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).
AZERBAIJAN
FY 1997 FY 1998 FY 1999 Actuals Estimate Request FREEDOM Support Act............... $16,400,000 $21,400,000 $31,500,000 Introduction
The emergence of Azerbaijan as a prosperous free-market democracy will advance U.S. national security as well as political, commercial and humanitarian interests. Azerbaijan is a country with an alternative source of oil available to meet U.S. energy needs, a key link in the trans-Caspian energy export system, and a promising market for American goods and services. At the same time, a government committed to rule of law and upholding human rights and other norms characteristic of democratic states would serve as a force for stability in the strategically important and historically volatile Caucasus region straddling Europe and Asia. Section 907 of the Foreign Assistance Act restricts assistance to the Government of Azerbaijan.
The Development Challenge
In the wake of the dissolution of the Soviet Union, Azerbaijan experienced a precipitous economic decline that was exacerbated by the country's territorial conflict with Armenia over the largely ethnic Armenian enclave of Nagorno-Karabakh. More than three years after a negotiated ceasefire, Azerbaijan must still contend with some 800,000 war-spawned Armenian refugees and their own internally displaced persons (IDPs), many of whom continue to live in terrible conditions.
Despite the beginnings of what is expected to be a financial windfall derived from development of its huge, off-shore oil reserves in the Caspian Sea, Azerbaijan has made only marginal progress in the transition to a market-based economy and democratic polity. Headway on privatization and economic restructuring has lagged even though Azerbaijan has attracted substantial oil-related foreign investment that has turned Baku into a boomtown. An authoritarian, highly-centralized regime has blunted democratic political reform.
Still, the Government of Azerbaijan (GOAz) has achieved a degree of macro-economic stability and a nascent small business sector is taking shape, though concentrated in the capital. These actions, however, do not include comprehensive economic reforms, laws and policies needed to create a fully democratic, market economy. A modicum of press freedom and increasing citizen participation in various types of political and social service delivery organizations is laying the foundation for future political change.
From the outset, the vast proportion of U.S. assistance to Azerbaijan has been for emergency humanitarian programs for refugees and IDPs. Those programs have been administered largely by Private Voluntary Organizations (PVOs) and international organizations (e.g., UN) and involve distribution of food, clothing and medicines, provision of basic medical services, and construction of shelters as well as water supply and sanitation systems. Emergency relief programs have reduced the level of human suffering but they cannot fill the need for longer-term development assistance efforts. This continues to be the case even after the introduction of activities such as small-scale income generation projects which attempted to provide vulnerable populations with the means to decrease their dependence on foreign aid. Because Azerbaijan is such a vital link in the trans-Caspian energy export system, it is important that the GOAz develop a market-oriented, transparent and corruption-free economic legal and regulatory system. Section 907 restrictions continue to prevent active U.S. engagement in achieving these foreign policy ends.
With the development of its enormous oil reserves, Azerbaijan will have the resources necessary to
consolidate the transition to a free-market system and to meet the needs of the most vulnerable segments of the population -- given the requisite political will. However, the present government's reluctance to introduce structural economic reforms and its questionable commitment to democratic political change makes the future for economic and democratic stability uncertain.
Other Donors
Major bilateral donors (France, Germany, Japan, Holland) and multilateral lending institutions (IMF and World Bank) which have approved tens of millions of dollars in credits to support critical reforms geared to restructuring the economy and stimulating small business development as well as loans for rehabilitation of Baku's main power plant and water supply system. Under an IMF Systematic Transformation Facility, the GOAz is committed to a comprehensive program of economic stabilization and structural reform.
The UN High Commissioner for Refugees (UNHCR) plays a prominent role in coordinating humanitarian assistance. Direct humanitarian aid in large quantities and dollar amounts is provided by several UN agencies (UNDP, UNICEF, World Food Program, World Health Organization) and by numerous other international organizations, including the International Federation of the Red Cross (IFRC) and the International Rescue Committee (IRC).
FY 1999 Program
USAID's program in Azerbaijan continues to have two central objectives: (1) alleviate human suffering in a post-emergency situation while helping to reduce dependence on humanitarian assistance, in part by strengthening the capacity of indigenous NGOs/PVOs and community groups to play a role in the country's development process; and (2) support more responsive, transparent and accountable democratic governance through the participation of informed citizens in the country's economic and political life. In addition, USAID is in the process of designing some Section 907-compliant programs to stimulate the nascent private sector, focusing on small-medium enterprise and agribusiness development, training and related areas. The growth of small and medium-sized enterprises builds a constituency for more macroeconomic reforms by the central government and also builds support for resolution of the dispute with Armenia because of the potential economic benefits to those same businesses. USAID is proposing to increase substantially the proportion of the Azerbaijan country assistance budget dedicated to supporting democratic pluralism and private economic restructuring objectives. A modest amount of funding is also likely to be dedicated to preliminary efforts at demining, resettlement and rehabilitation -- again, to be carried out consistent with Section 907 restrictions.
The U.S. Government has begun implementation of activities with the FY 1998 Congressional earmark to assist victims of the Nagorno-Karabakh conflict. In the event of a peace settlement, USAID will continue to provide humanitarian and rehabilitation assistance and expand the overall program to Azerbaijan in support of economic restructuring objectives.
A variety of training programs contribute simultaneously to more than one objective. Increasingly, training is being focused on economics and related leadership fields. USAID funded training tends to be U.S.-based or conducted in-country by U.S. advisors, although some third-country training is being promoted.
AZERBAIJAN
FY 1999 PROGRAM SUMMARY*
(in Thousands of Dollars)
Strategic ObjectivesEconomic Restructuring Democratic
TransitionSocial Stabilization Cross-cutting / Special Initiatives Total Privatization -- -- -- -- -- Fiscal Reform -- -- -- -- -- Private Enterprise 5,000 -- -- -- 5,000 Financial Reform -- -- -- -- -- Energy -- -- -- -- -- Environmental Management -- -- -- -- -- Citizens' Participation -- 3,000 -- -- 3,000 Legal Systems -- -- -- -- -- Local Government -- -- -- -- -- Crises -- -- 12,600 -- 12,600 Social Benefits -- -- -- -- -- Environmental Health -- -- -- -- -- Cross-cutting / Special Initiatives -- -- -- 10,900 10,900 TOTAL 5,000 3,000 12,600 10,900 31,500
*FREEDOM Support Act (FSA) funds
USAID Mission Director: Geraldine Donnelly
ACTIVITY DATA SHEET
PROGRAM: AZERBAIJAN
TITLE: Private Enterprise, 110-S001.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $5,000,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1997; ESTIMATED COMPLETION DATE: FY 2000
Purpose: Accelerate Growth and Development of Private Enterprises
USAID Role and Achievements to Date: This is a new activity area to complement USAID efforts to speed the transition from emergency humanitarian assistance to sustainable economic development programs. With Section 907 prohibiting aid to the (GOAz), it is expected that, USAID support for the embryonic private agricultural sector will help to stimulate broader policy reform at the national level.
Description: The activities will strengthen and expand the nascent private sector with an emphasis on agriculture, by providing technical assistance and training to short-term resident volunteers and technical experts, who will advise small and medium-sized retail and wholesale businesses. Credit and debt equity loans will be provided through the Small Enterprise Lending Program and a private investment fund partially guaranteed by Overseas Private Investment Corporation (OPIC). The goal would be to develop private food production and marketing systems and to help boost trade and investment by U.S agribusiness and related industries.
Host Country and Other Donors: The World Bank has identified agriculture as a priority sector and they are supporting programs in farm restructuring/privatization, infrastructure rehabilitation (e.g., irrigation systems) and credit. The European Union is concentrating on banking and marketing in the grains and bread industry. Aslo the International Islamic Relief Organization, the International Rescue Committee, OXFAM, the International Federation of Red Cross and Red Crescent are funding income generation projects, mostly agribusiness-based, and primarily targeted for IDPs and refugees. USAID-funded Eurasia Foundation and World Vision are also increasingly focusing on income generation projects.
Beneficiaries: Those intended to benefit from the program are primarily farmers and owners of small agriculture-related businesses which have acquired privatized land, and other private businesses. To the extent some of the activities can be linked with ongoing income generation projects for IDPs, segments of that population will also benefit.
Principal Contractors, Grantees, or Agencies: To be determined, pending approval of the proposed country assistance strategy.
Major Results Indicators: This remains a relatively underdeveloped strategic objective due to the assistance environment in Azerbaijan. The following indicators are illustrative; baseline and targets will be determined in FY 1998.
Per-hectare yield of privatized farms
Increased profitability of small and medium enterprises
ACTIVITY DATA SHEET
PROGRAM: AZERBAIJAN
TITLE: Citizens' Participation, 110-S002.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $3,000,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2000
Purpose: Increased, better-informed citizen's participation in political and economic decision-making.
USAID Role and Achievements to Date: Five USAID assisted independent televisions in the regions contribute weekly uncensored grass-roots news stories to a nation-wide audience through the second largest non-state television in Baku. Gearing up towards the upcoming municipal elections, a civic initiative, headed by a non-partisan group that is coordinating activities with an advisory board integrated by eight political party representatives, is successfully conducting a nation wide campaign to provide voter education in an effort to reinstate citizen trust in the election process.
Description: Given their experience and track record of successes in Russia and other NIS Republics, USAID assistance in equipment loans and professional know-how towards the financial sustainability of independent media is provided through Internews. The National Democratic Institute (NDI) and the Institute for Soviet and American Relations (ISAR) are engaged in civic education and capacity building of indigenous NGOs. NDI is also active in supporting political dialogue and distribution of voter election information.
Host Country and Other Donors: Mutual efforts to guarantee forward steps towards democratic progress are being closely coordinated with USIA, the U.N., OSCE and the EU.
Beneficiaries: All USAID funded activities are targeted to citizens and citizen groups that can benefit from the training and expertise provided by international private voluntary organizations to take an active role in pressing for democratic reforms and change. These include, but are not limited to: journalists, ecological and social NGOs, political parties, scholars, human rights and women's advocacy groups.
Principal Contractors, Grantees, or Agencies: USAID sponsored activities are implemented by NGOs such as Internews, ISAR and NDI.
Major Results Indicators: Baseline Target Level of voter knowledge/understanding 1 (1996) 3 (2000) (scale of 1- (lowest) - 5 (highest)
ACTIVITY DATA SHEET
PROGRAM: AZERBAIJAN
TITLE: Human Suffering and Crisis Impact Reduced, 110-S003.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $12,600,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 2000
Purpose: Reduced human suffering and crisis impact.
USAID Role and Achievements to Date: Through USAID-funded programs and contributions to UN agencies, USAID has provided humanitarian assistance to the internally displaced people (IDPs) in Azerbaijan since 1992. USAID grants to PVOs have provided food, clothing, shelter and sanitation, medical assistance, and commodities to more than 650,000 refugees and IDPs. USAID donations to the UN's World Food Program have helped IDPs throughout the country receive food parcels, and contributions to UNICEF have resulted in the immunization of IDPs against diphtheria. Recently, USAID-supported income generation projects have begun to help a number of these economically vulnerable people to become more self-sufficient.
Description: USAID-funded programs for refugees and IDPs in Azerbaijan have focused on distribution of food, clothing and other commodities, construction/rehabilitation of shelters and sanitation facilities, and provision of basic medical care. In FY 1998 USAID will continue efforts in these areas as well as look to expand existing income generation projects and consider launching some community development activities designed to help reduce the population's dependence on humanitarian assistance. Additionally, new programs for the victims of the conflict in Nagorno-Karabakh are planned.
Host Country and Other Donors: The European Union (EU) and USAID continue to coordinate shipment and delivery of humanitarian assistance to the Caucasus. In addition, the U.S., the EU, Japan and other bilateral donors have provided millions of dollars worth of food, medical and other humanitarian supplies. UNHCR plays a major role in coordinating humanitarian assistance provided by the EU and other bilateral donors.
Beneficiaries: Priority targets for humanitarian assistance continue to be the approximately 700,000 refugees and IDPs residing throughout the country.
Principal Contractors, Grantees, or Agencies: The main U.S. PVOs operating in Azerbaijan are Save the Children, UMCOR, Mercy Corps International, CARE, ADRA, World Vision, International Rescue Committee, Relief International, and the American Red Cross.
Major Results Indicators: Emergency assistance does not lend itself to baseline and targets. The following indicators were tracked during the 1996 program.
Results Achieved Number of Shelters restored and /or Reconstructed 150,000 (1997) Number of IDPs receiving health care 364,283 (1996) Number of Shelters built or rehabilitated 2,822 (1996)
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