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).
BOSNIA AND HERZEGOVINA
FY 1997 FY 1998 FY 1999 Actuals Estimate Request Support for East European Democracy $217,500,000 $215,000,000 $225,000,000
P.L. 480 Title II........................... $44,074,284 -- -- Introduction
Maintaining peace in Bosnia-Herzegovina (Bosnia) continues to be of direct importance to U.S. strategic and economic interests in Europe. The civil war in the former Yugoslavia created hardship conditions for its citizens and threatened to destabilize much of south-central Europe. Through the intervention of the United States, peace was brokered, economic assistance followed, and the warring factions reached agreement on the creation and management of new states. Because of its strong leadership and reconstruction assistance, continued U.S. involvement is seen as crucial to implementing the Dayton Peace Accords, maintaining the peace, and fostering economic recovery. The U.S. military presence and economic assistance programs have been highly complementary, with peacekeeping troops assuring a sufficiently stable environment for recovery to take root. In turn, economic recovery is helping to establish satisfactory conditions for the troops to come home. The U.S. is the only partner accepted and respected by all parties. Time and again, U.S. intervention has defused a critical situation or brokered a political solution. The efficient and effective U.S. assistance effort also provides a model to other donors. U.S. assistance is focused on well defined goals, moves quickly, and produces visible results. A continued U.S. role in Bosnia assures peace and progress.
1997 marked Bosnia's second year of peace. The Federation economy continued to improve; refugees and displaced persons (DPs) were returning to their homes; schools, hospitals and health clinics re-opened; private sector jobs created; a peaceful nation-wide municipal election was held; and a peaceful parliamentary election was held in the Republika Srpska (RS). Life is slowly returning to normal for many Bosnian citizens. However, life continues to be a daily struggle for many others. Minority refugees are not universally welcomed, much municipal infrastructure remains to be repaired, multi-ethnic municipal governments are slow to form, and the creation and management of both joint institutions and a privatization process is lagging. Bosnia needs additional time and additional U.S. Government assistance to resolve these and other important issues.
The Development Challenge
In the first two post-war years, development assistance focused on immediate and basic needs such as repairing the most devastated municipal infrastructure and infrastructure affecting the greatest numbers of people, re-starting businesses with immediate employment capacity, electing national and entity level governments, supporting independent media, and reforming basic economic policy. Notable and much needed progress was made in each area, but both the economy and democracy remain fragile.
The most important task facing Bosnia continues to be the reactivation of productive capacity to create jobs and income. This requires continued repair of municipal infrastructure and the provision of capital to restart and improve businesses. The resumption of economic activity and gainful employment gives Bosnian citizens a stake in a lasting economic recovery and allows returning refugees, DPs and demobilized soldiers to be reintegrated into their communities. This is especially true in the RS. However, large scale economic investment in the RS remains dependent on increased adherence to the Dayton principles.
Coupled with the economic recovery, the country needs to build a legal and financial framework and create a conducive environment for a private sector economy. Both central and entity-level governments need assistance in the development of transparent and accountable budget systems that ensure equitable and need based distribution of resources. Other legal changes needed are equitable and transparent privatization laws and a resolution of property issues hampering refugee and displaced persons return.
The development of a strong, pluralistic democracy and enduring democratic institutions are key elements to building a peaceful, just and multi-ethnic society in post-war Bosnia. In municipal elections held in September 1997, Bosnian voters turned out in high numbers and distinguished between a myriad of newly formed political parties contesting the elections. More importantly, election results have initiated the implementation of new multi-ethnic municipal councils. The challenges in moving toward a democratic Bosnia are still present, however, particularly in the RS. Though Bosnian election officials have developed the capacity to carry out their responsibilities with minimal international oversight, the administration of elections must be institutionalized as free, fair, and transparent. In addition, progress is needed in the reform of the political party process and media sector, as well as in supporting the ongoing installation of multi-ethnic governments.
Other Donors
In 1995, the international donor community endorsed a medium-term Priority Reconstruction and Recovery Program for Bosnia and Herzegovina. The World Bank estimated that approximately $5.1 billion would be needed to implement the Program. The Program is expected to cover most sectors of the economy and includes reconstruction activities, balance of payments support, multilaterally- and bilaterally-administered programs, and peace-building initiatives activities.
Donor support has been exceptional with approximately $3.2 billion pledged to date, of which $2.6 billion is firmly committed (including $490 million from the World Bank and $673 million from the European Union (EU). However, due to political turmoil in the Republika Srpska and delays in organizing the Third Donors' Conference in 1997, the third year has been slow in producing new donor commitments and program results.
In hopes of improving the speed and efficiency of reconstruction and recovery in Bosnia, the EU held a workshop in January 1998 to address issues regarding the implementation difficulties in view of the harsh political realities of the region. The EU made an appeal to the Bosnian authorities to enhance their commitment to reconstruction and rehabilitation. The EU also welcomed the new RS government and stated that EU assistance will follow strict conditionality and that in order to be eligible, the parties must comply with the letter and spirit of Dayton. The EU planned improvements for their assistance program are the following: 1) the Commission intends to work directly with "cooperative" local authorities, rather than dealing only with the central government; 2) the Commission will adjust their internal regulations so that their processes and procedures will be more flexible; and 3) the Commission will strengthen their staff in Sarajevo. These changes will mainly affect the EU 1998 "Return of Refugees and Displaced Peoples Program" and would speed up assistance delivery of these services.
FY 1999 Program
1996-1998 was a period of multinational support to reconstruction. USAID's FY 1996 program helped lay the groundwork and create a conducive environment for an enduring and just peace in Bosnia. The FY 1997-1998 program built directly upon these achievements by expanding economic productivity and employment, strengthening independent media, and supporting democratic reform. The USAID FY 1999 program will focus on deepening the institutionalization of these reforms. Efforts will continue infrastructure rehabilitation and promote business development, economic and legal reform, and media and democracy-building. In all cases, Bosnians will be active managers and participants.
In FY 1999, USAID will continue providing resources to stimulate production and generate employment. At the same time, USAID will support more intensive development of the financial systems and legal framework necessary to maintain economic growth. USAID programs and technical assistance will support the reconstruction and privatization of viable state-owned enterprises and continue to promote the efficient use of fiscal resources at the national and entity level. The fourth year of the Reconstruction Finance project will also see increased lending to the private sector or private companies demonstrating leadership in provision of public services originally sponsored by the state.
Whereas past democracy assistance in Bosnia has focused heavily on election activities, in FY 1999, efforts will expand in strengthening independent broadcast and print media. In addition, the program will also help foster a democratic electoral process in the 1999 municipal elections, support independent judicial institutions particularly in the RS, and increase emphasis on developing civil society.
On December 15, 1997, the Secretary of State waived Section 573(a) of the Foreign Operations Appropriation Act with regard to USAID-funded programs in the Republika Srpska based on her determination that USAID programs in Bosnia directly support the implementation of the Dayton Accords and its annexes. The recent Assembly elections in the RS and the formation of a new government are encouraging. The U.S. expects the new government to continue to pledge and act on those pledges, to commit themselves to honor the Dayton Accords, including increased dialogue between the RS and the Federation. As the RS government continues to make good on those pledges, U.S. assistance to the RS will be expanded. In preparation for this program expansion, USAID will implement an already established procedure for vetting proposed U.S. projects with the U.S. Embassy, Office of the High Representative (OHR), the International Police Task Force, and Strategic Forces (SFOR), to ensure that indicted war criminals are not participants or beneficiaries. USAID is also consulting with other government agencies and human rights organizations, both in Washington and in Bosnia, with relevant information to help prevent war criminals in the region from benefitting from USAID financial or technical assistance.
BOSNIA
FY 1999 PROGRAM SUMMARY*
(in Thousands of Dollars)
Strategic ObjectivesEconomic Restructuring Democratic
TransitionSocial Stabilization Cross-cutting and Special Initiatives Total Recovery from Crisis -- -- 225,000 -- 225,000 TOTAL -- -- 225,000 -- 225,000
*Support for East European Democracy (SEED) Act funds
USAID Mission Director: Craig Buck
ACTIVITY DATA SHEET
PROGRAM: BOSNIA HERZEGOVINA
TITLE: Recovery from Crisis, 180-S003.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $225,000,000 SEED
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2000
Purpose: To create a stable, democratic post-war Bosnia Herzegovina with strong institutions and a free market economy.
USAID Role and Achievements to Date: USAID has played an important role in jumpstarting Bosnia's recovery by quickly putting in place reconstruction programs to rehabilitate community infrastructure, help re-restart businesses and generate employment with quick disbursing loans, and create conditions to allow people to return home. USAID's reconstruction programs generate employment and provide balance-of-payments support to the Government of Bosnia and Herzegovina. Through the Bosnia Reconstruction Finance Facility (BRFF), quick disbursing loans are being provided to restart and expand private sector commercially viable businesses and generate jobs. As of December 1997, 164 loans had been made totalling approximately $72 million and contributing to the creation of over 12,000 jobs. The average loan amount this year was about $485,000 for businesses such as forestry, metals, agribusiness, construction, and textiles; sectors in which Bosnia has a natural competitive advantage. The BRFF program works through 29 Bosnian "agent" banks, and is working with staff from these banks to improve their skills so that, over time, they will be able to take on increasing responsibility within the program.
USAID's Municipal Infrastructure and Services (MIS) program finances the repair and reconstruction of basic physical infrastructure damaged during the war. Through this program, local contractors are repairing municipal electricity distribution systems crucial to economic recovery, resurfacing roads, repairing bridges and municipal water systems, and rebuilding local schools and health facilities. Where possible, focus is on cross-entity projects which foster cooperation between the Federation and Republika Srpska. 102 projects worth over $116 million are currently underway and have created 17,000 jobs. MIS accomplishments in FY 1997 included the Tuzla/Brcko/Vinkovci Rail Line Project, which reopened north-south rail access to Europe; a 400 Kilovolt Power Transmission Project, which is ensuring stable electricity and acting as a backup system for the Sarajevo Canton; and the Ozdak Municipality Project, which repaired the power and water infrastructure necessary for displaced refugees to move back to their hometown. Under MIS, USAID is also implementing a Community Infrastructure Rehabilitation Project (CIRP) in close partnership with US-SFOR and local municipalities. CIRP activities are designed to provide short-term employment for demobilized soldiers and other community residents and to conduct high-impact community restoration activities, such as minor road repairs, school and health clinic rehabilitation, and the cleanup of war damage. At the end of September 1997, USAID had approved 221 CIRP projects - 133 in the Federation and 88 in Republika Srpska, totaling $9.2 million and generating approximately 7,000 jobs. Overall, USAID coordinates its assistance program using the natural linkages among MIS, BRFF, USAID democracy and economic reform-related projects, as well as the work of other donors and U.S. Government agencies.
USAID's economic technical assistance plays a critical role in reinforcing Bosnia's economic recovery and ensuring its sustainability in a private sector context. A USAID-funded macroeconomic advisor is working closely with the State and Federation Prime Ministers on issues related to intergovernmental finance, tax administration, macroeconomic decision-making, and balance of payments management. The U.S. Treasury, using SEED funds, has several long-term advisors in Bosnia to improve the budgetary expenditure process, rationalize the tax administration system, and assist the Government of Bosnia and Herzegovina in negotiations with official bilateral and commercial creditors, including the successful London Club negotiations held in 1997 and the upcoming Paris Club negotiations, essential for Bosnia to normalize its relations with external creditors. Through this program, USAID also
provided technical assistance to the Federation Tax Administration, to help set up a modern data processing center to collect taxes in a transparent and efficient manner. With USAID technical assistance, four Federation privatization laws have been drafted and passed, marking an important step in Bosnia's transformation to a market economy. In addition, USAID assisted in the drafting of the remaining privatization laws addressing Opening Balance Sheets, Bank Privatization, and Privatization Investment Funds. USAID advisors also helped draft the Federation Banking Law and establish the Federation Banking Agency in 1996, a regulatory body vital for restoring public confidence in the banking system. USAID advisors provided training and technical assistance to the Federation Banking Agency which enabled it to examine 20 banks in 1997, covering 95% of the assets of the Federation banking system. USAID has also expanded its bank supervision technical assistance to the Republika Srpska. In customs activities, the joint USAID-EU customs training program has compelled Bosniak and Croat customs officials to work together for Federation purposes and trained 239 customs officials in both the Federation and Republika Srpska.
In the democracy area, U.S.-funded advisors played an important role in providing election-related assistance for the Organization for Security and Cooperation in Europe (OSCE)-administered national elections in September 1996 and municipal elections in September 1997. For the September 1997 elections, an International Foundation for Electoral Systems (IFES) Voter Education team developed a comprehensive, interactive voter education program designed to inform and directly engage voters in the electoral process through seminars, training, and workshops. Another of USAID's grantees, the National Democratic Institute for International Affairs (NDI), used political party training strategies in Bosnia that emphasized direct voter contact and encouraged parties to improve their grass-roots organizing capabilities. Since October 1996, NDI has also created a network of community discussion groups, moderated by NDI-trained Bosnians, designed to raise the political awareness of Bosnian citizens and promote participation in the political process. In the area of government transparency and accountability, USAID's fiscal federalism program provided technical assistance in budgeting and financial management to officials of the Zenica-Doboj and Tuzla-Podrinje Cantons. The fact that Tuzla-Podrinje is the only Canton to have prepared its 1998 budget illustrates both the importance and success of this project. Consequently, the program was expanded in 1997 to the Federation's remaining cantons (10). Over the last two years USAID has also supported the American Bar Association in helping the Federation Constitutional Court and Supreme Court develop rules and procedures, and assisted in the creation of a Federation-wide judges association dedicated to promoting independence of the judiciary. The Central and Eastern Europe Law Institute also assumed a lead role in facilitating revision of the Federation's Procedural and Substantive Criminal Codes and reviewed cases of persons indicted for war crimes in 1997 for the International Criminal Tribunal in the Hague.
USAID has given top priority to supporting the development of independent media to ensure the consistent provision of non-nationalistic, objective news reporting to Bosnian citizens. Efforts are aimed at developing viable independent radio and television stations in Bosnia through the provision of training, technical assistance, direct provision of programming, and the donation of equipment and supplies. In 1997, a USAID-funded seminar on long-form news production brought together television journalists and technicians of different ethnic groups to produce short election pieces; a weekly news magazine program, "FRESH," provided quality programming to independent stations in Bosnia; an equipment grant from Internews to TV Gorazde allowed the station to make on-site filed reports and film news stories in the RS; and an Internews Marketing Seminar allowed TV Gorazde to become an independent television station based on the advertising and marketing skills they learned attending the training seminar.
Over 300 Bosnian professionals have benefitted from U.S.-based participant training in 1997, including 220 Bosnian bankers, political party representatives, judges, tax officials, businessmen and NGO leaders.
Description: USAID's reconstruction assistance for Bosnia has four major components: two economic revitalization programs to help jumpstart the economy, generate employment, and provide balance of
payments support; an economic technical assistance program to reinforce the economic recovery and ensure that command-economy structures are reformed rather than rebuilt; and a democracy promotion program to encourage development of strong, enduring democratic institutions and processes.
Key economic revitalization activities include the Municipal Infrastructure and Services (MIS) program and the Bosnia Reconstruction Finance Facility (BRFF). In FY 1999, the MIS program will continue to support the return of former residents to war-damaged towns and villages by reconstructing infrastructure systems and selected community facilities. In FY 1999, the BRFF program will also continue to provide balance-of-payments support and liquidity to the economy through the provision of loans to commercially viable enterprises. These two programs form the cornerstone of USAID's reconstruction assistance in Bosnia.
Economic technical assistance activities in FY 1999 will continue to include a variety of advisory services to the Government and the financial and enterprise sectors. Macroeconomic advisory services will promote the successful operation of USAID balance-of-payments assistance programs and assist the Government of Bosnia and Herzegovina (GOBH) in managing and tracking large balance-of-payments inflows from all donors to ensure consistency with Bosnia's macroeconomic program. USAID's commercial bank training activity will continue to be closely coordinated with the BRFF program. The enterprise recovery and revitalization program will continue to assist businesses with the development of loan applications and business plans and to provide consulting services to Bosnian firms to help them re-start or strengthen operations and develop their comparative advantage. Customs administration assistance, provided in close partnership with the EU, will proceed to offer training for Bosnia Herzegovina's customs officials within the Federation Customs Administration and strengthen the legal environment for implementation of the February 1995 Customs Law. USAID's privatization program will carry on its training of Federation and canton officials in privatization strategies and enterprise preparation, aim to establish the legal foundation allowing privatization to be implemented, and increase public awareness and participation in the privatization process.
In FY 1999, democracy assistance will continue to focus in the following areas: election and political parties, independent media, civil society and nongovernmental organizations, governance, and rule of law. Election-related programs include targeted support for the OSCE which will administer Bosnia municipal elections in 1999; training and material support to strengthen local-level political party organizations; and voter education programs. USAID's media programs provide support for independent television and radio stations in improving news reporting, station management, business practices, and programming. USAID's Office of Transition Initiatives assists in the development of independent radio and print media through direct grants. NGO development programs include seed money and institution-building support for advocacy-oriented indigenous non-governmental organizations (NGOs) which represent citizen views, initiatives, and projects. In the governance area, activities will focus on helping make government procedures more transparent and parliament more accessible to citizens. Rule of law programs will continue to support newly-formed Federation and national-level courts, particularly canton courts, as well as lawyers' and judges associations
In FY 1999, the participant training program which provides U.S.-based training in a wide variety of democracy and economic restructuring areas will continue to be a key activity reinforcing the entire program.
Host Country and Other Donors: USAID's BRFF program was designed to be complementary to the World Bank's $30 million emergency Revolving Line of Credit. The MIS program was designed to target basic medium-scale physical infrastructure, leaving larger projects to the World Bank and EU. MIS projects are selected based on priority needs identified under the World Bank's program and by the GOBH. USAID's economic advisors actively coordinate with the International Monetary Fund (IMF) and World Bank, often serving as a critical source of continuity and information for the numerous IMF and World Bank teams coming into and out of Bosnia. USAID has coordinated closely with the World Bank in establishing conditionality in the banking sector. USAID chairs the Industry Task Force, one
of 11 donor coordination task forces organized by the World Bank and EU. In this role, USAID contractors have developed a donor activity inventory to avoid the potential for duplication and facilitate coordination.
Donor coordination is also important in the democracy area. USAID is working with the British Foreign Office, the Swedish Development Agency, the OSCE, the Canadian Development Agency, and the Office of the United Nations High Representative in efforts to support the Open Broadcast Network. USAID also coordinates with the EU on support for independent media and other democracy programs. In political party development, USAID works with the German political party foundations and the OSCE. In governance, USAID is coordinating closely with the World Bank, which is providing direct budgetary support for the Mostar City Administration. USAID is also collaborating closely with the World Bank's Fiscal Decentralization Initiative. The Soros Law Center is a locus of activity for rule of law programs in Bosnia, and the American Bar Association works in close coordination with the Center in implementing USAID-funded rule of law activities.
Beneficiaries: Because of the broad nature of this objective, the beneficiaries include all residents of Bosnia and Herzegovina. More specifically, the BRFF program benefits enterprise recipients of BRFF loans, the commercial banking sector, workers for whom jobs are created, and the State of Bosnia and Herzegovina which receives the balance-of-payments benefit. The MIS program is expected to benefit about 100,000 displaced families through repaired basic utility and other community services. Economic technical assistance programs directly benefit the Ministry of Finance, the Central Bank, the Federation Banking Agency, customs service, business associations, local business consulting firms, private entrepreneurs and firms. Democracy assistance directly benefits political parties, voters, civic groups, Parliament, independent television, radio and newspapers, and media audiences.
Principal Contractors, Grantees, or Agencies: USAID implements activities under this strategic objective through private American and local companies such as the Ralph M. Parsons Company and local construction firms; U.S. and local consulting firms such as Development Alternatives, Inc., the Recovery Group, Price Waterhouse, Booz-Allen, East/West Management Institute, and KPMG/Barents Group; U.S.-based and local NGOs, and private voluntary organizations (PVOs), such as the International City/County Management Association, the International Foundation for Election Systems, the National Democratic Institute, the American Bar Association, Internews, the American Refugee Committee, CARE, Catholic Relief Services and the International Rescue Committee; and other USG agencies such as the Department of Treasury, Department of State, and the U.S. Information Agency.
Major Results Indicators: Due to the special nature of this program, baselines and annual targets have not been established. Illustrative indicators include the following.
Real GDP growth.
Unemployment rate.
Number of jobs created through USAID programs.
Number of BRFF “agent” banks taking on own lending.
Number of residents provided with repaired infrastructure and restored services.
Number of residents returning to their communities.
Foreign exchange reserves measured in months of imports.
Financial system providing financing to private entrepreneurs.
Private sector investment in industry.
Number of local NGOs promoting citizen concerns.
Public confidence in the courts.
Self-generated revenue of cantons and municipalities.
Political party platforms are communicated to citizens and reflect citizen input.
Balanced information being reported by Bosnian media
Transparency of the budgeting process of cantons and municipalities
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