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).
CROATIA
FY 1997 FY 1998 FY 1999 Actuals Estimate Request
Support for East European Democracy $12,200,000 $19,000,000 $10,000,000 Introduction
As an integral partner to the peace process in former Yugoslavia, Croatia's commitment and adherence to the terms and principles of the Dayton Peace Accord are essential for establishing a durable peace. Prospects for long term stability in the region would be enhanced by fostering in Croatia an open, democratic society with a high standard of respect for the rule of law and protection of human and civil rights. The importance of Croatia to regional stability and the realistic potential for exerting a strong positive influence in favor of systemic change constitute the rationale for continued U.S. engagement in Croatia. The USAID program in Croatia directly supports achievement of U.S. foreign policy objectives in the region to establish a sustainable peace, foster full democratization, and enable newly independent republics to gain full access to European and Trans-Atlantic institutions.
The Development Challenge
Since the end of the war, the Government of Croatia (GOC) has accorded the highest priority to re-establishing its territorial integrity, reconstructing war damaged housing and infrastructure, and restoring economic growth. Further, since independence, Croatia has sought to establish itself as an integral part of Europe and to gain full membership in European and Trans-Atlantic institutions. With the end of the UN mandate in Eastern Slavonia, Croatia has successfully re-established its territorial integrity. Over the past two years, the economy has sustained economic growth rates of over four percent with good prospects for continued economic expansion. However, with the exception of membership in the Council of Europe, Croatia has made only limited progress in achieving its objectives towards integration with Europe. Full implementation of the Dayton Peace Accords and accelerated progress towards completing the transition to a more open democratic society based on the rule of law remain the principle development challenges in Croatia.
Croatia has made uneven progress in fulfilling its Dayton obligations, though some notable positive developments have occurred. GOC cooperation in delivering suspected war criminals to the International Criminal Tribunal for Former Yugoslavia (ICTY), facilitation of return of displaced persons to communities of origin, and support for the UN-managed process of peaceful reintegration of Eastern Slavonia have helped to sustain momentum for the peace process. Continued progress is needed to enable the return and resettlement of all displaced persons and refugees and ensure protection of human and civil rights. Ethnic tensions between Croats and Serbs, particularly in the formerly Serb-occupied regions, and uneven implementation and enforcement of legislation on the disposition of property and other rights of affected populations remain the principal obstacles to restoring a stable multi-ethnic society.
Croatia's poor performance in implementing a range of broader democratization reforms has raised questions about its commitment to basic civil liberties and democratic principals. Of particular concern are issues of freedom of speech, freedom of association, rule of law, independence of the media, openness and fairness of electoral processes, and independence of the judiciary. The combination of Croatia's uneven performance in fulfilling its commitments under the Dayton Accords and slow progress towards broader democratization prompted a temporary suspension of financial support from the International Financial Institutions and raised further questions about Croatia's suitability for full participation in European and trans-Atlantic institutions. Croatia's performance both in meeting its Dayton obligations and in fostering broader democratization will continue to be closely monitored.
USAID's response to the development challenge is to concentrate resources in the areas of democratization and reintegration of war affected populations. USAID has successfully supported the development of a broad range of civil society institutions including independent media, non-governmental organizations and citizens' groups and provide key support for maintaining social stability and the rule of law in Eastern Slavonia and other war affected regions.
Other Donors
USAID has been the most important bilateral donor in the areas of reintegration of war-affected areas and democratic transition. Over the past two years, in addition to the UN-funded operation in Eastern Slavonia, the international community led by USAID, the European Union (EU), Norway, Belgium, and Italy has pledged over $80 million to support reconstruction and reintegration efforts. Additionally, the Open Society Foundation, the EU and the governments of Norway, Belgium and Sweden have provided significant support for democratization. The UN High Commissioner for Refugees (UNHCR) will remain a major donor and development partner as long as Bosnian refugees and Croatia displaced populations remain in Croatia. In the area of Economic Restructuring, the World Bank, the International Monetary Fund and the European Bank for Reconstruction and Development are providing substantial resources to support structural adjustment and financial and private sector development.
FY 1999 Program
In 1999, USAID's highest priorities in Croatia will be to continue to encourage broader democratization and support full implementation of the Dayton Peace Accords. USAID's strategic objective in support of Dayton is “Reintegration of populations affected by the Erdut Agreement. This SO provides support throughout the Slavonia region and other war-affected regions to ensure access to basic legal services and advice, ensure that human and civil rights of affected populations are respected and protected, support local government initiatives to encourage and facilitate return of displaced persons and refugees to communities of origin in Croatia, and facilitate development and growth of small and medium scale private enterprises to generate jobs and sustainable incomes for affected populations. USAID's strategic objective in the area of democratic transition is “Increased, better-informed citizens' participation in political process and public decision making.” This SO supports independent media, civil society development, institutional development of non-governmental organizations (NGOs), women's groups, trade unions, human rights groups and political party development. USAID will continue limited support for economic restructuring under a third SO, “More competitive, market-responsive private financial sector.” This SO supports banking reform and capital markets development to improve transparency, increase confidence in the domestic financial sector, broaden domestic savings and investment opportunities, and increase availability of financing for private enterprises. Civic participation broadens the demand for better and improved factual information and services. This demand will apply to the public and private sector. The increased emphasis on transparency and accountability will encompass the economic sector hopefully creating mechanisms for greater access to financial information and continued emphasis on economic reform. Funds under cross-cutting and special initiatives support participant training activities under all SO's and cover Audit, Evaluation and Project Support costs.
CROATIA
FY 1999 PROGRAM SUMMARY*
(in Thousands of Dollars)
Strategic ObjectivesEconomic Restructuring Democratic
TransitionSocial Stabilization Cross-cutting /Special Initiatives Total Privatization -- -- -- -- -- Fiscal Reform -- -- -- -- -- Private Enterprise -- -- -- -- -- Financial Reform 700 -- -- -- 700 Energy -- -- -- -- -- Environmental Management -- -- -- -- -- Citizens' Participation -- 3,300 -- -- 3,300 Legal Systems -- -- -- -- -- Local Government -- -- -- -- -- Crises -- -- 4,380 -- 4,380 Social Benefits -- -- -- -- -- Environmental Health -- -- -- -- -- Cross-cutting / Special Initiatives -- -- -- 1,620 1,620 TOTAL 700 3,300 4,380 1,620 10,000
*Support for East European Democracy (SEED) Act funds
USAID Representative: Charles Aanenson
ACTIVITY DATA SHEET
PROGRAM: CROATIA
TITLE: More Competitive, Market-responsive Private Financial Sector, 180-S001.4
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $700,000 SEED Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 1999
Purpose: More competitive and market-responsive private financial sector.
Background: The countries of the former Yugoslavia do not have a tradition of free and open information sharing. Progress towards democratization will establish an environment of openness and transparency, benefitting the private financial sector. The development of a sound, efficient, private financial sector which mobilizes savings and allocates them in a decentralized way to their most productive use is essential to establishing a solid foundation for a modern market economy. A well-functioning banking system and capital market are necessary to promote sustainable growth which benefits all segments of the population. In the aftermath of the war, Croatia needs to attract private domestic and foreign investment to support reconstruction its economy and transform it.
USAID Role and Achievements to Date: USAID assistance has resulted in a number of financial sector developments. Six Treasury-bill auctions have been successfully conducted and the Ministry of Finance has established a public debt control system. A competent and professional banking supervision/examination unit has been established within the National Bank and Croatian examiners have improved their skills in on- and off-site procedures. Two banks have been placed into the bank rehabilitation program. The Zagreb Stock Exchange has established membership rules, and the Croatian Securities Commission (CROSEC) has been formed.
Description: USAID is providing training and technical assistance to the National Bank of Croatia to strengthen its bank supervision capacity and ensure that prudential rules are enforced. USAID assistance to the Bank Rehabilitation Agency has supported restructuring of large, regional, state-owned banks to accelerate their privatization. Technical assistance and training has been provided to assist development of the Croatian Securities Commission, the Central Registry and other financial sector institutions. American Bar Association/Central and East European Law Institute (ABA/CEELI) has provided technical assistance to improve legal/regulatory framework affecting financial transactions and the CARANA Corporation is providing bankruptcy-related training..
Host Country and Other Donors: USAID coordinates its assistance with the World Bank, International Monetary Fund ( IMF), Ministry of Finance, Central Bank. and the British Know How Fund.
Beneficiaries: Direct beneficiaries of this strategic objective include CROSEC, the Ministry of Finance, National Bank of Croatia, Zagreb Stock Exchange, Varazdin over the counter (OTC) Market; and the Croatian financial community. Indirect beneficiaries include private enterprises and households which are able to gain access to financing and a broader range of financial services and products.
Principal Contractors, Grantees, or Agencies: KPMG/Barents Group, Financial Services Volunteer Corps; ABA/CEELI. Carana/Recovery Group; World Learning.
Major Results Indicators: Baseline Target Interest rate spread between deposits and loans declines 19% (1996) 10% (1999) Share of assets in private banks increase 48% 60% Gov. Debt Securities issued domestically 0 (1995) 2.5 billion KN Ratio of Household deposits to GDP 18% 21% Bankruptcy law implemented No (1995) Yes (1997) % of non-performing bank assets identified and reduced 8% known (1995) 15% (1999) % of banks examined annually 10% (1995) 100% (1999) Companies with securities officially registered with the 1 (1995) 14 (1999) Stock Exchange Capital markets laws and CROSEC regulations in place No (1995) Yes (1998)
ACTIVITY DATA SHEET
PROGRAM: CROATIA
TITLE: Increased, better informed Citizens' Participation, 180-S002.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $3,300,000 SEED Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2002
Purpose: Create conditions to support increased, better-informed citizens' participation in public decision making.
Background: Despite many of the formal attributes of a constitutional democracy, Croatia's transition to an open democratic society based on the impartial rule of law remains far from complete. Croatia's continued poor performance in implementing a range of broader democratization reforms has raised serious questions about the Government's commitment to basic civil liberties and democratic principals. Of particular concern are issues related to freedom of speech, independence of the media, freedom of association, rule of law, fairness of electoral processes, protection of human rights, and independence of the judiciary. The GOC's unsatisfactory performance in supporting and encouraging broader democratization has restricted the country's access to European and trans-Atlantic institutions. Performance in this area will continue to be monitored closely and will be the basic litmus test for determining Croatia's further participation in the process of European integration as well as its eligibility for participation in trans-Atlantic institutions.
USAID Role and Achievements to Date: Despite the apparent lack of GOC cooperation and commitment, USAID has played an important leadership role in promoting democratization in Croatia, particularly in the areas of independent media and civil society development. USAID has been an vital and effective source of financial resources, technical assistance, and training to a broad range of non-governmental actors committed to fostering a more open democratic society. USAID has also been effective in leveraging and coordinating support from other donors to support democratization. USAID's sustained support for democratization in Croatia is an important tool for achieving US foreign policy objectives to promote peace and long term stability in Croatia and the region.
In the area of independent media, USAID support under the Professional Media Program has enabled the Croatian Journalists Association to become a viable and influential non-governmental institution for advocating, defending, and marshalling support for independent journalists and media practitioners in Croatia. The association serves as a central meeting place and service center. USAID support has assisted the association to establish and maintain a training center, provide access to a newspaper archive, develop a legal assistance program, and establish a press club. USAID has also supported the establishment of the Association of Independent Radio Stations and the Association of Small TV stations and in coordination with other donors provided crucial financial and technical support to sustain independent papers including Novi List, the Feral Tribune, Glas Istre and Tjednik.
In the area of civil society development USAID has supported the development of a broad range of Croatian NGOs including women's groups, human rights organizations and other advocacy related groups. USAID funded technical assistance has also played an important role in identifying priority issues for improving the legal and regulatory framework affecting NGOs. USAID support to Trade Unions encouraged reintegration of unions in Eastern Slavonia, helped establish a core of skilled local trainers to strengthen internal training capacity, and assisted unions to identify priority issues affecting workers and advocate effectively for reform and fair treatment.
Description: In FY 1999, USAID's democratization program will continue to support independent media and civil society development. Under its Professional Media Program, USAID will sustain support for independent print and electronic media to strengthen technical and professional skills and improve balance of reporting. Under its NGO sector development project, USAID will continue to support
institutional development of advocacy oriented NGOs and support reforms of the legal and regulatory framework in which they operate. In the area of political party development, USAID will continue to provide training and technical assistance to encourage more meaningful interaction between the parties and their constituents and support development of more effective and responsive party platforms in advance of elections expected in 1999. USAID will also continue to support capacity building within trade unions to advocate family and workers issues affected by economic transition and restructuring.
Host Country and Other Donors: USAID is coordinating activities under this SO with the Netherlands, Norway, the Open Society Foundation, and the EU.
Beneficiaries: Direct beneficiaries under this strategic objective include: the Croatian Journalists Association, political parties, independent media, trade unions and their members, and a broad spectrum of local NGOs working on advocacy issues. Indirect beneficiaries are the broad segment of Croatian citizens' who will have access to more information from the independent media and whose views and concerns are addressed by NGOs and political parties.
Principal Contractors, Grantees, or Agencies: International Research and Exchange Board (IREX), the National Democratic Institute (NDI), the International Center for not for profit law (ICNL), the American Solidarity Center (formerly the Free Trade Union Institute), the International Rescue Committee, and Delphi/Star International.
Major Results/Indicators: Baseline Target Improvement in Freedom House 58/Partly free (1996) 30/Free (1999) Press Freedom Rating Improvement of Freedom House 4.0/Partly free (1996) 2.0/Free (1999) Rating on civil liberties Improvement on NGO 4.4/Moderate (1996) 3.5/Slight imprv (1999) Sustainability Index Progress in accepting western D/barely passing (1996) B (1999) democratic institutions
ACTIVITY DATA SHEET
PROGRAM: CROATIA
TITLE: Reintegration of Populations Affected by the Erdut Agreement, 180-S003.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $4,380,000 SEED Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2000
Purpose: Peaceful resettlement and reintegration of populations affected by the Erdut Agreement.
Background: Eastern Slavonia was the scene of fierce fighting between Croats and Serbs at the outset of the war in 1991. The area, including the city of Vukovar, was one of several parts of Croatia occupied by rebel Serbs and incorporated into the so-called Serb Republic of Krajina. At the end of 1995, following military offensives by the army of Croatia to recapture other occupied areas of the country, Eastern Slavonia remained the last rebel Serb enclave in Croatia. Under an agreement brokered in November 1995 by the U.S. Ambassador and other diplomats (i.e., the Erdut Agreement), a UN Transitional Administration for Eastern Slavonia was established to coordinate the peaceful transfer of authority over the region to the Government of Croatia over a period of 24 months.
The UNTAES mandate expired in January 1998, and full authority over the region has been transferred to the Government of Croatia. The continuing reintegration process affects up to 250,000 displaced persons and refugees whose right to return to places of origin in Croatia and live under conditions of security are guaranteed under the Erdut Agreement. Successful implementation of the terms of the Erdut Agreement are essential to long-term viability of multi- ethnic society in Croatia and the region. Ethnic tensions between returning and remaining populations remain high and the potential for violence and instability of population groups remain serious concerns. Sustained support from USAID and other donors in the international community is needed to support economic revitalization to generate jobs and sustainable incomes for affected populations, promote social and political stability in the former occupied territories, and ensure adequate monitoring and protection of human and civil rights,
USAID Role and Achievements to Date: USAID played an important role in supporting UNTAES to carry out its mandate to effect a peaceful transfer of authority over Eastern Slavonia to the Government of Croatia. USAID has also been instrumental in catalyzing other donors to provide necessary support for reconstruction in Eastern Slavonia and other war-affected areas. The principal achievement of USAID and other donor-funded activities to date has been in maintaining a high level of social stability in Eastern Slavonia and creation of adequate conditions of security and application of the rule of law to prevent large scale cross-border departures of resident populations. With the departure of UNTAES from the area, USAID's sustained involvement in the area is needed to complement and support Organization for Organization for Security and Cooperation in Europe (OSCE) and others' monitoring efforts and to reassure affected populations of sustained international community commitment to ensure compliance with the terms and conditions of the Dayton and Erdut agreements.
More specifically, USAID-funded projects and activities contributed to the successful effort to register as Croatian citizens 120,000 undocumented residents of the area. Through a grant to an American private voluntary organization (PVO), USAID has also supported the development of a network of twelve local NGOs to provide basic legal services and advice to affected populations. Other USAID projects under this SO have promoted economic revitalization and private sector development in war-affected. Results include re-registration of almost 1,000 local private enterprises and provision of micro-loans, equity financing, technical assistance and training to over two hundred and fifty (250) private enterprises in the region. In FY 98, USAID will begin implementation of a Returnee and Reconstruction Assistance to support municipalities and local government' initiatives to encourage and facilitate return and permanent resettlement of up to 30,000 Croatian displaced persons in communities of origin in Croatia.
Description: In FY 1999, USAID support for this SO will continue to be concentrated in three areas: economic revitalization of the Slavonia region and other war-affected areas, human and civil rights protection including provision of legal services, and return of displaced persons and refugees to communities of origin in Croatia. USAID will sustain support for economic revitalization activities including equity finance and micro-loan projects and the small/medium-scale private business development project. USAID will also continue to support provision of legal services by local NGOs. FY 1999 will be the second year of operation of the Returnee and Reconstruction Project.
Host Country and Other Donors: USAID is coordinating with the OSCE, the European Union (EU), United Nation Agencies, the governments of Norway, Belgium, and other bilaterals, and the Government of Croatia in the implementation of this strategic objective.
Beneficiaries: Beneficiaries include the 250,000 current and former residents of East Slavonia.
Principal Contractors, Grantees, or Agencies: America's Development Foundation, International Organization for Migration (IOM), American Bar Association, Opportunity International, Small Enterprise Assistance Fund, University of Delaware, World Learning, the International Rescue Committee and Catholic Relief Services.
Major Results Indicators: Baseline Target Number of displaced persons in Croatia 240,000 (1995) 24,000 (1999) Level of employment in Slavonia region 63% (1995) 70% (1999) Private businesses registered in Slavonia 0 (1995) 800 (1998) Number of NGOs addressing problems of civil society in Eastern Slavonia 0 (1995) 30 (1999) Human and civil rights monitored and safeguarded Significant qualitative improvement
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