Strategic Goal: Democratic Transition

The development of democracy -- transparent and accountable governance and the empowerment of citizens through democratic political processes and civil society institutions -- is key to the success of sustained economic and social reform in Ukraine. As decision-making is decentralized and democratization proceeds, Ukraine's citizens will increasingly assume the responsibilities and enjoy the benefits of participation in the political, economic and social decisions that form their society. The success of this process will depend on the existence of appropriate institutions, laws, and processes, as well as the availability of relevant information. USAID's democracy program in Ukraine is focused on strengthening these building blocks of democracy -- developing competitive and fair political processes, including elections; promoting the active participation of citizens in political and economic decision-making through non-governmental organizations; strengthening independent media; putting in place laws and legal institutions that support democratic processes; and strengthening local government to make it effective, responsive and accountable to its citizens.

With USAID's support of electoral information systems, results of recent elections are being reported on a more timely basis and an increasing amount of information is being collected and published about political candidates, elected officials and party platforms. A new election law, drafted with USAID assistance and expected to be passed by Parliament, addresses a number of major shortcomings in the current law and will greatly increase the efficiency of the electoral process. To strengthen political parties, USAID is helping to improve the capacity of party members to communicate their message to constituents and translate voters' interests into policy. USAID is also helping voters articulate their interests and strengthen their capacity to participate in economic and political decision-making by supporting the work of non-governmental organizations, among them women's groups, independent trade unions, independent media and human rights groups. The result of this effort is that these organizations are increasingly active and effective. They are investigating and reporting on human rights violations; addressing such key women's issues as domestic violence, legal inequality and women's entrepreneurship; conducting opinion polls; publishing a public policy journal; and producing and broadcasting daily television programs that keep Ukrainian citizens informed about the news, politics, free-market economics, and other current events.

Among the greatest challenges Ukraine faces is the completion of its new constitution this year, with enormous implications for how the country functions, as well as its future development. USAID has provided legislative drafting assistance in support of constitutional development, as well as for a new civil code and a wide variety of legislation. USAID-supported activities have created a system of Rada (parliament) interns who provide legislators with research and analysis on draft laws. An information system was designed for the Rada which has increased the access of lawmakers and the public to information, connected Ukraine with the Internet, and improved research and analysis of information. USAID assistance is also having a significant impact on Ukrainian law schools. The five largest law schools, representing 80% of law students, have each received in-house publishing equipment so that their curricula can be revamped with post-Soviet material. Law schools will introduce 26 new subjects into their curricula over the request period. With USAID support, the Supreme Court and Supreme Arbitration Court are conducting in-house continuing education for all judges, who will play an ever-increasing role in upholding the constitution, enforcing laws and resolving disputes. USAID programs are also helping to initiate court cases to protect the environment and the rights of workers.

Aided by USAID technical assistance, leaders of local governments all over Ukraine are beginning to practice democratic governance through the introduction of more open budgeting, town meetings, citizen task forces, constituency outreach and local government watchdog groups. The result is that local governments are improving their financial management, and becoming more effective, transparent and accountable to their citizens. For instance, in the City of Kharkiv, the mayor appeared on television after publication of the recently-passed budget for all to examine, to explain spending priorities and answer call-in questions about it, responding to criticism. The city of Ternopyl revamped its entire bus system to include higher fares but better maintenance and more service, increasing its public transportation capacity by 40%. The Ukrainian Association of Cities is very active in advocating on behalf of Ukraine's municipalities, especially with regard to new legislation being considered in Parliament. As a result of continued USAID assistance, the majority of Ukraine's urban population will have more access and better services from their local elected governments.

Strategic Goal: Social Stabilization

The objective of USAID's assistance in this area is to help make social services work for the Ukrainian people, both during and after the country's economic and political transition. USAID support for social sector restructuring is designed to protect the most vulnerable members of society during the economic transition, reduce government budget expenditures in the social sector, and facilitate the price increases necessary to improve social service quality. Political support for economic reform in Ukraine will evaporate if affordable methods are not developed to shelter the poor from rapid price increases, falling incomes, and the deterioration of basic public services. USAID activities are designed to address the urgent humanitarian needs of the people of Ukraine, support the government in moving from universal price subsidies to those based on income, and to lay the foundation for a sustainable system of social insurance. They are also designed to reduce the public health risks caused by environmental mismanagement.

USAID provides humanitarian assistance to address critical needs of the most vulnerable groups and to respond to emergency situations. Ukraine has benefited greatly from the distribution of excess U.S. military supplies. Roughly $6 million worth of these supplies have been distributed to the needy through local Ukrainian NGOs, and a 1,000 bed U.S. Army hospital worth approximately $17 million was delivered to the city of Donetsk. In response to highly destructive flooding in Kharkiv last summer, USAID provided chloride disinfectant to render household water potable, along with emergency relief supplies flown in on five cargo planes.

USAID has been the largest donor of vaccine to combat the diphtheria epidemic in Ukraine, providing 32 of 50 million doses needed and related technical assistance. This program has demonstrated that Western vaccines work, that mass campaigns work, and that Ukraine can safely modify its immunization protocols. As a result of USAID efforts, the epidemic is beginning to subside. USAID is also providing a one-year supply of insulin for Ukraine's child diabetics while concurrently helping to restore indigenous production of basic medicines and to market promising Ukrainian plants to potential U.S. partners. Partnerships between U.S. hospitals and facilities in Kiev, Lviv, Donetsk and Odessa are focusing on improving the prevention and treatment of disease and on cost containment. Results are heartening. The Kiev partnership hospital has reduced the mortality rate for newborn babies by 62% between 1993 and 1995, and the cost of health care has been reduced at partnership hospitals through 45-65% reductions in the number of days patients stay in the hospital. The Ukrainian National Emergency Medical and Disaster Medicine Training Center, supported by this program, opened in December, with the potential to increase greatly the effectiveness and efficiency of Ukraine's emergency response capacity.

To help make social protection services work for the Ukrainian people, USAID is supporting the development of non- governmental organizations (NGOs) to provide services that government can no longer afford. Since the break-up of the Soviet Union, the number of NGOs has grown markedly, from roughly 40 in 1990 to over 800 in 1995. The USAID-supported NGO Service Center provides a broad range of services to the local NGO community, includingtraining, technical assistance, and seed grants to local NGOs working in social protection services. More than 200 NGOs have received grants, over 1,300 NGO leaders have been trained, substantially strengthening the capacity of NGOs to meet critical social needs.

To promote social sector restructuring, USAID is providing technical assistance to help refine and build support for the new income-based benefits program on housing and utilities, and to help develop a broader program of means- tested benefits for the needy. To date, over a million people have received subsidies for part of the cost of their housing and utility bills, while price increases for housing and communal services for those who can afford them have resulted in a savings to the Government of Ukraine of $600 million in 1995 and a projected $1 billion in 1996. Since 1994, USAID has supported technical assistance and training in U.S.-based health care management, finance, and information to enable Ukrainian counterparts to use existing resources more effectively and to generate new revenues to the health sector. Health care finance and service delivery reform is focused at local level structures, including intensive demonstration sites in Lviv and Odessa, where USAID is working to reduce the cost of health care by supporting reorientation of health care delivery away from long hospital stays and toward clinic visits, and by introducing market incentives. Reducing health care costs is also a goal of the reproductive health project, which aims to reduce the rate of abortion through physician training in modern family planning methods. As a result, Lviv Oblast recently issued a decree restructuring financing for its health care system and providing for use of paid services.

In addition to addressing the economic implications of Ukraine's environmental problems, USAID's environment program also focuses on the public health risks caused by Ukraine's deteriorating municipal infrastructure. In the city of Lviv, where water quality does not meet minimum U.S. health standards, USAID is helping the city re-engineer its water utility and establish consumption-based billing and cost-recovery for sustainable system maintenance. This is expected to lead to the city's eligibility for a World Bank loan based on demonstrated ability to generate revenue to repay bank loans. When the city of Kharkiv was flooded last summer, causing a sewage emergency, a USAID team quickly conducted an on-site assessment of the public health needs and contributed commodities and technical assistance to prevent a health emergency. USAID also provided water pipe to local authorities in Crimea for completion of a new pipeline, which doubled the previous delivery capacity and now provides water to some 82,000 residents. Thousands of brochures were also provided with instructions for improving environmental health.

For the future, USAID will also assist Ukraine in developing and implementing a comprehensive plan for the environmentally sound economic re-development of the Chernobyl region.

USAID Mission Director, Gregory Huger

PROGRAM: UKRAINE
TITLE: Privatization, 110-S001.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $11,000,000 Freedom Support Act
INITIAL OBLIGATION: FY 1994; ESTIMATED COMPLETION DATE: FY 1999

Purpose: Increased transfer of state-owned assets to the private sector.

Background: Economic reform in Ukraine began in earnest with the administration of President Leonid Kuchma. Key to this reform is the privatization of industries, housing and land. In November 1994, President Kuchma set an overly optimistic target of privatizing 8,000 medium and large scale enterprises by the end of 1995. Over 1,500 medium/large enterprises and approximately 22,000 small scale companies have been privatized to date. The government of Ukraine has since revised its targets for medium and large-scale privatization and is accelerating the pace. Small-scale privatization has progressed rapidly since mid-1995.

USAID Role and Achievements to date: USAID has worked very closely with the government of Ukraine and other donors to develop a certificate privatization program that is rapid and transparent, and that elicits popular participation and support. Forty-eight million privatization certificates and 200 million savings certificates were designed, printed and delivered to Ukraine for use in the program. Close to 60% of the population has either picked up their certificates or opened a privatization account. Twenty-six auction centers operate around Ukraine and over 1,000 bid collection centers are open in local neighborhoods for citizens to offer certificates for shares. Recent improvements in policy have tripled the number of enterprises auctioned each month. USAID supports small-scale privatization in 18 cities in 13 oblasts throughout Ukraine, and most USAID-funded cities have privatized between 50 and 90% of available small-scale objects. USAID has also developed and is helping implement procedures for competitive privatization of urban land parcels, titling and registration, and zoning procedures. USAID's housing program was instrumental in creating condominium associations that now include more than 500 housing units, with groundwork laid for a national roll-out of the program, and almost 22,000 units are being operated under private management nationwide.

Description: United States is the principal source of funding and technical assistance for implementing Ukraine's privatization program. USAID finances and provides technical assistance to 1) operate a nationwide network of enterprise auction centers and bid collection centers, 2) prepare state enterprises for auction, 3) calculate and disseminate auction results, 4) advise the State Property Fund (SPF) and its regional affiliates on a wide range of issues regarding improving the implementation of the privatization program, 5) assist local government to carry out small scale privatization, 6) conduct pilot privatization of agricultural land on six collective farms, 7) improve procedures for the privatization of housing units and formation of condominiums, and privatization and development of urban land, and 8) inform and advise the public about privatization and market reform.

Host Country and Other Donors: USAID activities in privatization are coordinated with the World Bank and the European Union's TACIS and the Government of Ukraine.

Beneficiaries: The participating Ukrainian public benefits from the privatization program through direct ownership in the country's productive and commercial capacity. The GOU and local governments benefits by being able to eliminate subsidies to state industries and increase revenues from privatization auctions and increased tax revenue.

Principal Contractors, Grantees, or Agencies: USAID implements its activities through the IFC, Price Waterhouse, Gavin Anderson, PADCO and RONCO.

Major Results Indicators*:

Percent of land owned by state of parastatal entities declines
Percent of business assets in state-ownership nation-wide declines
Percent of GDP attributable to private sector activities increases
Percent of housing privately owned, managed and maintained in specific locals increases

* 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: UKRAINE
TITLE: Fiscal Reform, 110-S001.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $5,800,000 Freedom Support Act
INITIAL OBLIGATION: FY 1994; ESTIMATED COMPLETION DATE: FY 1997

Purpose: Increased soundness of fiscal policies and fiscal management practices.

Background: Technical assistance under this strategic objective aims to make the process of fiscal budget development more systematic and transparent so that the policy level decisions will be made in an environment where the implications of these decisions are clear to all. Under the reform-oriented regime of President Kuchma, Ukraine is moving to strengthen its fiscal sector and the institutions involved with it, including the Ministry of Finance, the Ministry of Economy, relevant committees of the Parliament (Rada) and units of local government. Over the past year there has been modest, but undoubted progress made. This involves efforts to institute macroeconomic forecasting, improve tax policy and administration, and gain tighter control over the budget in order to reduce budget deficits and meet other fiscal targets set by the International Monetary Fund as a condition for receiving future assistance.

USAID Role and Achievements to date: USAID has provided training to officials of the State Tax Inspectorate of the Ministry of Finance in the areas of tax collection procedures, tax law enforcement, audit and internal control mechanisms. Government-wide taxpayer identification numbers and an electronic master file are being created with USAID assistance. A Budget Policy and Macroeconomic Analysis unit has been created within the Main Budget Department of the Ministry of Finance and supplied with computers and related equipment and training in their use.

Description: USAID's fiscal program focuses on improving overall tax structure and administration, developing tools for budget preparation, analysis and monitoring, formulating alternative approaches to inter-governmental finances, and strengthening the ability of institutions, particularly the Ministry of Finance, to function effectively in a market economy.

Host Country and Other Donors: USAID activities are part of a coordinated effort with the IMF and the British Know How Fund.

Beneficiaries: The Ministry of Finance and the State Tax inspectorate are the immediate beneficiaries, and by extension the tax payers and voters of Ukraine.

Principal Contractors, Grantees, or Agencies: USAID activities are implemented by KPMG. In addition, USAID- funded advisors from the U.S. Department of Treasury are advising counterparts in the Government of Ukraine.

Major Results Indicators*:

Amount of Karbovanets budget deficits
Amount of Karbovanets of government budgetary transfers to state-owned enterprises
Amount of Karbovanets 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: UKRAINE
TITLE: Private Enterprise, 110-S001.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $56,500,000 Freedom Support Act
INITIAL OBLIGATION: FY 1994; ESTIMATED COMPLETION DATE: FY 1999

Purpose: Accelerated development and growth of private enterprise.

Background: Business development in Ukraine is essential to create jobs, generate income, expand the availability of goods and services, increase tax revenues and other economic benefits especially at the local level. However, Ukrainian entrepreneurs have difficulty exercising the business skills required for a market environment and getting together with investors. Support services, especially financial services, are inadequate. And the regulatory and local political environment does not yet encourage the growth of competitive businesses. Agriculture remains a major contributor to production in Ukraine, comprises nearly 30% of GDP and 20% of employment, and is a major export earner. Agriculture was central to the structure and functioning of the previous planned economy and its transformation is critical to creating a successful market economy. In all sectors, Ukraine is making mixed progress in developing a framework for institutionalizing rules regarding property relations, and an enforcement system for ensuring that contracts are adhered to. In the area of antimonopoly and unfair competition, the Antimonopoly Committee of Ukraine (AMC) has moved aggressively to develop necessary statutes, internal and investigative procedures, and enforcement mechanisms, gaining international recognition for its progress. Ukraine is applying for the harmonized system of the classification of traded goods, is actively moving toward accession to the World Trade Organization (WTO) and is also expected to join the Kyoto Convention.

USAID Role and Achievements to date: In March 1995, the West NIS Enterprise Fund was registered to do business in Ukraine, and has issued three letters of intent so far, totaling $4 million. The Eurasia Foundation has funded ten loans so far through its small business loan program. The NewBizNet project is assisting local business advisory organizations to strengthen their services to small and medium businesses. Two new projects are being prepared to support the recovery of privatized companies. USAID's $175 million EXIM bank program has leveraged private sector resources to supply much needed inputs to the agricultural sector. Three Farm Service Centers have been established with strong U.S. private sector participation, and a private farm finance company is under development. In housing, USAID assistance has supported the growth of a private realtors' association, and has developed the regulations and procedures to form condominium associations of privatized housing owners as well as the provision of housing maintenance and management services by private businesses. USAID has also assisted the AMC in drafting anti-trust legislation and procedural and administrative laws and regulations, and in initiating several hundred cases of violations of monopoly statutes, unlawful agreements, unfair competition and discrimination by state agencies and executive authorities in restraint of competition. USAID has helped Ukraine complete over half the prerequisites for admission to the WTO. USAID is supporting the creation of the infrastructure necessary to support increased trade by assisting the State Customs Committee (SCC) in several areas necessary for WTO accession and in establishing training programs for approximately 16,000 new employees.

Description: Under the Newbiznet Project, Business Service Centers will continue to provide advisory services directly to enterprises. This activity works in collaboration with other USAID-funded activities such as the Enterprise Fund. Through the Small Business Loan Program and the Micro-Lending Program of the West NIS Enterprise Fund, enterprises will receive loans and equity financing. Other USAID activities will work with organizations such as the Association of Cities and the Council of Regions, under the President of Ukraine, to support policy development and improve the environment for business. The Association, and potentially other Ukrainian institutions, will also use USAID assistance to promote a private housing market, including condominium formation. Ukraine's Realtors' Association will tap USAID support to promote the private management and maintenance of multiple occupant buildings by private firms. USAID will also continue to support the development of market driven, private sector agricultural production, including private marketing and input supply and private sector farm supply centers, which provide farmers with alternative sources of inputs and marketing channels, new technology and technical and managerial support. USAID has initiated a bankruptcy law program to provide the legal infrastructure for the restructuring of insolvent enterprises.

Host Country and Other Donors: The roles of the AMC and SCC have been noted above. The British Know How Fund has provided certain short term assistance to the AMC, and the World Bank has an RFP outstanding for European training for AMC personnel. The bankruptcy program will directly foster compliance with planned conditionality for bankruptcy reform to be included in the IMF's medium term facility expected in 1997.

Beneficiaries: Proprietors and employees of small and medium-sized businesses benefit from the various firm-level assistance activities described above. The business community at large will benefit from bankruptcy reform and the introduction of restructuring procedures for insolvent businesses. The business community and the public at large will benefit from vigorous antitrust enforcement being promoted by USAID assistance to the AMC. All participants in Ukraine's international trade will benefit from WTO accession and the harmonized system, as well as from training provided to SCC personnel. Producers and consumers benefit from agricultural activities under the program.

Principal Contractors, Grantees, or Agencies: The contractor for the bankruptcy program is IRIS. Assistance to the SCC is being provided under contract with IRIS, through a subcontract with Nathan Associates, Inc. Assistance to the AMC is being converted from an IRIS contract to an Interagency Agreement with the Federal Trade Commission and Department of Justice. Other contractors and/or grantees include: the International Executive Service Corps, DA, the World Council of Credit Unions, the Eurasia Foundation, and the Eastern Europe Real Property Foundation.

Major Results Indicators*:

Number of business associations advocating on behalf of private sector initiatives, needs, and future growth requirements
Number of laws implemented to expand the private sector
Number of regulatory procedures necessary to strengthen competitiveness in key economic sectors
Number of commercial (e.g. contract disputes) cases brought to courts and being resolved
Commercial tax system in place that is considered equitable and transparent
Volume of business support services available to private enterprise from self-sustaining local institutions
Number of private sector businesses operating and generating employment
Competitive pricing for efficient use of energy resources
WTO accession
Harmonized system accession
Kyoto Convention accession

* 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: UKRAINE
TITLE: Financial Reform, 110-S001.4
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997 $10,700,000 Freedom Support Act
INITIAL OBLIGATION: FY 1994; ESTIMATED COMPLETION DATE: FY 1997

Purpose: A more competitive and market-responsive private financial sector.

Background: The National Bank of Ukraine has made some progress in developing the infrastructure for a safe and sound banking sector in which banks are able to pay a true intermediation role. Specifically this means development of bank supervision capacity, accounting and reporting, the legal infrastructure and government securities markets. This work is critical to developing a larger number of viable banks as opposed to the current fragmented situation in which many of the banks may not be solvent and some serve as little more than adjuncts to company treasuries. Ukraine's capital markets structure underwent significant changes last year, the most noteworthy item being a) approval by Parliament of a strategy for capital market development that stresses sound principles of competition and regulating and b) the establishment of the Securities Regulatory Commission (SRC).

USAID Role and Achievements to date: US bank supervisors have begun working with Ukrainian supervisors to develop capacity at the National Bank of Ukraine (NBU) to analyze and monitor risk and enforce prudential regulations. The NBU's Interbank Payment System (EFPS), partially funded by a USAID grant, is fully functioning, and technical execution of payments is now minutes rather than weeks. Approximately 2,000 bank employees from over 100 banks have attended training at the National Center for Training Bank Personnel, which was created with substantial investment and support from the NBU. A collateral law program has been initiated to provide the legal infrastructure for rational secured credit transactions. The Association of Investment Businesses has been established, uniting 140 investment funds and trust companies that subscribed to its code of conduct. Temporary share registries compiling initial shareholder lists are operating at 26 privatization auction centers around Ukraine, independent pilot registrars and a registrar support center have been established. More than 450 directors of private enterprises have received training on the principles of shareholder rights.

Description: USAID is assisting the new SRC on the development of its regulations and oversight capacity with the support of full time legislative regulation drafting and monitoring and enforcement advice. It is also providing it with up to date information and market analyses through the Capital Markets Monitoring Unit. Most of its board members are also receiving specialized training courses in the U.S. and other NIS countries along with a program that provides ongoing support to the Commission via a cooperative program of orientation and training with the U.S. Securities Exchange Commission. USAID is also providing technical assistance, training and equipment establishing independent share registries in Ukraine, educating managers of privatized enterprises and the public on shareholder rights, and establishing a national over-the-counter share trading system, owned and operated by a broker/dealer self- regulatory organization.

Host Country and Other Donors: Financial reform activities are coordinated with EU/TACIS, the World Bank, the IMF, the British Know How Fund, the National Bank of Netherlands and the Government of Ukraine.

Beneficiaries: The entire private financial sector will benefit directly from these activities, as will, by extension, shareholders, bank account holders and the people who need and use capital to finance the economy's growth.

Principal Contractors, Grantees, or Agencies: USAID's activities in Financial Reform are implemented by KPMG- Barents, Price Waterhouse, Intrados, Ukrainian Center for Certificate Auctions, IRIS and Financial Service Volunteer Corps.

Major Results Indicators*:

Amount of investment, from both domestic and foreign sources
Number of licensed viable private commercial banks
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.
Functioning pilot and, then, central collateral registries

* 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: UKRAINE
TITLE: Energy, 110-S001.5
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $11,000,000 Freedom Support Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 1999

Purpose: A more economically sustainable and environmentally sound energy sector

Background: Ukraine inherited inefficient industries from the former Soviet Union that require enormous energy consumption; fully 60% of all energy produced is consumed by industry. Ukraine depends heavily on foreign sources, particularly Russia, for fuel, importing more than 80% of its gas and more than 95% of its oil. Nuclear energy plays an important role in Ukraine electricity systems and the G-7 and Ukraine have signed a Memorandum of Understanding for a program to close Chernobyl by 2000 and develop new nuclear and thermal electricity production facilities. Ukraine's Ministry for Environmental Protection and Nuclear Safety needs to revise environmental regulations and standards to those of a free market economy. Ukraine's power sector is rapidly transforming from a State-owned and operated regionalized monopoly system into a reconfiguration of privately-owned and operated companies, reorganized to maximize the play of free market forces.

USAID Role and Achievements to date: Ukraine's eight former vertically-integrated regional monopolies, which had combined the basic utility functions of power generation, transmission and distribution, have been reconfigured into over thirty-three companies with the aim of pulling out the naturally competitive elements of the industry into separate competing companies, while retaining and corporatizing the system's natural monopolies. With the break up the monopolies, four new power generating companies (GENCOs) have been structured to compete in a wholesale market leading to increased operating efficiencies and lower electricity costs for the country. A new company, Energomarket, has been created to operate the wholesale competitive market and serve as a national financial clearing house/electricity dispatch center for the reconfigured system. A National Electricity Regulatory Commission (NERC), the first of its kind in the NIS, has been created to oversee fair competition in the GENCOs and to ensure an equitable system of retail tariffs.

Description: In concert with the Ministry of Power and Electrification, the World Bank and other donors, USAID developed a multifaceted energy program for Ukraine which focuses on (I) Power Sector Restructuring, which has helped transform the power sector from a vertically integrated monopoly to a market system, with separate, competing components, a national regulatory body to set tariffs and grant licenses in response to market costs and efficiencies, and a national dispatch center to oversee power distribution based upon financial bids, and (2) Improving Energy Production and Efficiency through the introduction of new practices and technologies and assistance in applying market principles.

Host Country and Other Donors: USAID works with the Ministry of Power and Electrification of Ukraine, and coordinates with the activities of the British Know How Fund, the EU, and the EC/TACIS. The governments of Switzerland, the Netherlands, Canada and Japan also provide energy assistance.

Beneficiaries: USAID energy reform assistance benefits newly corporatized electric generating and distribution companies, the NERC, industrial energy users and the coal industry.

Principal Contractors, Grantees, or Agencies: Hagler-Bailly and Partners in Economic Reform (PIER) are USAID's energy activities implementors, with support from USAID-funded advisors from the US Department of Energy.

Major Results Indicators*:

Number of improved environmentally-friendly energy technologies
Percent of private enterprises using environmentally-friendly energy technologies
Percent of heat and power plants with energy-conservation measures
Percent of cost savings of selected heat and power plants due to improved environmental technologies
Percent of industries with energy efficiency programs which focus on demand-side management
Amount of electricity provided through competitive market
Percent change in pollution due to the application of environmentally-sound technologies at selected sites
Payment for electricity

* 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: UKRAINE
TITLE: Citizens' Participation, 110-S002.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $10,300,000 Freedom Support Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2001

Purpose: Increased, better-informed citizens' participation in political and economic decision-making.

Background: During 1994, free and fair elections were held for the Presidency, the Parliament, and councils at the oblast and local level. However, new legislation governing elections and political parties is needed to improve the political process and the public's trust in it. Independent media initially began to thrive following Ukraine's independence and scores of independent newspapers, radio stations, and local TV stations now exist. Furthermore, advertising revenues are increasing to the extent that it will soon be possible for independent media to be profitable. However, the government still exerts considerable influence over the media through ownership of the two national TV channels, legal regulation, licensing oversight, and distribution of vital resources. Non-Government Organizations (NGOs) are forming rapidly in Ukraine and the sector is developing with associations of NGOs forming in some cities and with foundations being established to allow businesses to support charitable activities. However, the lack of legislation concerning taxation and registration of NGOs, as well as the citizens' lack of experience with a civil society, continue to hinder the development of NGOs.

USAID Role and Achievements to date: Comprehensive USAID support in 1994 contributed to the fact that democratically-elected officials hold office in all branches of government throughout Ukraine. Public-policy and human rights NGOs are being strengthened through training and small grants. Their activities include investigating human rights violations, conducting regular and well-publicized opinion polls, publishing a public-policy journal and a popular political TV program. Women's NGOs are being fostered and assisted to address key issues involving women such as domestic violence, legal inequality and women's entrepreneurship. A daily television news program, free-market economics program, and other informational programs are being produced independently and broadcast nationwide. Independent local TV and radio stations are being supplied with high-quality programs and staff training, while a USAID-funded press center provides journalists with access to a wide range of resources.

Description: USAID is promoting the active participation of citizens in political and economic decision-making through support to civic action groups, public-policy NGOs, political parties, and democratic free trade unions. USAID assists government entities with improving election administration, drafting electoral legislation, and educating the public of the democratic process. USAID supports the production of non-state daily and weekly news programs which are broadcast nation-wide. With the support of a USAID grantee, Ukrainian independent TV stations are in the process of forming the country's first independent television network.

Host Country and Other Donors: USAID works in concert with the Central Election Commission, committees of the Rada, the Eurasia Foundation, EU/TACIS, UNDP and the Canadian International Development Association. The Renaissance Foundation is also active in citizen participation activities.

Beneficiaries: The Central Election Commission, Ukrainian NGO's, political parties, independent media and trade unions all benefit from USAID support for and promotion of citizen participation and education activities.

Principal Contractors, Grantees, or Agencies: USAID programs in this area are implemented by Freedom House, Internews, the Free Trade Union Institute, NDI, IRI, and the International Foundation for Electoral Systems.

Major Results Indicators*:

Number of changes made to government policy as a result of citizen participation
Number of draft legislative initiatives introduced by legislative branch in which there was citizen participation in the deliberative process
Number of draft legislative initiatives voted on by legislative branch in which there was citizen participation in thedeliberative process
Number of new federations, organizations, coalitions, etc. formed to promote/oppose specific policies/legislation
Number of NGOs brought into the legislative process (e.g., testifying before Congressional committees)
Number and types of fora in which NGOs engage state institutions in policy debate
Number of NGOs representing women's issues
Number of NGOs representing ethnic and other minorities
Percent of citizens who believe they are being represented by their legislators
Number of public hearings held
Existence of laws protecting freedom of association, assembly and speech
Percent of news coverage expressing opposing views
Percent of public with opinion that elections are free, fair and transparent
Rating of elections as free and fair by local and international monitors

* These are illustrative indicators. ENI Missions are in the midst of the complex process of developing measurable country-specific indicators and targets, which will be completed by June 1996.

PROGRAM: UKRAINE
TITLE: Legal Systems, 110-S002.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $5,700,000 Freedom Support Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2001

Purpose: Legal systems that better support democratic processes and market reforms.

Background: Ukraine has yet to pass a post-Soviet constitution and is currently being governed by a temporary constitutional agreement designed to break the deadlock between the executive and legislative branches. Although progress has been made to improve the legal system, further significant reform will depend on the adoption of the new constitution. A Constitutional Commission is working to submit a final draft of a new constitution to the parliament in the next few months, but it is unclear how long the draft will be debated or by what means it will be adopted. A civil code is being drafted and should be introduced to the Parliament in the next few months. But much work needs to be done to draft, revise and pass laws dealing with every aspect of Ukrainian life, including the criminal justice system, the economy, and civil society. The Parliament is still passing laws without adequate analysis and research, although the quality of debate and of new laws continually improves. It is generally agreed that the leaders of the court systems and the new Minister of Justice are committed to the independence of the judiciary, upholding new laws and protecting individual rights. But due to antiquated technology, poor training and resistance to change in the regional and local courts outside of Kiev, Ukrainian citizens still do not think of the courts as the venue to redress grievances or press for respect for their rights. On the human rights front, Ukraine is considered partly free.

USAID Role and Achievements to date: The term "the rule of law" was difficult to translate 3 years ago; now it is a basic tenet, enshrined in the 1995 Law on Power. USAID-supported activities have provided Rada members with research and analysis on draft laws, and an information system was designed for and delivered to the Rada to increase access by lawmakers and the public to information, connect Ukraine with the Internet, and improve research and analysis of information. The five largest law schools, representing 80% of law students, have each received in- house publishing equipment so that their curricula can be revamped and so that students will have post-Soviet material to study. The Supreme Court and Supreme Arbitration Court have established in-house continuing education for all judges. USAID programs have helped to initiate court cases to protect the environment and the rights of workers, and have supported the work of human rights groups that collect thousands of complaints of human rights violations every year.

Description: USAID programs provide technical assistance, training and access to information, and to a lesser extent commodities, to counterparts in the Ministry of Justice, the courts, Ukraine's top law schools, the Rada, including key committees and political factions, the presidential administration, legal associations, and municipal governments.

Host Country and Other Donors: The Ministry of Justice, Presidential Administration, the Council of Advisors Rada and the court system are all actively engaged in the reform process. USAID coordinates its activities with those of EU/TACIS, the Government of the Netherlands, and CIDA.

Beneficiaries: The Ministry of Justice, the court system, Law schools and the Rada all directly benefit from USAID's activities in legal system reform. The common citizen when dealing with the legal system also benefits from system improvements and more knowledgeable jurists and lawyers.

Principal Contractors, Grantees, or Agencies: USAID's legal system reform activities are implemented by three organizations; ARD/Checchi, ABA/CEELI and the US - Ukraine Foundation/Indiana University.

Major Results Indicators*:

Percent of population knowing/understanding specific rights
Targeted laws are:
- up-to-date
- published in a timely manner
- available to all judges and court officials organized in a manner that expedites research

* These are illustrative indicators. ENI Missions are in the midst of the complex process of developing measurable country-specific indicators and targets, which will be completed by June 1996.

PROGRAM: UKRAINE
TITLE: Local Government, 110-S002.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $5,000,000 Freedom Support Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2001

Purpose: More effective, responsive, and accountable local government.

Background: Ukraine still needs to clarify the role of local and regional government. The law on Local Self Government and State Power and Local Administrations needs to be re-written and passed by parliament in order to define the jurisdiction and powers of local government. Currently, municipal governments consist of an elected Council of People's Deputies acting as the legislature and having general oversight of the management of city affairs; a city administration headed by an elected Head of City Council ("mayor") in which executive powers are vested; and a Presidential appointee, Head of Oblast State Administration which transfers the state executive power. Nearly all local government officials lack knowledge and experience in public administration, e.g. human resource management and finance management. All staffing, office and administrative expenses of the finance departments in cities are financed directly by the Federal Government, under the budget of the Federal Ministry of Finance. Thus, municipal finance systems lack incentives for effective, cost sensitive program budgeting and monitoring. However, local governments are responsible for many municipal services, such as transportation, health, education, and housing. This highlights the need for developing a transparent, consensus-based intergovernmental system that ensures revenue-expenditure balance and an independent revenue privilege. There are therefore two considerations to address: the need for local governments to be autonomous in order to decentralize power, and the need for new local government laws to be passed and enforced in order to reinforce democratic practices at the level most accessible to citizens.

USAID Role and Achievements to date: Local governments are becoming the venue for the development of democratic leaders and governance, through the introduction of a variety of mechanisms such as more open budgeting, town meetings, citizen task forces, constituency outreach and local government watchdog groups. The Ukraine Association of Cities, modeled after the U.S. National League of Cities, is composed of mayors lobbying the central government for greater decentralization with an agenda covering local level policy, intergovernmental relations and municipal service. Municipal governments are improving their financial management while becoming more transparent and accountable to their citizens. In Kharkiv, the municipal budget for 1995 was printed in the local newspaper. In Ternopil, an Economic Development Office was established and instituted as a structural sub- committee in the city's administration. In Lviv, an estimated $50,000 USD will be saved by the city per year in phone charges due to operation of the city phone branch exchange (PBX) system. In addition, the Ternopil municipal government restructured its aging and insufficient fleet of buses and improved public transportation management, increasing capacity by 40%.

Description: USAID developed pilot projects in three Ukrainian cities: Lviv, Kharkiv, and Ternopil which focus on municipal finance management, improving municipal administration and increasing transparency. Our program also supports the Ukraine Association of Cities, which advocates on behalf of cities, especially with regard to the development of the draft Constitution regarding local government and new local government legislation being considered by parliament. Finally, we support training of local politicians so that once elected to office, they are aware of the need to respond to constituents' problems and learn techniques for doing so.

Host Country and Other Donors: EU/TACIS has a technical assistance project in the area of Self Government and a city training program focusing on cooperation between cities and the EU; the UN Habitat II program conducts training courses for self-governance leaders in management; World Bank reviews intergovernmental finances and sector loans; The Canadian International Development Agency assists the Ukrainian Academy of Public Administration in becoming a self-sustaining institution; USIS conducts a Community Connections exchange program; AED conducts training under the NET program for local government officials; IREX has a partnership program between the University of Georgia and Uzhorod State University and created a center for Public Administration Reform and Assistance; ACCELS conducts a Muskie fellowship program including public administration; Pylyp Orlyk Institute for Democracysupports local government officials in Ukraine under a Pew grant; and the British Know How Fund (KHF) is planning in 1996 to strengthen regional government focusing on Crimea.

Beneficiaries: Mayors, city administrators, local government officials and policy makers are the primary beneficiaries of these programs, and the public are the secondary beneficiaries through improved services and more responsive government.

Principal Contractors, Grantees, or Agencies: USAID's activities in local government reform are implemented by the Research Triangle Institute.

Major Results Indicators*:

Percent of communities where X percent of resources are being efficiently used for projects by voting citizens
Number/percent of local governments that have active systems in place for publishing/disseminating information
Number of karbovanets saved from corruption or because of improved efficiency as a result of oversight and audits
Percent of national revenue flowing to local government
Passage of legal, fiscal and procurement reforms that empower local governments
Percent of local population that believes management and delivery of services at municipal level:
- improved,
- more cost effective,
- responsive
to their needs and desires (desegregate by subgroups of population, regions of country and other relevant/important categories)

* These are illustrative indicators. ENI Missions are in the midst of the complex process of developing measurable country-specific indicators and targets, which will be completed by June 1996.

PROGRAM: UKRAINE
TITLE: Crises, 110-S003.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $1,000,000 Freedom Support Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2001

Purpose: Human suffering and negative consequences of crises are reduced.

Background: Upon Ukraine's independence from the Soviet Union in 1991, the government was no longer able to provide adequate social services for the population and an emergency situation ensued. The international community, including USAID, responded by providing critical humanitarian assistance to temporarily sustain the population. A nationwide diphtheria epidemic and seasonal outbreaks of cholera are a continuing threat to the nation's health. Flooding in Kharkiv in July, 1995 resulted in a breakdown in sewage and water treatment systems. An unusually heavy snow fall this past winter has raised the possibility of floods in many parts of the country this spring.

USAID Role and Achievements to date: The number of NGOs in Ukraine has increased from roughly 40 in 1990 to at least 800 in 1995, many of which are providing urgently needed social services. USAID has provided over $23 million worth of DOD excess property and in-kind donations as humanitarian assistance through local NGOs and social service providers to meet the critical needs of vulnerable populations. Critical supplies provided include medical supplies, basic living supplies and capital goods. In response to the floods in Kharkiv last summer, chloride disinfectant was provided to render household water potable and 5 cargo planes of U.S. excess military supplies were distributed as emergency relief through local NGOs. In order to maximize emergency preparedness, USAID has trained government officials and NGO staff members in the U.S. working in this area and created a stockpile of emergency supplies. The Ukrainian National Emergency Medical and Disaster Medicine Training Center, supported by the hospital partnership program, opened in December, 1995. A total of 770 budding NGO leaders have received training in basic NGO management and sustainability. The Ukrainian campaign against diphtheria has been supported through Feb. 1996 by 26 million doses of U.S. vaccine, enough to vaccinate about 19 million adults.

Description: In order to help make social services work for the people during the country's very difficult economic and political reform and after, USAID supports the institutional development of local non-governmental organizations (NGOs) whose efforts are critical as part of the private sector network of organizations providing social protection services. Furthermore, in order to alleviate to the extent possible the hardships imposed on the most vulnerable populations during the country's difficult transition, USAID has continued to provide humanitarian assistance through local NGOs and social services to meet the critical needs of these groups.

Host Country and Other Donors: The SOROS Foundation works with USAID and often provides funding for activities which USAID is unable to support. The British Know How Fund and EU/TACIS are also active, and USAID is instituting a coordination system with representatives of both organizations.

Beneficiaries: Ukrainian NGOs and charity organizations throughout the country, hospitals and orphanages, invalids, the elderly, and most other vulnerable groups benefit in some way from USAID activities in this area.

Principal Contractors, Grantees, or Agencies: USAID activities in helping to prevent and manage crises are implemented by Counterpart, World Learning, Eurasia Foundation, Program for Appropriate Technology in Health (PATH), American International Health Alliance (AIHA).

Major Results Indicators*:

Amount of temporary assistance appropriately targeted
Alternative conflict resolution mechanism in place
Restoration/reconstruction of basic infrastructure that can provide basis on which future economic development depends
Number/kind of man-made disaster prevention actions
Numbers of people with reduced suffering because of access to
- food
- shelter
- clean water, etc.
- immunization, vital pharmaceuticals (insulin)

* 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: UKRAINE
TITLE: Social Benefits, 110-S003.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $4,500,000 Freedom Support Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2001

Purpose: Improved sustainability of social benefits and services.

Background: President Kuchma and Prime Minister Yevhen Marchuk have set reform of the social protection system in the country as a major goal for 1995-96. General price subsidies to the population are to be replaced in large part by targeted, means-tested subsidies for the poor. Price increases for government services and utilities are being phased in. The government has also set a goal of reforming the system of social insurance; in September it submitted a fundamental law on social insurance to the parliament. The government has also decided to establish a regulatory system for private pension funds. While a planned law on health insurance is stalled, health insurance demonstration projects are underway, and the government is moving to make its health care system more efficient.

USAID Role and Achievements to date: In May, 1995, an income-based housing subsidy program was implemented and 716 housing subsidy offices opened around Ukraine. By February 1, 1996, 1.65 million Ukrainian families had received subsidies for part of the cost of their housing and utility bills. On October 1, 1995, Lviv Oblast issued a decree restructuring financing for its health care system and providing for use of paid services. The Kiev partnership hospital, the Center for Maternal and Child Care, has reduced the mortality rate for newborn babies by 62% between 1993 and 1995. The cost of health care has been reduced at partnership hospitals through 45-65% reductions in the number of days patients stay in the hospital. Demonstration sites for training and delivery of family planning services were established in Odessa and Donetsk.

Description: USAID is providing technical assistance to help refine and build support for the new income-based subsidy program on housing and utilities, and to help develop a broader program of means-tested subsidies for the needy. Our health financing reform project is working to reduce the cost of health care by supporting reorientation of health care delivery away from long hospital stays and toward clinic visits, and by introducing market incentives. Reducing health care costs is also one goal of the reproductive health project, which aims to reduce the rate of abortion through physician training in modern family planning methods. In 1991, the Ministry of Health estimated that the cost of treating abortion complications was four times that of supplying the population with contraceptives. Partnerships between US hospitals and hospitals in Kiev, Lviv, Donetsk and Odessa are focusing on improving the prevention and treatment of disease, and on cost containment.

Host Country and Other Donors: Price increases for housing and communal services are a requirement of Ukraine's agreement with the IMF; EU/TACIS has an assistance project in the area of labor and social insurance; the Government of Germany is working in Ukraine on pension reform.

Beneficiaries: Low-income Ukrainians, children and adults, notably pensioners, at selected sites in Lviv, Odessa, Donetsk, Kiev.

Principal Contractors, Grantees, or Agencies: USAID social protection activities are implemented through Chemonics/PADCO, Smith-McCabe, Abt Associates, American International Health Alliance (AIHA), AVSC International, Johns Hopkins Population Communication Services, JHPIEGO.

Major Results Indicators*:

Number of services privatized (e.g., pharmacies, hospitals)
Incentives for private (profit and non-profit) exist for quality service delivery
Percent of public with confidence in private service delivery
Change in numbers of public/private partnerships
Market reforms in place and introduced to various sub-sector service deliverers

* 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: UKRAINE
TITLE: Environmental Health, 110-S003.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $2,700,000 Freedom Support Act
INITIAL OBLIGATION: FY 1994; ESTIMATED COMPLETION DATE: FY 1999

Purpose: Reduced environmental risks to public health.

Background: A legacy of the Former Soviet Union was complete disregard for the environment, a lack of social awareness of the costs of natural resources, and an inability to manage natural resources as the foundation for economic development. Chernobyl is a prime example of resource mismanagement that has resulted in environmental degradation and significant economic costs. One of the major environmental risks to public health is unsafe water.

USAID Role and Achievements to date: Pipe was delivered to local authorities in Crimea for completion of a new pipeline, doubling the previous delivery capacity and now providing water to some 82,000 residents. Equipment is being provided to test and address priority repair and upgrading of the Vodokanal in Lviv, which provides potable water to residents, services and industry. This activity provides a model for roll out to other areas. During the Kharkiv sewage emergency, a USAID/Kiev team assessed public health needs and made recommendations for the national and international response. The Pest and Pesticide Management Project was launched, which includes training for Ukrainian agricultural chemical distributors, farmers and extension workers in integrated pest management and safe use of pesticides.

Description: USAID is strengthening environmental institutions within government, the private sector, and the NGO community to create an institutional framework that will support Ukraine's transition to a market-economy. Activities include environmental assessments for heavy industry in Donetsk to identify opportunities to reduce waste and improve efficiency, and eco-efficient business development in the Carpathian region focusing on sound resource management for sustainable economic development. In addition, USAID is helping with the re-engineering of the City of Lviv's water utility, including focusing on consumption-based billing and cost-recovery to enable long-term system maintenance. USAID is also assisting Ukraine to effectively manage the closure of Chernobyl as outlined in the G-7 comprehensive program.

Host Country and Other Donors: USAID coordinates with the Ukrainian/American National Policy Workgroups to promote sustainable development for Ukraine. USAID cooperates with The World Bank on the upgrade of Lviv's water supply and industrial waste management in Donetsk. EU/TACIS is a partner on the Chernobyl Social Impact Study.

Beneficiaries: In this phase, the citizens of Lviv, Donetsk, Kiev, Crimea, and Chernobyl are the primary beneficiaries.

Principal Contractors, Grantees, or Agencies: CH2M HILL is USAID's principal implementor, with assistance from USAID funded advisors from the USEPA working on water quality pest and pesticide management and a mobile radiation laboratory. Other activity implementors include PADCO, WEC, CUNY and ISAR.

Major Results Indicators*:

Number of uncertified nuclear plants closed
Number of industrial plants modified to reduce emissions to acceptable levels
Percent of hazardous wastes destroyed in environmentally sound fashion, recycled into harmless wastes and economically reusable by-products, or reconstituted into usable hazardous products under proper control and management
Number of people with access to potable water
Percent change in absenteeism due to work-related illness

* These are illustrative indicators. ENI Missions are in the midst of the complex process of developing measurable country-specific indicatorsand targets, which will be completed by June 1996.