of contract and protection of private property. The Code will also help protect against the proliferation of financial crimes that is undermining society's confidence in the market. It literally creates new regulatory systems to help enforce the laws and resolve economic disputes, and gives those institutions the authority and legal guidance necessary to promote commerce and business investments. The Code is also viewed by many Russian reformers as a bulwark against future attempts to retrench on hard-won economic and political gains. Foreign legal experts from the U.S. and Europe participated in the drafting of the Code, working with the Research Center for Private Law. USAID-funded experts convened working sessions both to review the draft text and to examine the underlying theory of commercial law.
USAID has been the primary supporter of virtually all of the key legal reformers working on the Civil Code over the last several years, including those working within the Office of the President as well as the Parliament. Key U.S. assistance has been provided by many of the leading U.S. experts in the commercial law field through multi-year programs with the University of Maryland/IRIS, the Rule of Law Consortium and the Harvard Institute for International Development.
A body of both national and local legislation (municipal and oblast level) has been developed as the basis for functioning land and real estate markets. The Presidential Decree "On the State Land Cadastre and the Registration of Documents on Real Estate Rights," passed in December, 1993, authorized the local Land Committees to register privatized land parcels. Local administrations have used this authority to establish real estate market regulations.
The development of pilot Real Estate Information Systems (REIS) which USAID has funded in several cities has contributed to the implementation of the legal frameworks, furthering the growth of the private housing market.
-- A reliable and efficient financial system begins to be established.
The Russian banking sector has grown rapidly. From a handful operating in Moscow in 1992, there are now more than 50 foreign banks listed in the Moscow phone directory and more than 3,000 Russian banks currently in operation. Many of the Russian banks are undercapitalized and poorly-managed, but a September crisis in the interbank loan market was successfully weathered through successful stabilization efforts by the Central Bank of Russia (CBR). Bank supervision has also been improved as the CBR has established and staffed Bank Inspection and Supervision Departments. Almost 200 senior CBR inspectors and supervisors have received USAID-financed training in on-site inspection of banks.
-- A stable currency prevents further erosion of savings and encourages investment.
In the 1993-95 period, the Central Bank greatly strengthened its capacity to exert monetary controls as well, in part through close collaboration with, and following the discipline of, the International Monetary Fund (IMF). Use of Treasury bill auctions as a means of financing government debt has grown from a level of less than 5% of the central government deficit in 1993 to more than 85% of the deficit in 1995. The Financial Service Volunteer Corps (FSVC) has received funding from USAID to work with the Central Bank in this important area.
-- The capacity to raise capital through the market increases.
In 1993, no comprehensive securities law governed the emerging Russian securities markets. The markets were subject to a series of decrees and agency regulations, many of which were neither observed nor enforced.
The Russian Federation Commission on Securities and Capital Markets (RFCSCM) was established through legislation by the end of 1994 (ahead of schedule) and began operation by the end of 1995. To date, more than 50 new personnel have been trained. A database on market participant activities, registrars, and new issues has been created. The leadership of the RFCSCM actively provides policy advice and oversight for Russia's capital markets. USAID's consistent support in this area has been important for this achievement.
By September, 1995, there were 89 members in the Moscow Broker-Dealers' Association and 70 members in three regional associations in St. Petersburg, Novosibirsk, and Yekaterinburg. These self-regulatory organizations provide market discipline complementary to that of the Russian Federation Commission on Securities and Capital Market. The Russian Trading System was developed in 1994/95 and went on-line in July, 1995. The weekly volume of trade was $20 million. A Registrar Support Center (RSC) provides expert advice and market monitoring as well as conducting training seminars and carrying out audits. The RSC developed standards for voluntary certification of software for share registry; these were recently approved by the State Committee of Standards. The National Registry Company, established in spring of 1995, provides an independent share registration service which meets the professional standards in all areas of registrar operations and administration. It has attracted $10 million in start-up capital from its shareholders: the Bank of New York, Nikoil, Unexim Bank, the International Finance Corporation (IFC), and the European Bank for Reconstruction and Development (EBRD). Its independence will ensure that the NRC will eliminate ownership risk for investors, guarantee the protection of shareholder rights, and facilitate Russian companies' ability to raise capital. Clearing and Settlement Organizations (CSOs) in Moscow, St. Petersburg, Yekaterinburg, and Novosibirsk clear and settle trades being made in the capital market. The Depository Clearing Corporation in Moscow is the only one currently linked electronically with the Russian Trading System. USAID has been the key bilateral donor supporting the development of both private and public organizations in their efforts to build a transparent and dynamic capital market.
-- Other institutions and organizations which support entrepreneurship and innovation are flourishing.
Business incubators, a new approach to business start-up in Russia where space to work is often a major constraint, are now operating in Nizhny Novgorod, St. Petersburg, and Moscow and supplying start-up assistance to new, often micro- or small businesses. Leasing programs are often associated with the incubators. A decree, "On the Development of Leasing in the Activity of Investment," was issued in June, 1995, to serve as the legal basis for such innovative programs. USAID helped stimulate the formation of this decree -- funding the development of a manual on leasing in 1994, sponsoring international experts who provided input on the future law, and organizing a conference attended by over 250 business leaders from all over Russia.
The Government has taken on a new role in promoting small business. The Russian Federation State Committee for Small Entrepreneurship Development and Promotion was formed in June, 1995, and charged with improving the legislation for small business and operating a small business support program with a budget of 700 billion rubles (or about $155 million) in proceeds from the privatization program. This was a vital step, considering that no federal body formerly existed to promote small business growth. USAID resources helped the leadership and the staff to explore options in the small business area through a study tour to the U.S., and continue to provide information, advisory services, and limited equipment in support of the Committee.
USAID support, through the State University of New York, to the Morozov Project, a Russian nonprofit organization dedicated to building the business skills and experience of Russians across the country has resulted in the development of business training network in 36 regions. Working through established educational institutions, the Morozov project creates, refines, and disseminates quality business training curriculum. 1,650 trainers have already completed intensive "train the trainers" programs at the headquarters in Moscow and have returned to their communities to further spread their newly-gained knowledge. The Project's most popular courses include Small Business and Entrepreneurship, Financial Management, and Corporate Governance.
Eight regional Business Support Centers (BSCs) operated by Deloitte and Touche under a USAID contract have already provided over 19,000 Russian entrepreneurs and business managers with a range of consulting and training services in less than two years of operation. The Centers are currently actively supporting 77 business associations and business support organizations throughout Russia, and have already helped small businesses access financing valued at over $5 million -- even though the Centers themselves offer no credit facilities.
More than 535 private agribusinesses and farming enterprises have been formed by the nearly 45,000 people associated with 74 former state and collective farms that have been legally restructured using a model procedure for farm reorganization developed with USAID financing. British Know-How Fund support and Canadian assistance have complemented USAID's direct support to 21 farms to achieve this outcome. Approximately 25,000 privatized state/collective farms are estimated to require such restructuring, however, so the next area of focus will be in training more Russians to roll out the process on a wider scale.
To encourage investment in Russia, USAID is providing venture capital through the U.S. Russia Investment Fund ("TUSRIF"). TUSRIF, which began operations in 1995, with a commitment of $440 million from USAID, replaced the Russian American Enterprise Fund and the Fund for Large Enterprises in Russia.
-- And efforts have been made to protect the environment and to promote development and income growth at the same time.
Lake Baikal and its associated watershed are among the world's unique natural resources. The lake contains more than 20 percent of the world's fresh water and supports a tremendous assortment of biodiversity. The local governments' capacity to manage this environment has been strengthened through activities with carried out by a USAID grantee, Ecologically Sustainable Development, Inc. (ESD).
Three stations with computer-based Geographic Information Systems (GIS) have been set up in Chita Baikal Department, the Buryat Baikal Department, and Irkutsk. The GIS is being used to implement the Lake Baikal Comprehensive Plan. This information on soil classification, taxonomy, and hydrology is being shared with scientists, government, and NGO personnel throughout the Lake Baikal watershed and beyond and applied in land use planning to determine approaches for both revenue planning and environmental protection.
Two more GIS stations have been set up in scientific institutes in Khabarovsk and Vladivostok to develop the Ussuri Sustainable Land Use Plan. Through the Sustainable Natural Resources Management Project in the Russian Far East, the Sikhote-Alin Biosphere Reserve (Primoryia Krai) received a GIS upgrade and training for the new equipment, for use in protected areas management.
Strategic Goal: Democratic Transition
USAID is helping Russian counterparts to establish and build the range of public and private institutions necessary to ensure a pluralistic, democratic society. Already established are a number of basic democratic institutions, including an election system, independent media, and literally thousands of grassroots non-governmental organizations which provide direct opportunities for citizen participation in the solution of a number of problems being faced by Russia. In addition, USAID is working with both public and private organizations tasked with assuring the rule of law. Efforts have also been focussed on increasing the capacities of local government to respond to the newly-
decentralized system of governance which has gradually evolved since 1992 and to the demands of the newly-
articulate citizenry. The media development program focuses nearly exclusively on the regions, and is helping develop a network of respected independent televisions stations, capable of providing credible alternative sources of objective information. Political party building activities have begun to shift their emphasis from working with central organizations to working with municipal and other structures in the regions. A broad and far-flung program to help young NGOs is in place, and provides both technical and direct assistance in the form of small grants.
Examples of Results to Date
Russia's progress toward the establishment of a participatory democracy has been substantial. The December 1995 Duma elections were the first consecutively held democratic elections in Russia's history. Multiple political parties are beginning to build constituencies on the basis of issues as well as personalities. Finally, at the grassroots, the community of nongovernmental organizations addressing social and economic issues continues to grow and strengthen -- by one recent estimate, more than 30,000 strong. Independent media provide all Russians with a variety of perspectives on issues of the day and, especially in 1995, played an important role in fostering public debate on governmental policy toward the breakaway region in Chechnya. A Presidential election is scheduled for June 16, 1996.
Strategic Goal: Social Stabilization
Russia's management of the difficult human dimensions of political and economic change has a major effect on the viability and durability of democratic and market reforms. Housing and health care services are critical social concerns for many Russians and are the focus of USAID efforts.
Specific Results to Date
To support private housing markets and ownership, USAID has helped establish condominium associations and private building maintenance, tested market-based mortgage lending, trained real estate professionals and developed systems for titling land and property.
USAID health programs help Russia restructure health care finance and service delivery with a focus on preventive care and quality improvement. A special initiative on women's reproductive health reduces abortion and increases access to modern family planning. U.S.-Russian hospital partnerships teach Russian health professionals state-of-
the-art practices in several specializations.
|
Strategic Objectives |
Economic Restructuring |
Democratic Transition |
Social Stabilization | Cross-cutting / Special Initiatives | Total |
| Privatization | |||||
| Fiscal Reform | 6,750,000 | 6,750,000 | |||
| Private Enterprise | 43,350,000 | 43,350,000 | |||
| Financial Reform | 11,500,000 | 11,500,000 | |||
| Energy | 5,200,000 | 5,200,000 | |||
| Citizens' Participation | 5,400,000 | 5,400,000 | |||
| Legal Systems | 6,500,000 | 6,500,000 | |||
| Local Government | 4,000,000 | 4,000,000 | |||
| Crises | |||||
| Social Benefits | 5,500,000 | 5,500,000 | |||
| Environmental Health | 31,600,000 | 31,600,000 | |||
| Cross-cutting / Special Initiatives | 53,200,000 | 53,200,000 | |||
| TOTAL | 66,800,000 | 15,900,000 | 37,100,000 | 53,200,000 | 173,000,000 |
USAID Mission Director: James Norris
PROGRAM: RUSSIA
TITLE: Fiscal Reform, 110-S001.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $6,750,000 Freedom Support Act
INITIAL OBLIGATION: FY 1992; ESTIMATED COMPLETION DATE: FY 1999
Purpose: To support the development of an efficient fiscal system in Russia which is adapted to the needs and functions of a market economy as well as to government's need to raise revenues sufficient for public expenditures.
Background: Russia's fiscal system was designed to be consistent with the needs of a centralized, state-dominated economic structure; all revenue-raising as well as expenditure responsibilities were matters of explicit national policy. The privatization of the economy in 1993-94 combined with the substantial decentralization of governmental rights and responsibilities which accompanied the formation of the Government of the Russian Federation in 1991 both led to a growing need for significant revision of the fiscal system. It was evident that fiscal policy needed to be reconsidered from a private sector perspective; the drafting of a new, comprehensive Tax Code was launched in 1994. The need for better fiscal administration was underscored in 1994 and 1995, when shortfalls in revenue collection threatened the program of macro-economic stabilization being undertaken within the framework of an IMF Stand-By agreement. Local governments began to demand fiscal reforms which would permit them greater latitude in revenue generation so that they could begin to fulfill the expenditure responsibilities which were, de facto, arrogated to them by the federal government.
USAID Role and Achievements to Date : USAID has provided a range of technical experts and training opportunities to the Ministry of Finance, the Ministry of Economy, the Commission on Economic Reform, and the Russian Parliament (both the Duma and the Federation Council) to support various initiatives in fiscal reform. The advisory services have included experts in drafting of tax legislation, administration of tax systems, projecting and monitoring of tax revenues, design of fiscal policy to meet different economic and social objectives, and analysis of alternative tax mechanisms in terms of yield and impact. USAID has also supported local government efforts to address fiscal and budget issues in ways which would support private sector growth and, at the same time, meet local government revenue requirements; increase the efficiency of programs intended to meet social sector responsibilities; and make the whole process of taxing and spending a bit more transparent.
The Tax Code has gone through innumerable drafts and discussions and the first of two sections of the new code has been approved by the Federation Council and is now before the Duma. Revenue estimation and other analytical methods have been developed with technical assistance and adopted for use. Local governments in several cities have moved toward the privatization of land through sales of property to privatized enterprises. This has increased the business opportunities for the purchasing firms, contributed to the development of a nascent commercial real estate market, and spurred the interest of municipal governments in replacing lost leasing revenues with a system of property taxes which, combined with zoning reforms, will lead to the more economic use of land. The Municipal Finance and housing projects have worked with other municipalities on improving budget and revenue planning to assure improved social services to city residents.
Description: USAID and its partner USG institutions in this effort (the Department of Treasury and the Internal Revenue Service) plan to respond in FYs 1996 and 97 to the requests of both local and national entities as they begin to grapple with the structural and administrative changes which will be required in putting the new Tax Code into place. As before, the national level contacts will be broad, involving both the Ministries and the Parliament as well as the special Tax Reform Commission which was formed under the aegis of the Economic Reform Commission in 1995, the State Tax Administrative Service and the Tax Enforcement Service. USAID will also support institutionalization of the work with property-based taxes with cities which have participated in the enterprises land sales activities through FY 96 and FY 97. A revised approach to local government fiscal planning and management which involves the local citizens to a greater extent will be developed in FY 96 and implemented in FY 97 - FY 99.
Host Country and Other Donors: USAID's involvement with host country officials at all levels of the government on these critical issues of public finance has already been noted. USAID coordinates closely with other donors, particularly the International Monetary Fund and the World Bank, both of which are also providing technical assistance and training in fiscal issues and tax administration.
Beneficiaries: No one likes to pay taxes; no one minds receiving the benefits of a public sector program funded through public revenues. While it is clear that a revised tax structure in Russia along the lines being included in the new Tax Code should provide significantly more positive incentives for private businesses by changing the principles for levying taxes, providing more equitable policies for different sectors, and more transparent (and customer-
oriented) administrative procedures, it is not clear that all businesses will perceive it positively in the short term. Evasion is common now and any tightening up of the system may cause people intended to benefit from the new system to pay more. The housing sector example, however, may provide a ray of optimism. Privatization of housing and improved maintenance of housing led to municipalities' taking steps to increase rent and maintenance fees. By simultaneously installing a system of means-targeted housing allowances designed with USAID support, city governments across Russia found it was possible to meet the needs of two beneficiary groups at the same time. Those with low incomes were enabled to pay the increased rents and those paying the increased rent/maintenance fees got better service for their money.
Principal Contractors, Grantees, or Agencies: Fiscal reform activities are implemented under the overall direction of USAID. The Department of Treasury and Internal Revenue Services participate actively in the program through 632 transfers. The Harvard Institute for International Development (HIID), KPMG's Barents Group, the Research Triangle Institute, and various Omnibus II contractors (PADCO, Chemonics, CFED, etc.) are all engaged in different aspects of the program. HIID is currently serving as the overall technical coordinator for fiscal reform activities at the national level.
Major Results Indicators*:
Amount of budget deficits
Amount of government budgetary transfers to state-owned enterprises
Amount of revenues available from cost efficient tax administration
* 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: RUSSIA
TITLE: Private Enterprise, 110-S001.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $43,350,000 Freedom Support Act
INITIAL OBLIGATION: FY 1992; ESTIMATED COMPLETION DATE: FY 1999
Purpose: To accelerate development and growth of private enterprise in Russia, thereby realizing the transformation of Russia from a centrally-planned economy to one based upon individual initiative and the operation of market forces.
Background: In 1993, Russia undertook a process of mass privatization which made it possible for nearly 150,000 enterprises of all sizes to consider themselves private companies. The transfer of state assets to these companies was, however, only the first step toward accomplishment of the transformation of Russia into a market economy in which private ownership and management are dominant. Since 1993, many private as well as public initiatives have been launched to help the privatized enterprises become viable and competitive in both domestic and international markets and to foster the growth of new businesses, particularly small businesses. The critical mass of successful private enterprises is gradually developing. Those not yet successful are beginning to understand what it takes to turn their companies around. Those who have experienced some success are realizing what else must be done to stay competitive and to grow. Macroeconomic stability and political leadership have proven to be important even for small firms with domestic markets. Policies, legislation, and regulations conducive to broad-based competition and private sector growth are being developed, but are not yet adequate to provide entrepreneurs and managers with the incentives and structures they need to operate more profitably. A network of business support institutions providing advisory and training services as well as more specialized help has literally sprung up in every region across the country, but still needs strengthening technically and financially before it can be considered a reliable resource.
USAID Role and Achievements to Date : USAID has made direct contributions to developing the policy, legislative and regulatory frameworks appropriate for private sector growth through the provision of expert technical advisors, training and study tour opportunities, and by financing experimental models which have demonstrated what can work in Russia. Successful models of private ownership and management in firms both large and small have been developed in collaboration with private Russian partners and the lessons of these models have been shared with policy- and decision-makers at all levels of the government. USAID has also contributed significantly to the growth of an increasingly viable network of business support institutions rendering services to entrepreneurs and businesses. The Morozov Project training network now offers business courses in nearly two-thirds of the regions of Russia. The eight regional Business Support Centers offer advisory services, training, and trouble-shooting help to literally thousands of small business owners every year. Further, USAID has supported the establishment and the functioning of factor markets critical to all entrepreneurs and managers: land and real estate markets and financial markets.
In addition, USAID is addressing the needs of the private sector in Russia for both debt and equity capital through the U.S. Russia Investment Fund ("TUSRIF"). TUSRIF began operations in 1995, with a commitment of $440 million from USAID, to replace the Russian American Enterprise Fund and the Fund for Large Enterprises in Russia. TUSRIF has provided venture capital financings totalling $38.7 million to twelve (12) private companies, the largest of which is a financing to Sun Brewing in the amount of $10.5 million. TUSRIF also has developed a small lending program in collaboration with Russian banks and has disbursed $3.9 million to fifty (50) enterprises.
Description: Foci for USAID support for accelerating private enterprise growth in FY 97 will be: developing the sustainability of Russian business support organizations (i.e., providing quality services and achieving financial viability); further development of the policy, legislative, and regulatory environment within which private enterprises operate (in which fiscal policy, S.O. 1.2, is but one element); replication or "rollout" of successful models of private ownership and modern, market-oriented management; and better operation of the nascent factor markets (land, real estate, and capital) which are important to private enterprises.
Host Country and Other Donors: USAID works with private Russian institutions, the managers and owners of private enterprises and associations of private businesses, and with various Ministries and agencies of the government at both national and local levels. USAID collaborates with other donors seeking to support private sector growth, especially the British Know-How Fund, the European Bank for Reconstruction and Development, the International Finance Corporation, and the World Bank. EU-TACIS provides complementary support as do both private and public representatives of European governments.
Beneficiaries: Accelerated development and growth of private enterprises in Russia will benefit everybody. GDP and productivity have been declining for years. Official unemployment is growing as large firms, especially those which have been part of Russia's impressive military industry, begin to downsize. More successful businesses will provide new jobs and new incomes.
Principal Contractors, Grantees, or Agencies: USAID works with literally dozens of U.S. nongovernmental organizations as well as for-profit contractors in implementing a broad program of support to private sector growth.
Major Results Indicators*:
Number of private sector businesses operating and generating employment
Volume of business support services available to private enterprises from self-sustaining local institutions
Number of laws implemented to expand private sector
* 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: RUSSIA
TITLE: Financial Reform, 110-S001.4
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $11,500,000 Freedom Support Act
INITIAL OBLIGATION: FY 1992; ESTIMATED COMPLETION DATE: FY 1999
Purpose: A more competitive and market-responsive financial sector is a fundamental for accelerated private sector growth.
Background: The financial sector in Russia has expanded significantly since 1992 as new private, commercial banks have been established across the country and the basic regulatory and market infrastructure necessary for a capital market have been put in place. Adequate measures to regulate the commercial banking sector, however, have only gradually been put in place by the Central Bank of Russia and public confidence in the sector is periodically eroded by bank failures. Better banking supervision and stiffer licensing requirements are expected to bear fruit in the coming years. Further developments in the capital market are planned to provide small investors alternatives to savings accounts or, as many expect, mattresses. Continued regulatory and institutional development are key to realizing the objective of a market-responsive financial sector which actively mobilizes capital for investment and provides the range of financial services needed to support entrepreneurial growth.
USAID Role and Achievements to Date: USAID has provided both long-term and short-term technical advisors and assistance in the development of legal frameworks and regulatory mechanisms for the development of the banking sector as well as for capital markets. Advisory services to the Central Bank of Russia have led to the establishment of bank supervision and inspection departments. Training in both the CBR and dozens of commercial banks has increased the capacity of middle and upper-level managers to understand and respond to market opportunities with effective banking practices. An increasingly efficient banking sector has resulted in more transparent and clear regulations for borrowing and lending which is making more capital available for investment. USAID-funded advisors have also provided support to the Central Bank in the issuance of treasury bills, thereby permitting Russia to manage its financing needs without recourse to the budget. This has been critical to compliance with the IMF Stand-By agreement in 1995. USAID advisors have been key players in the establishment of the Russian Federation Commission on Securities and Capital Markets, and in developing the institutional infrastructure for trading of shares in a secondary market. USAID's assistance has been crucial in the development of an increasingly well-regulated capital market and to increased confidence among foreign investors in Russia.
Description: USAID will continue to support both public and private participants in the banking sector and the capital market to assure continued broadening and deepening of the financial sector as a whole. Regulations need to be fine-tuned and the capacity of regulatory agency staff to apply them and develop them needs further development. Funds are used for direct technical assistance, such as the development of regulations for stock issuance, for training in financial sector reform, and for long term projects, including commercial bank reform.
Host Country and Other Donors: USAID plays a critical role in the financial sector. Activities are used as practical laboratories for future funding by the World Bank, the EU, and other donors. USAID works closely with the Russian Government on the development of an enabling regulatory and legal environment for strengthening of the financial sector.
Beneficiaries: Russian business, which creates jobs, Russian citizens who will be able to count on understandable bank regulations, and personal investment vehicles, and Russian banks are the beneficiaries of these activities.
Principal Contractors, Grantees, or Agencies: USAID implementers include: KPMG, Booz Allen, Intrados, HIID, IBTCI, PW, Burson Marstellar and Financial Services Volunteer Corps (FSVC).
Major Results Indicators*:
Number of licensed viable private commercial banks
Amount of investment, both from domestic and foreign sources
Amount of funds for equity/credit provided to small and medium-sized businesses from private commercial banks
Percent of credit for housing construction and purchase available at reasonable interest rates from private commercial institutions
*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: RUSSIA
TITLE: Energy, 110-S001.5
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $5,200,000 Freedom Support Act
INITIAL OBLIGATION: FY 1992; ESTIMATED COMPLETION DATE: FY 1999
Purpose: A more economically sound and environmentally sustainable energy sector.
Background: Centrally controlled generation led to financial waste and unwise use of natural unsustainable natural resources. Uncontrolled power generation also led to enormous amounts of air and water pollution. By working to assure a more economically sustainable power sector with economically feasible pollution abatement procedures, USAID is one of the leading donors in Russia in the major restructuring of this sector.
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USAID Role and Achievements to Date: USAID contractors and grantees have provided technical advice and training in many different energy sectors. Two major studies in coal sector restructuring have led to new innovations in mine management, and new, enforceable health and safety standards in mines. In collaboration with the World Bank, USAID advisors introduced modern management practices in the grossly mismanaged oil and gas sector. Assistance to one newly created oil company was singled out for further World Bank assistance and the company was able to offer shares by the end of 1995. USAID has sponsored utility to utility partnership programs between US and Russian utilities that have resulted in improved accounting practices, financial reporting, and management planning. In a major effort, USAID sponsored coal sector and electrical power restructuring resulting in safety net considerations being written into new mining regulations, and in the electrical industry, the provision of competitive models which can be applied to the sector for the first time ever. To date, USAID has also imported $10 million US manufactured equipment in energy efficiency and environmental monitoring equipment..
Description: USAID works with US contractors, PVOs, local industry, and the Russian government on the development of rules and regulations and a legal framework leading to more efficient energy generation and distribution. USAID supplies technical assistance and commodities for this program.
Host Country and Other Donors: USAID works closely with the World Bank and other donors -- the EU, the Germans -- to develop Russia specific workable models for wise use of natural resources for energy and for efficient distribution systems.
Beneficiaries: The private sector in energy generation and distribution, and the government of Russia stand to save financial resources through this program. The people of Russia stand to gain through the implementation of market-
determined energy pricing, less harmful use of resources, and decreasing environmental pollution due to more efficient energy production.
Principal Contractors, Grantees, or Agencies: USAID works with many groups to achieve this objective, including: U.S. Energy Agency (USEA), IDEA, Burns and Roe, RCG-Hagler/Baiily and Co., U.S. Department of Energy (DOE), PIER, Price Waterhouse, the Atlantic Council and the World Bank.
Major Results Indicators*:
Number of improved environmentally-friendly energy technologies
Percent of private enterprises using environmentally-friendly technologies
Percent of heat and power plants with energy conservation measures
Percent of cost savings o;f selected heat and power plants due to use of improved environmental technologies
*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: RUSSIA
TITLE: Citizens' Participation, 110-S002.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $5,400,000 Freedom Support Act
INITIAL OBLIGATION: FY 1992; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Increased, better informed citizen's participation in political and economic decision-making.
Background : In the transition to a free-market democracy, transparent processes for selection of political leaders is crucial. Open and responsive political parties are an important part of this process. Elections must be free and open and citizens encouraged to vote for the candidate or party of their choice. Neither of these prerequisites to democratic reform were in place until recently. Improvements in both areas were and are still needed to help guarantee that the process of reform continues. The ability of citizens to understand the issues and to use this knowledge to influence economic and political policy is not only the result of political systems. Independent media have grown explosively in Russia since 1992 and have had a major, measurable impact on the quality and quantity of information about current events which all Russian citizens have available to them. And Russians now have the capacity to band together voluntarily around issues of common interest in nongovernmental organizations. Social issues, environmental concerns, and a host of other interests have stimulated the growth of thousands of NGOs to date. While the independent media are attempting to grow and survive in an increasingly competitive commercial market, NGOs are developing their strategies for effective sustainability by employing techniques of private fund-
raising as well as relying on foreign donors for start-up financing.
USAID Role and Achievements to Date : USAID works through contracts and other financing mechanisms to provide technical assistance at the national, and now more the regional and local level to assure transparency, accuracy and reliability of Russia's election management system. USAID supported the run-up to the first multi-party Governor election in Russia in the Sverdlovsk Oblast in August, 1995. USAID has provided training for political parties and has been instrumental in developing party communication systems. USAID funded NGO assistance provides training directly to voters on communicating needs to public officials. Internews, an American PVO dedicated to the growth of global independent media, has played a key role in Russia with USAID funding by training and networking both broadcast and print media in the private sector.
Description: USAID-funded technical assistance works directly with voters and public officials and various political party officials and provides a variety of citizen-training opportunities in a variety of areas. Major grant programs are administered directly by USAID (often through umbrella grants to U.S. PVOs) and by the Eurasia Foundation. Media partnerships between American and Russian entities have been started in 1995 and will continue to be nurtured through the 1996 - 1998 period.
Host Country and Other Donors: Russia has literally dozens of political parties. USAID emphasis has been on responding to requests for technical advice and training services among those that consider themselves to be "democratic." Work with citizens' groups has generally been carried out through the community of NGOs and in concert with local institutions, including those of the local and regional governments. Other donors have been active in electoral process issues; USAID has coordinated regularly with them in all election run-up periods and will continue to do so. USAID also coordinates with other bilateral donors providing assistance to the media.
Beneficiaries: Beneficiaries include the entire population of Russia. The political process activities are of most importance to the voting public and public officials at the national and regional level. But media and NGO avenues for communication touch virtually all Russians.
Principal Contractors, Grantees, or Agencies: USAID is working with the following: International Republican Institute (IRI), Free Trade Union Institute (FTUI), IFES, National Democratic Institute (NDI), ISAR, Save the Children Federation, United Way, Helping Hand, Internews, RAMPS and the U.S. Information Agency (USIS).
Major Results Indicators*:
Number of NGOs representing women's issues
Number and types of fora in which NGOs engage state institutions in policy debate
*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: RUSSIA
TITLE: Legal Systems, 110-S002.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $6,500,000 Freedom Support Act
INITIAL OBLIGATION: FY 1992; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Legal systems that better support democratic processes and market reforms
Background: USAID's Rule of Law activities focus on judicial reform, legal education and training, and legal information. The objective is to introduce and assure the sustainability of a society that is subject to fair, transparent, and understandable laws and to ensure that citizens are entitled to fair trials and equitable treatment under the law.
USAID Role and Achievements to Date: USAID's Rule of Law program is focussed on three principal aspects of legal reform in Russia: judicial reform, legal education and training, and legal information. Specific activities include providing technical expertise in the reinstatement of trial by jury after a 70 year hiatus. USAID funded technical experts from the U.S. Department of Justice (DOJ) who reviewed and commented on new legislation, including the Draft Criminal Code and the draft Code of Criminal Procedures. USAID has worked with a Rule of Law Consortium to ensure that all Russian Commercial Court judges are familiar with the new Civil Code. USAID support assured that all 1600 commercial judges in the country received Part 1 of the new commercial code and over 40% of commercial court judges received training in commercial law. USAID has funded the bringing together of US and Russian legal associations which has resulted in improved continuing legal education programs and increased flow of information between the two countries. USAID is funding another group from the US Department of Justice which is helping Russia reform its criminal justice system. USAID is also working with many local NGOs on advocacy, helping Russians become more aware of their rights in such areas as housing, property, civil rights, and environmental protection. The Free Trade Union Institute works with local legal groups to provide citizens with the resources and encouragement necessary to enable them to enforce their labor rights and to organize into effective labor unions.
Description: Grants are made to educational institutions, NGOs, legal institutions, and media groups to increase Russians' awareness of their rights and the law in many different areas. USAID funds PASAs with other USG agencies, associations, contractors, NGOs, and relies on pro bono assistance from the American Bar Association (ABA/CEELI). USAID advisors and contractors work directly with Russian legal entities, other European donors, and the Russian government.
Host country and other donors: The World Bank, the EU, and several bi-lateral donors are involved in the development of the Rule of Law for Russia. USAID also works closely with the Russian government, local governments, legal associations, and NGOs.
Beneficiaries: Russian citizens desiring an open, transparent civil and commercial legal system, and the legal profession stand to benefit from activities that increase transparency and usability of new laws.
Principle Contractors, Grantees, or Agencies: In addition to DOJ technical assistance, USAID works with ABA/CEELI and the Congressional Research Service (CRS).
Major Results Indicators*:
Percent of population knowing/understanding specific rights
* 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: RUSSIA
TITLE: Local Government, 110-S002.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $4,000,000 Freedom Support Act
INITIAL OBLIGATION: FY 1992; ESTIMATED COMPLETION DATE: FY 1999
Purpose: More effective, responsive, and accountable local government
Background: One of the most important components of the shift to democracy is the devolution of power and decision-making ability from the center to the regional level and even further to municipalities. Before 1991, information flow was limited and use of funds lacked transparency. The lack of an independent media inhibited free information flow which made free choice impossible and non-governmental organizations working on behalf and for people were non-existent. All of these areas needed an infusion of assistance in order to strengthen the underpinnings of the emerging democracy.
USAID Role and Achievements to Date: USAID targets funds at local government entities, NGOs, and media. For municipalities USAID provides technical advisors to help them better prioritize local budgets, help local authorities make choices on how to use funds to help the local populations, incorporate more information flow, and ensure transparency. To date, USAID assistance has helped install an information networks and library in the Moscow mayor's office to facilitate improved information, analysis, coordination, and decision-making. In two other cities, USAID advisors have helped mayors' make informed decisions on how to increase budgeting and transport efficiency. USAID has supported the development of NGOS, including the Moscow center for Human Rights, which, using USAID-supplied technical assistance, has reported on Chechnya and is communicating, via e-mail, to other similar organizations in Russia. USAID has helped the Social Information Agency disseminate topical information about medical and NGO reform in Russia. USAID also, through a grant, assured the publication of a booklet describing legal guidance on founding, registering, and funding voluntary organizations in Russia. Other important NGO activities supported by USAID contracts and grants include environmental awareness forums, the first ever official public hearing on NGO legislation at the Duma, and innovative NGO funding strategies. USAID grants have strengthened independent media in Russia by linking a network of news stations for more efficient news gathering, training in media, and helping media organizations become private and grow.
Description: USAID advisors and experts work directly with city administrations, NGOs, and media outlets. USAID supports this work through direct grants and cooperative agreements, with contractors, US private voluntary organizations.
Host Country and Other Donors: USAID works closely with Russian NGOs and municipal governments. The World Bank and European donors also are fully engaged in similar work which is discussed at periodic democracy round table discussion.
Beneficiaries: Local governments making decisions transparently, strengthened NGOs, and independent media benefit all Russian citizens and, also, assures that Russia continues its development into a full economic and political partner with the West.
Principal Contractors, Grantees, and Agencies: The Research Triangle Institute is the main implementor of the program.
Major Results Indicators*:
Percent of national revenue flowing to local government
* 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: RUSSIA
TITLE: Crises, 110-S003.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: TBD Freedom Support Act
INITIAL OBLIGATION: FY 1992; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Reduced human suffering and crises impact.
Background: USAID responded to the Chechnya crises with funding to the International Committee of the Red Cross and to the International Organization for Migration.
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USAID Role and Achievements to Date: USAID provided funds to the ICRC and IOM for implementation of emergency humanitarian activities in Chechnya.
Description: Through the provision of funds to the ICRC and the (IOM), 400,000 persons displaced by the Chechnyan conflict were provided basic food, shelter, and health care.
Host Country and Other Donors: International Committee of the Red Crescent/Cross (ICRC), International Office of Migration (IOM)
Beneficiaries: Displaced Chechnyan citizens
Principal Contractors, Grantees, or Agencies: ICRC, IOM
Major Results Indicators*:
Number of people given basic services.
* 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: RUSSIA
TITLE: Social Benefits, 110-S003.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $5,500,000 Freedom Support Act
INITIAL OBLIGATION: FY 1992; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Improved sustainability of social benefits and services.
Background: The Russian health care system is falling apart. In 1995, expenditures on health were estimated to be less than 1.5% of GDP. Budgetary pressures preclude the government health care system from providing adequate health services to the total population. Inefficient management systems and lack of alternative financing mechanisms assured that health service delivery was unsustainable and of low quality. Improved efficiency in management and resource allocation, and enabling policies and regulations are needed to assure that service delivery is sustainable and of sufficient quality.
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USAID Role and Achievements to Date : USAID has provided technical assistance and advice in several sectors, successfully demonstrating the benefits of a restructured, more privatized health system. This has been accomplished through support for the development of working models which integrate financial incentives for high quality with cost-
effective service delivery. USAID has provided ground-breaking assistance in setting up total quality management (TQM) for physicians, piloted health maintenance organizations and other financing models, and tested approaches for improving systems for pharmaceutical management. USAID is also providing a system to upgrade basic service delivery for residents of recently privatized state farms and is close to completion of a nation-wide policy for means testing for housing subsidies for low income populations. USAID is also supporting technical assistance to the Russian national immunization program to develop information and education campaigns related to vaccinations.
Description: USAID advisors work directly with physicians and polyclinics on the local level and with oblast and the Federal government on policy-level questions. Advisors also work directly with medical educational institutions, insurance companies, and private sector entities to develop and implement pilot activities which can be replicated throughout the country. In the future, USAID will focus on technical assistance to: 1) create a legal and regulatory framework to support health sector transformation, 2) develop models of innovative privatization and governance structures that include capital formation schemes, and 3) dissemination of results.
Host Country and Other Donors: Activities are closely coordinated with the World Bank, EU-TACIS, the British Know-
How Fund and other donors. USAID normally pilot tests activities which are later modeled by other donors. The Ministries of Health, Agriculture, and Housing consider USAID activities to be very important and work closely with USAID in development of policy.
Beneficiaries: Efforts in assuring the sustainability of basic social services and benefits are targeted towards users of the health care system, low-income populations, and members of recently privatized state farms. Achievement of this SO will result in more efficient and sustainable delivery of quality basic services.
Principal Contractors, Grantees, or Agencies: Activities are implemented through IBTCI, BMS, Mir Searle, the U.S. Food and Drug Administration, Management Sciences for Health, U.S. Pharmacopeia, the U.S. Center for Disease Control, University of North Carolina, BASICS, U.S. Department of Health and Human Services, HPI, BU and Abt.
Major Results Indicators*:
Number of services privatized
*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: RUSSIA
TITLE: Environmental Health, 110-S003.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $31,600,000 Freedom Support Act
INITIAL OBLIGATION: FY 1992; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Reduce environmental risks to public health
Background: The acuteness of environmental problems in Russia, deepened by the most critical socio-economic crises, has led to a substantial deterioration in the health of its population and undermines its drive towards economic reform. Environmental degradation and destruction of resources have led to substantial losses in economic productivity.
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USAID Role and Achievements to Date: USAID has developed a comprehensive environmental health strategy that was endorsed by the Gore-Chernomyrdin Commission. This strategy focuses on the use of risk assessment as a tool in priority setting and environmental management, policy and legal changes that will lead to decreased environmental health risks, support to NGOs working in the environmental health sector, and training in risk assessment and environmental epidemiology. To date, six environmental audits have been completed that resulted in recommendations to decrease emissions of pollutants, an audit of municipal drinking water resulted in recommendations or long term financial savings in water system management, and other audits have resulted in the reduction of wastewater discharges. Over 100 small Russian NGOs have received assistance and over 200 Russians have received training in environmental management, risk assessment, environmental policy and environmental enforcement. Energy efficiency audits at district heating boilers have demonstrated that major reductions in air pollution (up to 30%) can result from efficiency improvements that also result in significant cost savings at these facilities.
Description: USAID advisors and contractors are working directly with Russia public and private sector counterparts implementing activities that demonstrate the effect of pollution abatement activities on public health. In addition, USAID works directly with NGOs on community environmental awareness activities. Representatives from local and national government and NGOs have been trained in improved environmental management techniques. Technical assistance is provided to national level policy makers in the use of risk assessment in prioritizing investments.
Host Country and Other Donors: Ongoing efforts are coordinated closely with the World Bank and other donors. Other donors are watching USAID's pilot activities and plan to duplicate some successful ones.
Beneficiaries: Beneficiaries of activities under this SO are intended to be the people of Russia who are exposed to air and water pollution, making them unhealthy, thereby decreasing their ability to consistently contribute to economic and political reform.
Principal Contractors, Grantees, or Agencies: USAID is working with the following: the U.S. Nuclear Regulatory Commission and the U.S. Department of Energy, the World Environment Center, the U.S. Environmental Protection Agency, CH2MHILL, Management Systems International and EPAT..
Major Results Indicators*:
Number of industrial plants modified to reduce emissions to acceptable levels
*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.