Note: This document may not always reflect the actual appropriations determined by Congress. Final budget allocations for USAID's programs are not determined until after passage of an appropriations bill and preparation of the Operating Year Budget (OYB).
BELARUS
FY 1998 Assistance to the NIS Request . . . . . . . . . . . . . . . . . $4,900,000 Introduction
Continued assistance for Belarus is in the national interest of the United States due to three strategic concerns. First, similar to all of the New Independent States of the former Soviet Union, the U.S. Government wishes to see Belarus join the community of democratic, market oriented nations at peace with itself and its neighbors. Second, Belarus is a strategically located buffer between an increasingly assertive Russia and former states of the Eastern bloc seeking closer ties with the West and possible NATO membership; however, Belarus is pursuing closer ties with Russia to the detriment of that buffer. Third, there is a continuing interest in seeing Belarus maintain its commitment to internationally supported arms agreements. Belarus, though, is among the slowest of economic and democratic reformers in the NIS and the U.S. assistance request is appropriately modest.The Development Challenge
Belarus has been called the "assembly line" of the former Soviet Union, and despite a drastic decline in output, per capita income in purchasing power parity terms remains among the highest in the NIS. However, production is patently inefficient and energy intensive while the country remains highly dependent on energy sources elsewhere in the NIS. Symptomatic of structural problems, market costs of energy imports are beginning to exceed export values. In the early years of independence the Government of Belarus (GOB) attempted to retain a Soviet style administered economy in contrast to its liberalizing neighbors. Events are increasingly showing that Belarus cannot thrive in isolation from these neighbors. Uncontrolled inflation, 93% in 1991 upon independence, averaged 30% per month in 1994 and 1995.In 1993, the GOB undertook discussions with the International Monetary Fund (IMF) on a Structural Transformation Facility and with the World Bank for a Rehabilitation Loan. Inflation has more recently been constrained and the budget kept reasonably in balance. This brought the IMF back for consultations, but despite initial progress in discussions, GOB adherence to agreements has been generally unsatisfactory. In the name of stability, the GOB recently has experimented with a dual exchange rate and has attempted to support an overvalued official exchange rate resulting in a critical loss of reserves. The IMF canceled the first review of a Standby Agreement over lack of performance on exchange rate policy, external payments and structural reform, and in February 1996 the IMF indefinitely postponed granting a loan. These economic difficulties will postpone adjustment and conceivably spill over into the social field.
Privatization also lags. USAID has funded successful small-scale privatization through the International Finance Corporation (IFC), but broader efforts have not been encouraged by the GOB, re-enforcing the lack of engagement of donors. Through the IFC, which completed its 100th auction in November 1996, about 14% of small-scale enterprises are now privately owned. Around 15% of GNP is estimated to be generated entirely in the private sector, among the lowest ratio in the NIS. While President Lukashenko signed into law legislation to complete small-scale privatization by the end of 1997 and to implement changes to facilitate the auction process, state-owned enterprises remain largely untouched by privatization and many are insolvent. Regulatory hindrances such as ceilings administered on profit margins for wholesale and retail trade, along with structural impediments, limit economic development. In the fall of 1996 price controls were reintroduced on basic goods and services.
Progress in democratization as indicated by independent judiciaries and media also mirrors the Soviet system and lags its Eastern European and NIS neighbors. May 1995 parliamentary elections were judged less than free and fair and low voter turnout invalidated results in most districts. Observers noted lack of press freedoms, campaign restrictions and a flawed election law. A new legislature did not convene, leaving Presidential power largely unchecked.
A relatively high voter turnout in the December 1995 elections in reaction to the President's efforts to discourage voting resulted in a functioning parliament. However, the legislature quickly divided into five caucuses, the largest of which was the pro-presidential "Concord" caucus. The President moved to assert further power by proposing changes to the Constitution to be adopted by a referendum in November 1996. The Constitutional Court ruled the changes to be in actuality a new Constitution which may not legally be adopted by a referendum. The USAID-funded American Bar Association Central and East European Law Initiative had conducted an assessment of the President's proposed revision of the Constitution at the request of the Constitutional Court. The President disregarded the ruling and proceeded with the referendum, worsening the already weak separation of powers. The referendum passed with 70.5% of the vote, giving the President broad powers, extending his term to 2001, and enabling the President to assemble a new Parliament.
Public dissent had peaked in the spring of 1996 in response to the April 2 "association" treaty with Russia. Public protests in Minsk were met by riot police and on April 26, following violent clashes with the authorities, more than two hundred people were detained. Opposition groups continue to resist the President's authoritarian tendencies, as well as his policy of seeking closer integration with Russia, but despite a recent drop, independent polls indicate that the President still enjoys broad popular support, retaining strong backing from the elderly and pensioners.
Other Donors
Lack of progress with the IMF has slowed implementation of World Bank and European Union sectoral projects necessary to further reform. A European Union voucher privatization program for larger organizations has been stalled. The Soros Foundation is providing $8 to $9 million, and the Government of Netherlands has provided small amounts of assistance through training.FY 1998 Program
The development challenge continues largely unchanged from the previous year. Priorities for U.S. technical assistance, outside the Nunn-Lugar program, remain economic restructuring, democratization, and humanitarian assistance. Limited U.S. assistance will remain targeted on reform-minded elements and take advantage of opportunities to encourage progress where possible, especially at the grass roots level where reform is most promising.
Cross-cutting and Special Initiatives
.Steady progress in USAID-funded privatization of small-scale enterprises, implemented through the International Finance Corporation in ten cities, has resulted in a gradual improvement in the enabling environment. Laws enacted in the fall of 1996 accelerated small-scale privatization through the breakup of large-scale trading structures and improvements which facilitate the small-scale auction process. Though privatization has made new private enterprise possible, lack of a durable commitment to reform by the GOB is a great impediment. The investment climate remains very poor, with the GOB retaining much control over the business sector such as imposing foreign exchange restrictions and two different official exchange rates, one for privatized companies and one for state-owned enterprises. Because of past successes in privatization, USAID will continue to explore opportunities to support small-scale enterprise development in Belarus.
Public support is critical to sustained, national reform. The public, however, lacks basic and objective information. The state media provided one-sided coverage of the President's illegal referendum in November 1996. Independent media cannot use government owned printing facilities, or government distribution kiosks, or even the government postal service. Direct and often indirect government censorship persists. Although the current political environment in Belarus limits the range of potential media activities, programs will include training of journalists in management and reporting skills. Additionally, building upon USAID success in strengthening the Constitutional Court and legal organizations through funding of the American Bar Association Central and Eastern European Law Initiative, assistance to media associations focuses on improving media laws and promoting freedom of speech with support by these institutions.
The Eurasia Foundation is an independent, grant-giving organization which uses public and private resources to foster the process of economic and political reform. The initial grant to work in the New Independent States was received in 1993. By aiming projects at economic reform, government and nonprofit sector reform, and media and communications at the local level, Eurasia supports and complements USAID's strategic objectives of increased citizens' participation and development of private enterprise while focusing on the grass-roots level targeted by USAID programs.
In FY 1996, several grants were awarded to provide Internet access and improve computer skills in schools. The Eurasia Foundation also supports an NGO resource center through the local branch of the United Way in Minsk. Eurasia consults with USAID technical staff in order to program their activities to best complement USAID and other donor and organization efforts. Eurasia is actively working to leverage other resources from organizations and private businesses for their activities.
USAID has also supported a hospital partnership program which focusses on pediatrics, poison control, and hospital administration and management. Coordinated through the American International Health Alliance (AIHA), the partners on the U.S. side are the Children's Hospital of Pittsburgh in cooperation with the University of Pittsburgh Schools of Medicine and Nursing. The Belarusian partners are Minsk Children's Hospital No. 4, the Radiation Medicine Institute and the Minsk Medical Institute. Through the partnership, Children's Hospital No. 4 initiated plans for development of a complete and accurate registry of childhood cancer. Consequently, physicians have been able to meet the pressing need to improve detection and treatment of an increased number of pediatric thyroid cancers resulting from Chernobyl. The partnership program has also helped to establish a contemporary poison information resource database and an intensive training program for clinical toxicologists in Minsk at the Poison Control Center of Children's Hospital No. 4.
BELARUS
FY 1998 PROGRAM SUMMARY*
Strategic Objectives
Economic Restructuring Democratic Transition
Social Stabilization Cross-cutting / Special Initiatives Total Cross-cutting / Special Initiatives -- -- -- 4,900,000 4,900,000 TOTAL -- -- -- 4,900,000 4,900,000 *FREEDOM Support Act (FSA) Funds
USAID Mission Director: Gregory Huger
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