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).
UKRAINE
FY 1997 F 1998 F 1999 Actuals Estimate Request FREEDOM Support Act............... $225,100,000 $225,000,000 $223,500,000 Introduction
The United States has an important stake in Ukraine's successful transition to an independent, stable democracy. A strong Ukraine will enhance regional stability by being able to resist threats to its independence and that of its neighbors. An economically prosperous Ukraine can be an important commercial partner, providing a sizeable market for U.S. goods and services. Economic success will also enable Ukraine to afford technology that eases critical global problems such as environmental degradation. As a regional power, a peaceful and democratic Ukraine can be a significant partner in the effort to eradicate terrorism, conflict and disease. It can actively support important American values, such as basic freedoms, respect for human rights, and humanitarian causes.
The Development Challenge
The fundamental development challenge for Ukraine's leaders is to muster the political will and bureaucratic skill to implement comprehensive economic reform. Although much remains to be done, Ukraine can take justifiable credit for a number of important advances achieved to date. Inflation has been reined in and remains low (10.2% for 1997), the budget deficit has been reduced, the decline in GDP has decreased, and the new currency has remained remarkably stable. With the 1996 enactment of a new Constitution, fundamental rights and protections that will form the basis of a stable and transparent legal system have been established. Beyond that, the prospects for deeper reform to create an environment conducive to private enterprise development and investment are uncertain, both in terms of pace and parameters. President Kuchma continues to declare his commitment to radical economic reform, but to date there has been little action. Ukraine's ultimate path will no doubt be influenced by worsening economic and social conditions, as well as upcoming Parliamentary and Presidential elections. To date, the President's economic reform program has met with considerable resistance from the Parliament, a situation which may well worsen if upcoming elections result in a strengthened opposition. Another important factor that will influence Ukraine's course of action is the current competitive state of world financial markets. To attract urgently needed resources, Ukraine will have to inspire confidence in its economic outlook, which will require extraordinary measures.
The social cost of the transition is staggering. It is among the most potentially destabilizing forces in Ukraine, and exacerbated by the government's failure to reform the social infrastructure. The cost of living continues to rise above the means of average Ukrainians, whose buying power has plummeted over the past six years. Incomes are falling as the economy deteriorates. Pension reform is being studied, but it will be some time before a new system will be operational. A full array of targeted subsidies for the neediest is not yet in place, which means that the 54% of the population that falls below the poverty level is without an effective social safety net. Life expectancy continues to decrease, and the health care system, in need of wholesale structural change, is not able to meet a number of basic needs such as vaccines and drugs. It is generally agreed that comprehensive social sector reform is essential to ensuring the sustainability of reforms that will lead to economic growth, but there is no consensus within the government on the scope and content of such reform. The underlying concern is that if the Government of Ukraine (GOU) does not take steps to address these social problems, popular support for market reform will deteriorate along with the chance for a successful transition.
Corruption is a growing and much publicized concern, both in terms of the viability of good governance
and successful business development. Pressure is building within Ukraine and the United States to do something about it. On the U.S. side, involvement is contemplated with specific reference to protecting U.S. business interests in Ukraine. Corrupt practices and bureaucratic red tape overwhelm most American firms trying to operate there. With Ukrainian sights set squarely on increasing foreign investment, neither side can ignore this problem any longer. The U.S. is looking at options to assist Ukraine with anti-corruption measures, including ongoing support for deregulation, legal reform and other efforts to create an appropriate enabling environment for private enterprise development and investment.
There are no doubt limits as to how much sustainable reform can be accomplished in the absence of an appropriate policy environment. However, given the difficult climate in Ukraine at present, USAID has an impressive record of achievement to date of measures that have advanced reform and are paving the way for progress in the second stage of reform. The mass privatization and small-scale privatization programs are largely completed, with over 7,000 medium and large enterprises and 42,000 small enterprises privatized. Condominium associations covering 39,000 families in 43 cities have been or are being registered and contracts for residential building maintenance services for more than 140,000 families in 26 cities have been or are being negotiated with private firms. Competitive privatization of urban land parcels has been implemented in four cities and is being replicated throughout Ukraine. The National Bank of Ukraine's Interbank Payments System is fully functioning, with technical execution of payments taking minutes rather than weeks. Six farm service centers, established with U.S. private sector participation, are providing U.S. technology and inputs, as well as a private alternative to state systems for marketing output. Ukraine has made significant gains in power sector reform. The energy wholesale market is operating live, the generation system has been demonopolized into four joint stock companies, with 27 local joint stock electricity companies to distribute and sell electricity to consumers and a national electricity regulatory commission created to oversee fair competition and ensure reasonable tariffs. Modernization of the Lviv water utility's water distribution system has resulted in improved water service for over 100,000 people. USAID support to municipal governments has led to their reducing operating costs, increasing revenue and improving services to citizens. About six million families who could otherwise not afford increases in housing and utility costs have received subsidies for part of the cost.
These and other examples demonstrate that U.S. assistance has been instrumental in promoting sustainable reform. Given strong U.S. interests in an independent Ukraine, it is essential that we continue to provide adequate support in strategic areas, particularly as the economy continues to deteriorate. With so much at stake and such tremendous economic potential, the USAID role in promoting economic, democratic and social reform becomes all the more important during this uncertain period.
Other Donors
The United States is the largest bilateral donor to Ukraine. Other major donors include the World Bank, European Union, European Bank for Reconstruction and Development, United Kingdom, Germany and Canada. USAID maintains close contact with the major multilateral and bilateral donors working in Ukraine to ensure that foreign technical assistance is mutually reinforcing to the extent possible. There is particularly strong collaboration with World Bank and IMF lending programs, which contribute substantial leverage to USAID technical assistance programs by virtue of their considerable financial incentive to proceed with difficult reforms. Notable examples of effective donor coordination include completion of the mass privatization program, substantial restructuring of the energy sector, and G-7 work toward the closure of the Chernobyl Nuclear Power Plant.
FY 1999 Program
In FY 1999, the USAID program in Ukraine will continue to assist in the fundamental restructuring of Ukraine's economic and political system and support the efforts of the government to alleviate the
privations imposed on the most vulnerable members of society during the economic transition.
Under the economic restructuring and growth goal, USAID is requesting FY 1999 funding for the following strategic objectives: increased soundness of fiscal policies and fiscal management practices; accelerated development and growth of private enterprises; a more competitive and market-responsive private financial sector; a more economically sound and environmentally sustainable energy system; and increased environmental management capacity to support sustainable economic growth. A major emphasis in all these objectives is the creation of a transparent, rule-of-law based legal and regulatory framework which must exist for a market-based economy to flourish. Energy and environmental programs will also help reduce Ukraine's role in Global climate change issues. A new U.S.-sponsored initiative involving Ukrainian cooperation with government and private institutions in Poland presents a promising opportunity for Ukraine to benefit from Poland's considerable successes, with an initial focus on business development.
Under the democratic transition goal, USAID is requesting FY 1999 funding for the following strategic objectives: increased, better-informed citizens' participation in political and economic decision-making; legal systems that better support democratic processes and market reforms; and more effective, responsible, and accountable local government. Expected achievements include a more efficient and capable judiciary and legal community; improved capacity of the Ukraine Parliament; an active, strong civil society; an increase in the amount of objective news and information available to citizens; a stronger election process; adoption of new civil, civil procedure, criminal, and criminal procedure codes; greater debate and media coverage throughout Ukraine on the role of women in Ukrainian society; and improved local government management and administrative capacity.
Under the social stabilization goal, USAID is requesting FY 1999 funding for one strategic objective: improved sustainability of social benefits and services. USAID will focus its efforts on helping Ukraine mend its social safety net in such areas as health care financing, pension reform, unemployment insurance and targeted benefits. Particular attention will be paid to strengthening NGOs to provide services that government cannot, and to influence public policy on behalf of citizens' interests.
Under cross-cutting and special initiatives, USAID requests FY 1999 funding in four areas: training and exchanges; improved public health delivery; women's initiatives; and Eurasia Foundation. USAID sponsors training and exchanges between American and Ukrainian organizations in a range of sectors that directly complement and support USAID technical assistance programs. USAID's overall goal in health is to improve the quality and efficiency of care by making health services more available to the neediest people, and fiscally sustainable for the country, both during and after the country's economic transition. As part of the effort to relieve the burden on the fragile health care system and better assure a reliable, healthy workforce that can be mobilized under a revitalized economy, USAID will assist Ukraine with prevention strategies to reduce detrimental lifestyle choices with significant negative impacts on Ukrainian society, such as smoking, alcohol and drug abuse, domestic violence and poor nutrition. In addition, USAID will look at increasing the emphasis on primary health care, improving pre- and post-natal care to reduce low birth weight and women's and children's morbidity, HIV/AIDs prevention and self-care of chronic illness. This "healthy community" thrust will complement USAID's ongoing programs in health care financing, medical partnerships, women's health, and infectious disease control, including tuberculosis.
USAID-sponsored activities under the special initiatives rubric are increasing women's participation and influence in the economic and political life of Ukraine through entrepreneurship and leadership training, support to women's credit unions and strengthening NGOs that influence public policy on women's issues and provide a range of services to women. USAID activities are also improving the quality of women's lives by addressing women's health needs and by supporting organizations that are working to prevent and treat violence against women. Also of significance is the Eurasia Foundation's small grants program which complements USAID's larger transition program, specifically in the areas of economic and government reform, small business lending, nonprofit sector support, media and communications.
UKRAINE
FY 1999 PROGRAM SUMMARY*
(in Thousands of Dollars)
Strategic ObjectivesEconomic Restructuring Democratic
TransitionSocial Stabilization Cross-cutting / Special Initiatives Total Privatization -- -- -- -- -- Fiscal Reform 6,100 -- -- -- 6,100 Private Enterprise 40,300 -- -- -- 40,300 Financial Reform 15,500 -- -- -- 15,500 Energy 44,050 -- -- -- 44,050 Environmental Management 4,500 -- -- -- 4,500 Citizens' Participation -- 5,000 -- -- 5,000 Legal Systems -- 2,500 -- -- 2,500 Local Government -- 5,500 -- -- 5,500 Crises -- -- -- -- -- Social Benefits -- -- 9,900 -- 9,900 Environmental Health -- -- -- -- -- Cross-cutting / Special Initiatives -- -- -- 90,150 90,150 TOTAL 110,450 13,000 9,900 90,150 223,500
*FREEDOM Support Act (FSA) funds
USAID Mission Director: Gregory Huger
ACTIVITY DATA SHEET
PROGRAM: UKRAINE
TITLE: Fiscal Reform, 110-S001.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $6,100,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1994; ESTIMATED COMPLETION DATE: FY 2004
Purpose: Increased soundness of fiscal policies/fiscal management practices.
USAID Role and Achievements to Date: USAID's fiscal reform program aims to make Ukraine's tax and budget system more comprehensive, systematic and transparent so that informed policy level decisions will be made and implemented and the implications of these decisions will be clear to all. The intent is to strengthen the fiscal sector and the institutions involved with it, including the Ministry of Finance (MOF), Ministry of Economy (MOE), relevant committees of the Parliament (Rada) and units of local government.
With the assistance of USAID and Treasury advisors, value-added and enterprise profit tax laws have been enacted, and personal income and excise tax laws are drafted and pending before the Rada. The State Tax Administration (STA) has moved to implement the new laws within a very tight time frame, including issuance of taxpayer identification numbers; preparation of forms, instructions and informational materials; and development of computerized tax information systems. The National Tax Training Center has opened, and courses are being developed to train tax collection officials in new laws and tax enforcement techniques. The MOF has adopted a new budget classification system and initiated procedures aimed at achieving a realistic 1998 budget. A comprehensive budget system law covering preparation, adoption, and execution of the budget has been drafted and is under consideration in the Rada. Centralized Treasury operations are finally underway, with prospects for real progress. A relational database for budget information has been developed for MOF use, along with time series for key budget data going back to 1992. Revenue forecasting models have been developed for the MOF Budget Department. A Fiscal Analysis Unit has been established for the Rada, and analyses prepared by the Unit have been used by leading members of the Rada in debates on proposed tax legislation. An intergovernmental fiscal model has been developed for estimating and analyzing alternative financing arrangements between central and local governments; staff of both the MOF and the Rada are being trained to utilize and maintain this model. The Government of Ukraine (GOU) has committed to reforming public administration at the central and, eventually, local levels, including reducing the number of Cabinet ministries, defining clear lines of authority, reforming the central “apparat,” and creating a civil service system. A functional review of the MOF and MOE is underway, with a view to rationalizing and consolidating their various economic policy functions.
Description: USAID's fiscal program focuses on (1) advising on macroeconomic policy and analysis; (2) improving tax law, policy and administration, (3) developing techniques and procedures for budget preparation, analysis and execution, (4) improving the system of intergovernmental finance, and (5) strengthening the fiscal management capacity of economic policy institutions, particularly the MOF, but also the STA, MOE, State Statistics Committee and the relevant committees of the Parliament (Rada), to enable them to function more effectively within a democratic system and a market economy. In all of these activities, emphasis is placed on working with local counterparts to ensure that skills are transferred and work products are appropriate to the Ukrainian situation.
Host Country and Other Donors: USAID activities are coordinated with the IMF, the World Bank, the EU, German Technical Assistance, and the Soros-Asland Group.
Beneficiaries: The MOF, the STA and the Rada's tax and budget committees are the immediate beneficiaries, and by extension the taxpayers and voters of Ukraine. Entrepreneurs will benefit as more comprehensible and transparent fiscal systems are established.
Principal Contractors, Grantees, or Agencies: USAID activities are implemented by KPMG/Barents and Harvard Institute of International Development. In addition, USAID-funded advisors from the U.S. Department of Treasury are advising counterparts in the GOU.
Major Results Indicators: Baseline Target GOU meets IMF deficit target No (1995) Yes (1999) Reduced number of budget revisions 3 (1995) 1 (1999) due to inaccurate budget forecasts Number of taxpayers included in the 15.6 (1996) 30 (1999) taxpayer identification system (millions) Fiscal reform legislation drafted/submitted/ Drafted (1995) Enforced (1999) passed/enforced
ACTIVITY DATA SHEET
PROGRAM: UKRAINE
TITLE: Private Enterprise, 110-S001.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $40,300,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1994; ESTIMATED COMPLETION DATE: FY 2005
Purpose: Accelerated development and growth of private enterprises.
USAID Role and Achievements to Date: Business development is essential to create jobs, generate income, expand the availability of goods and services, increase tax revenues and achieve other economic benefits, especially at the local level. However, Ukrainian entrepreneurs lack market-oriented business skills and support services. The legal, regulatory and local political environment does not yet encourage the growth of competitive businesses. Agriculture -- comprising nearly 30% of GDP and 20% of employment -- is critical to creating a successful market economy. Overall, the economy is marked by a high level of insolvency, and Ukraine must continue its good progress toward implementing a bankruptcy system that provides for reorganization of enterprises. Ukraine must also continue developing a framework for institutionalizing rules regarding property relations and a system for enforcement of contracts. Of key importance to Ukraine's critical accession to the World Trade Organization (WTO) will be to ratify and implement legislation conforming to basic WTO standards.
Having reached its objective of assisting Ukraine to privatize eight thousand medium and large state enterprises, USAID is focusing substantial resources on the development and growth of private enterprises in Ukraine. Major activity areas under this objective include: small and medium enterprise (SME) development; legal, regulatory and policy reform to improve the overall environment for business; enterprise restructuring; and improved private sector agricultural production.
To date, the 12 USAID-supported business service centers have provided advice, training and information to over 10,000 businesses. Proposed and recently enacted changes to the principal tax laws affecting SMEs will help to promote SME development within the official economy. Simplified forms for small businesses are in preparation for both the value-added tax and the enterprise profits tax, along with clear informational materials. USAID is also assisting the State Tax Administration (STA) with training in understanding and auditing tax returns based on international accounting standards (IAS). Over 1,000 Ukrainian accountants and auditors are being trained in IAS, reporting and managerial accounting, and a national certification program has been established. USAID is also supporting several programs in small business lending, including the Western NIS Enterprise Fund, Eurasia Foundation, credit unions and a new microenterprise credit facility.
USAID has elicited the cooperation of the Highest Arbitration Court of Ukraine (HAC) on bankruptcy law reform and intensive training to over 100 arbitration court judges has resulted in better bankruptcy administration. With the enactment of amendments to the pledge law, provision for a collateral registry for pledges of movable property has been made, creating a firm basis for secured lending in Ukraine. With the help of USAID assistance, the Anti-Monopoly Committee (AMC) has moved aggressively to develop necessary statutes, internal and investigative procedures, and enforcement mechanisms, gaining international recognition for its progress. Also as a result of USAID assistance, the accession process to the WTO is well advanced. USAID also has addressed the need for commercial law reform with assistance to the drafters of the proposed Civil Code of Ukraine, which will establish the overall framework for civil law in Ukraine. USAID has also initiated a program of deregulatory reform as well as a program to enhance the enforcement of contracts and judgments.
In agriculture, twelve Farm Service Centers have been established with strong U.S. private sector participation, providing an alternative to state-run input supply and marketing channels. Twenty more such centers are planned, with a revised focus on serving small, private farmers. Development of a private farm finance company has been completed, and a commercially driven, private sector EXIM credit program is now in development, which will make seasonal and medium-term credit available for input purchases. The GOU has agreed to rapidly privatize more than three-quarters of the grain elevator and storage industry. Nine commodity exchanges, as well as an exchange association, are
in operation, and the GOU has announced its intent to make future grain procurement through the exchanges rather than the old state order system. Restructuring of collective farms and land titling work has been carried out on farms in 13 oblasts and will be expanded to six more, for a total of 19 out of 25 oblasts.
The West NIS Enterprise Fund has booked close to $26 million in investments to date, with another $19 million committed. Some of the Fund's companies are into their second year of operation and beginning to show impressive results. The Eurasia Foundation funded ten loans through its initial small business loan program and has negotiated a program agreement with a new bank to continue the loan program.
Description: USAID is promoting entrepreneurship by assisting Ukraine with (1) tax and regulatory changes to alleviate the burden on SMEs while encouraging compliance; (2) the adoption of IAS; (3) the adoption of deregulation measures; (4) business skill development, including a focus on the sustainability of the USAID-supported Business Services Centers and a broad-based business education program; (5) small business incubators; (6) financing, including such programs as small business lending, microenterprise credit, credit union development, leasing and franchising; and (7) the establishment of a local and national mandate for SME support, including a high-level initiative that brings Poland's experience to bear on Ukraine's SME development. USAID is also assisting local business advisory organizations in their efforts to improve the business environment and, in collaboration with the Ministry of Economy, has established a National SME Policy Task Force to develop effective and productive SME support structures on the national and regional levels. Other areas of emphasis include legal reform to support a market economy, including a commercial legal framework, accession to the WTO, and bankruptcy and financial restructuring. In addition to a supportive overall business environment, the successful restructuring of privatized enterprises is also key to the growth of Ukraine's economy. USAID assistance is beginning to address such post-privatization issues as consolidation of ownership; protecting ownership rights; introduction of restructuring tools, financial resources and incentives; and the facilitation of bankruptcy to restructure or liquidate the firm in the event of insolvency. USAID is also supporting efforts to privatize land under enterprises. In agriculture, the USAID program involves a range of land and enterprise privatization, input supply, marketing, finance, private farm support and related policy reform interventions.
Host Country and Other Donors: GOU participants include the Deputy Prime Minister for the Economy, the State Entrepreneurship Development Committee, the State Property Fund, Committees for Land Resources and Urban Development, the State Customs Committee, the Ministry of the Agro-Industrial Complex and the Interministerial Commission for Agrarian Reform. Private Ukrainian businesses are major development partners, as well as beneficiaries of assistance. The British Know How Fund, the Germans, the European Union, and the EBRD also provide assistance in agriculture and enterprise development.
Beneficiaries: Proprietors and employees of micro, small and medium-sized businesses benefit from the various firm-level assistance activities and policy/regulatory reforms described above. The business community at large will benefit from bankruptcy reform and the introduction of restructuring methods. All participants in Ukraine's international trade will benefit from WTO accession. Producers and consumers benefit from increased agricultural production and related processing and distribution through increased incomes and lower food prices.
Principal Contractors, Grantees, or Agencies: Contractors and grantees include: the Alliance, DAI, IRIS, KPMG/Barents, Sibley International, RONCO, the Recovery Group, Chemonics, Price Waterhouse, the World Council of Credit Unions, the U.S. Department of Commerce, the U.S. Department of Agriculture, Iowa State University, Citizens Network for Foreign Affairs, Land O'Lakes, ACDI, VOCA, the World Council of Credit Unions, the Eurasia Foundation, and the International Finance Corporation.
Major Results Indicators: Baseline Target Growth of legally registered firms 240,000 (1996) 20% increase (1999) Number of businesses 400 (1996) 1,200 a year (1997-99) assisted through networks Private joint ventures in agricultural 4 (1996) 34 (1999) services and processing Percent increase in yields from land areas 30% (1996) 50% (1999) using new technologies Number of foreign joint ventures 50 (1995) 700 (1999) Anti-monopoly enforcement: cases 31 (1995) 120 (1999) decided in favor of preserving competition Collective farms restructured/rationalized 0 (1995) 3,000 (1999) Private housing maintenance contracts 4 (1995) 100 (1999)
ACTIVITY DATA SHEET
PROGRAM: UKRAINE
TITLE: Financial Reform, 110-S001.4
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999 $15,500,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1994; ESTIMATED COMPLETION DATE: FY 2004
Purpose: A more competitive and market-responsive private financial sector.
USAID Role and Achievements to Date: Although the contours of a market-based financial system are beginning to form, the fundamental infrastructure remains weak. Because Ukraine is rapidly being integrated into international financial markets, there is a danger of a systemic financial crisis. As seen in all too many countries, this in turn can adversely impact the real economy and jeopardize Ukraine's fragile and nascent economic recovery.
USAID's financial sector program in Ukraine focuses on (1) banking (2) government securities, (3) capital markets development and (3) collateral law reform and registry development in order to build the infrastructure to support secured lending. USAID is assisting the National Bank of Ukraine (NBU) to develop professional capacity to exercise its prudential regulatory responsibilities, thus promoting a safe and sound market-oriented banking system. A more efficient government securities market will promote more effective monetary policy operations while helping to build confidence among foreign and local investors in Ukraine's economy. USAID is also helping to transfer commercial risk-based banking skills to Ukrainian banks and to promote the use of good banking practices. USAID's capital markets development program is assisting Ukraine to put in place the fundamental elements of securities market operations and regulatory oversight. The first phase of the collateral program succeeded with the enactment in November 1997 of an amendment to the Law on Pledge, providing for a State Pledge Registry for movable property. The program will now proceed with implementation of the Registry, as required by the new law to be established by July 1, 1998.
With the help of USAID assistance, Ukraine has one of the most efficient electronic funds transfer systems in the region. As accounting is crucial for the efficient allocation of resources in a market economy in both and public and private sectors, USAID supported the formation of the Ukrainian Federation of Professional Accountants and Auditors, which was approved as a self-regulatory organization for accounting and audit professionals. This organization, the first association of its kind in the former Soviet Union, now has over 1,400 members, 18 fully operational regional chapters throughout Ukraine and six standing committees. USAID-funded banker training, conducted by the National Bank of Ukraine's Training Center and by the International Management Institute of Kiev, has provided innovative and cost effective training in finance, accounting and management to 3,100 Ukrainians. The Securities Commission was fully empowered to oversee capital markets activities and completed its first enforcement case, sanctioning the offending investment company for trading its own securities and not disclosing required information on its activities.
Description: USAID's financial sector program provides assistance in (1) bank supervision at the NBU, including support for on-site supervision capacity, bank rehabilitation, and support for the development of the legal department; (2) international accounting standards conversion at the NBU, including strengthening internal controls and audit procedures; (3) banker training, focusing on the self-sustainability of the banking school and the initiation of a regional training program to extend the program to banks outside the capital; (4) government securities markets, including support for implementation for the National Depository Law; (5) establishment of a corporate disclosure and corporate governance program for all large open joint stock companies; (6) initiation of a securities commission enforcement program; and (7) nationwide expansion of the over-the-counter trading system and support to key institutions of the securities market: Broker-Dealer Association, Inter-regional Securities Union Depository and the Professional Association of Registrars and Depositories.
Host Country and Other Donors: Financial reform activities are coordinated with the EU, the World Bank, the IMF, the British Know How Fund, and the GOU, principally through the National Bank of Ukraine and the Securities and Stock Market State Commission.
Beneficiaries: The entire private financial sector will benefit directly from these activities, as will, by extension, enterprises and households who need access to finance.
Principal Contractors, Grantees, or Agencies: USAID's activities in financial reform are implemented by KPMG-Barents, IBTCI, Financial Markets International, Price Waterhouse, IRIS and Financial Service Volunteer Corps and the Ukrainian Center for Certificate Auctions.
Major Results Indicators: Baseline Target Banking sector investment in private sector 36% (1995) 55% (1999) and households (% of total bank credits) Securities market capital as a % of GDP .005% (1995) .050% (1999) Assets of ten largest private banks as a 35% (1995) 68% (1999) % of assets of state-owned banks
ACTIVITY DATA SHEET
PROGRAM: UKRAINE
TITLE: Energy, 110-S001.5
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $44,050,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2005
Purpose: Economically sound/environmentally sustainable energy system.
USAID Role and Achievements to Date: USAID views the financial viability of the energy sector as a key element to Ukraine's economic transition. Ukraine depends heavily on foreign sources for fuel, particularly Russia, importing more than 80% of its gas and more than 95% of its oil. At the same time, Ukraine has also had to import large amounts of coal, despite its own sizeable deposits, because of poor delivered quality and inefficient distribution mechanisms. Nuclear power holds great potential, but is problematic due to the Chernobyl disaster. Ukraine has built up over $1.7 billion in energy debts since independence, financed almost entirely through credits from international donors. Ukraine is also a major contributor to global climate change.
USAID's energy program for Ukraine focuses on (I) energy sector restructuring, including power, coal, oil and gas; (2) improving energy efficiency of industrial enterprises through energy audits and adoption of low-cost/no-cost efficiency measures; (3) improving energy efficiency and reducing costs in the municipal sector; (4) increasing public awareness of the country's energy issues and problems; (5) addressing the social and economic impacts of the closure of Chernobyl; (6) promoting private sector development through demand-side management programs; (6) developing private Ukrainian energy service companies (ESCOs); and (6) providing opportunities for alternative energy sources. Success in these areas will help address Ukraine's role in global climate change.
With USAID assistance for power sector restructuring, Ukraine has (1) divided its original integrated regional monopolies into four thermal, one nuclear, and two hydro-electric generating companies (GENCOs); a high-voltage network enterprise, and 27 local electricity distribution companies (LECs); enacted the Energomarket Members Agreement on power market rules, and appointed a Board of Directors to administer the technical market operation and market funds distribution; (2) created an independent regulator, the National Electricity Regulatory Commission (NERC), to oversee wholesale market operation and set market-based electricity tariffs; (3) initiated the wholesale market through the active bidding of generating companies; and (4) started a transparent, market-based system for power sector funds allocation in accordance with Energomarket Rules and a Market Funds Procedure. The GOU has also taken vigorous measures to address financial problems and has agreed to develop a comprehensive plan for financial recovery centered upon privatization.
The Ukrainian power utilities partnership program has been viewed as a flagship program, successfully delivering the best of America's expertise in technical and commercial operation in the power sector. These partnerships have proved to be extremely successful, with reforms in metering, billing, collections, business orientation, and preparation for privatization.
USAID's assistance to promote energy efficiency has resulted in a projected 31.2 million cubic meters reduced annual natural gas usage and total annual savings of more than $5 million among six enterprises. As part of the Lviv vodokanal project to decrease operating costs and improve water service, the installation of energy efficient pumps has resulted in a 75% increase in water service.
Description: USAID assistance to Ukraine's power sector is aimed at facilitating the financial recovery of the power industry. By agreement with the GOU, World Bank and other donors, USAID focuses on a number of activities, including (1) providing technical assistance to the newly-established Inter-ministerial Work Group on Power Sector Financial Recovery; (2) working with selected local electricity distribution companies to increase cash collections and to prepare for privatization; (3) working with power generating companies on restructuring mechanisms to develop optional arrangements for current supply and debt offsets with coal suppliers; (4) providing an independent expert economic analysis of operation at fossil-fuel power plants to identify measures to reduce operation and maintenance expenses; (5) working on market funds procedures to ensure that all forms of payments should be
counted, documented and disbursed to market members; (6) strengthening Energomarket Board functions administratively, as well as promote interaction with work groups and the NERC; (7) working with the National Dispatch Center to ensure that it plays a leading role in the technical operation of the wholesale market and bringing scheduling, dispatch, and settlement of the GENCOs' bids in accordance with the Energomarket Rules; (8) assisting the NERC to become more proficient in its role of regulator for the power sector, with additional assistance in the area of oil and gas regulation to help the NERC meet the challenges given its new regulatory authorities in oil and gas.
Other activities in which USAID is engaged include (1) training for the Ministry of Energy including an MBA program for managers in the electricity sector, with expansion into the oil and gas sectors in the near future; (2) a utility partnerships program, which will be enlarged and also expanded to include partnerships in the oil and gas sector; (3) an alternative fuel center to develop coal-bed methane as a commercially viable product; (4) assistance in preparation of business plans to attract investments for the most productive coal mines; (5) assistance to develop a legal and regulatory framework for the oil and gas sectors, as well as assistance with private and strategic investment in gas transit systems and market development; and, (6) energy efficiency, including several activities in demand-side management, industrial energy efficiency resulting in reduction of natural gas usage and monetary savings in industrial plants, industrial energy audits and development of eight private energy service companies.
A sizable portion of resources are also allocated to Chernobyl. USAID has had a major role in designing an action plan to ameliorate the social impact on Ukraine of the Chernobyl's facility closure. USAID is also rendering support to ensure an ecologically-sound sarcophagus at Chernobyl, safety parameter display systems, and increased nuclear energy efficiency. Other implementers in this effort include the U.S. Department of Energy and the EBRD.
Host Country and Other Donors: USAID works with the Ministry of Power and Electrification of Ukraine, the State Committee on Energy Policy and Energy Conservation, the Ministry of Industrial Policy, and regional administration in the Lviv, Dnipropetrovsk, and Donetsk Oblasts, and coordinates with the activities of the British Know How Fund, the EU, the World Bank, the European Bank for Reconstruction and Development, and the EU. 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 and municipal 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 U.S. Department of Energy. Energy efficiency projects are implemented by Burns&Roe Enterprises, Alliance to Save Energy, CH2 M Hill International Services, and the World Environmental Center.
Major Results Indicators Baseline Target Reduction in budgetary subsidies (a) 625 (1995) (a) 400 (1999) for (a) power and (b) coal sectors (b) 1.6 (1995) (b) 1.5 (1999) ($ millions) Percent of energy consumption above 30% (1995) 15% (1999) OECD levels Private investment in the power sector 0 (1995) 750 (1999) ($ millions) Percentage of tons of emissions reduced 1.1m SO2; 10% reduction from thermal power plants .23 noxious gases (1995) from baseline (1999)
ACTIVITY DATA SHEET
PROGRAM: UKRAINE
TITLE: Environmental Management, 110-S001.6
STATUS: New
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $4,500,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1999; ESTIMATED COMPLETION DATE: FY 2005
Purpose: Improved capacity for environmental management to promote sustainable economic growth.
USAID Role and Achievements to Date: Earlier USAID activities in environmental health developed a strong linkage between environmental concerns and economic development. Initial work helped define preliminary national policies and legislation regarding the environment and demonstrated through pilot programs better environmental management practices.
USAID supports the Ukraine Council and Work Group Program to Promote Sustainable Development, which was created to identify institutional barriers to sustainable development and work toward establishment of national policies to help overcome these barriers. Under USAID's auspices, the U.S. Environmental Protection Agency is managing the establishment of a new environmental resource center in Ukraine similar to that successfully operating in Budapest for Central Europe. Among other things, the center will provide a linkage between industry and environmental standards required to participate in the world market place.
In the water sector, USAID is assisting the city of Lviv to establish an economically and technically sustainable municipal water utility (vodokanal) through significant improvements to energy efficiency, reduced leakage and improved hydraulic pressure. USAID is collaborating with the World Bank to assist Lviv in qualifying for a $40 million loan to upgrade the water infrastructure. In addition, USAID is planning a 6-10 city roll-out of the Lviv program to achieve more efficient and economically sustainable municipal water utility operations. USAID's Kaniv Reservoir project completed the development of a point source water quality assessment and monitoring model. Laboratory equipment has been procured and a water quality assessment and monitoring laboratory established within the Ministry of Environment. USAID is applying the model to the Lower Dnieper River Estuary project. A USAID grant supported technology transfer and the establishment of a joint venture enterprise, which can produce a compact, cost-effective, small-system drinking water purification units for areas in need.
In the Carpathian region, USAID supports environmentally sound small businesses in the wood processing industry to reduce the timber required for operations for more efficient resource utilization, and reduce waste products and usage of energy-inefficient equipment. An action plan has been developed which identifies immediate opportunities for partnerships with U.S. private enterprises and other donor sources to initiate investments in environmentally sound businesses in the wood processing sector.
Within the large industrial sector, waste minimization/energy conservation demonstration projects at enterprises located in the Donetsk and Dnipropetrovsk regions have already yielded several millions of dollars of annual savings, increased industrial energy efficiency and the prevention of hundreds of tons of pollutant from being released into the environment. Companies like the Azovstal Metallurgical Plant in Marioupol are replicating waste minimization actions using their own investment funds. USAID is also supporting the establishment of private, energy service companies that will continue to develop an indigenous business sector that promotes and expands implementation of energy efficient measures. In the agriculture sector, USAID is demonstrating and transferring alternative approaches and techniques for pest and pesticide management. Currently the project is addressing issues related to stockpiled pesticides, pesticide storage, and registration of pesticides.
In the context of USAID's Chernobyl-related work, USAID funded the procurement of a Mobile Radiological Laboratory. The laboratory will be used to support radiological assessments like that currently planned for the town of Slavutych (located 30 km from Chernobyl). USAID, in collaboration with the EU and GOU, published an action plan to address the social impact of the closure of Chernobyl.
Description: USAID's environmental program aims to (1) promote an integrated approach to the environmental and economic policy development and planning processes of national and local policy making institutions; (2) build local capacity within the government, the private sector, and the NGO community to create an institutional framework that will provide guidance on environmental issues while supporting Ukraine's transition to a market economy; (3) develop safer and more economically sustainable potable water infrastructure and environmentally sustainable agriculture and industrial sectors; (4) increase Ukrainian Government's compliance with international environmental standards and guidelines; (5) address the social impact of the closure of Chernobyl; (6) promote energy efficiency and energy conservation technologies and processes, and (7) under the Chernobyl MOU as well as through the G7-Ukraine Nuclear Safety Working Group activities, provide staff support for monitoring and facilitating least cost energy investments, decommissioning, safety upgrades, and sarcophagus implementation plan.
Host Country and Other Donors: USAID coordinates with the Ukraine-U.S. Council and Work Group Program, whose members are drawn from the Government of Ukraine, including six Cabinet Ministers, and from local and international private sector companies, NGOs, and the international community. USAID cooperates with the World Bank on the upgrade of Lviv's water supply and industrial waste management in Donetsk. The EU is a partner on the Chernobyl Social Impact Study and on environmental proposals and programs. Discussions are continuing with EBRD on energy efficiency investments. USAID participates actively in UNDP environment donor meetings. Through the Chernobyl program USAID collaborates with UK, Canada, Japan, Italy, France, EU and many other donor countries.
Beneficiaries: Currently the primary beneficiaries are the citizens of Lviv, Donetsk, Dnipropetrovsk, Kiev, Crimea, Slavutych, Ivano-Frankivsk, Kharkiv, and Odessa.
Principal Contractors, Grantees, or Agencies: CH2M-Hill has been USAID's principal implementer for Ukraine environmental activities since 1994. With this contract ending in September 1998, the principal follow-on contractor is currently being determined. USAID has also funded advisors from the U.S. Environmental Protection Agency and the Department of Energy. Other implementers include Virginia Tech, World Environment Center, Hagler Bailly, Management Systems International, ISAR, Burns & Roe, Alliance to Save Energy, Biodiversity Support Project, and City University of New York.
Major Results Indicators: Baseline Target Environmental laws and regulations 0 (1995) 7 (1999) include market incentives Increased access to water services (hours) 0-3 (1996) 24 (1999) by hospitals and other public activities Number of environmental education centers 1 (1995) 4 (1998) established Number of independent energy efficiency 0 (1995) 20 (1999) and waste reduction organizations Safer more economically sustainable pesticides 0 (1995) 3 (1999) practices adopted in agriculture (# of programs) Safer, more efficient production practices 0 (1995) 1,000 (1999) adopted by industry (plants with clean technologies)
ACTIVITY DATA SHEET
PROGRAM: UKRAINE
TITLE: Citizens' Participation, 110-S002.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $5,000,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2005
Purpose: Increased citizen's participation in political/economic decision-making.
USAID Role and Achievements to Date: USAID is promoting the active participation of citizens in political and economic decision-making through support to civic action groups, public-policy NGOs, the news media, political parties, and democratic free trade unions. USAID assists government entities with improving election administration, drafting legislation, and educating the public on the democratic process. USAID supports the production of non-state daily and weekly news programs which are broadcast nationwide, improved operation of newspapers as well as development of a cadre of news professionals in both the print and broadcast media. 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, the Central Election Commission, legal associations, and municipal governments. Programs also provide training and support to legal professionals, law students, and non-government organizations working in the sphere of legal reform.
As a result of USAID assistance, non-government newspapers now directly compete with government newspapers. One regional paper increased its subscription rate by more than 10% soon after receiving USAID-funded assistance and advice on advertising, financial management, and product design. Virtually all of the leading journalists and media technicians working on today's most successful non-state TV news programs previously received USAID-funded training and/or worked at the USAID-funded media center. Quality informational programs produced by the media center are broadcast on state TV, including the daily news program, Vikna, which sets the standard for news reporting. Although the government has dropped independently produced news programs from the state channels, most of the USAID-sponsored programs continue to be aired on independent channels. The formerly USAID-funded non-profit training and production facility has become affiliated with the flagship station of a new commercial network of independent TV stations reaching every region of the country. Ongoing training programs for regional journalists continue to produce news programs of such high quality that they are sought by independent TV companies.
Since 1991 the number of non-governmental organizations (NGOs) has grown from a handful to approximately 5,000, and thousands of Ukrainians, including judges, journalists, attorneys, newspaper managers, political party activists, NGO leaders, civic activists, legislative drafters, municipal government leaders, law faculty, and trade union leaders, have received training that is directly applicable to their democratic reform efforts. With USAID assistance, Ukraine adopted a new election law that eliminated many problematic provisions in the previous law such as the 50% minimum voter turnout requirement. Also with USAID assistance, a non-governmental poll monitoring organization was created to serve as an election administration watchdog.
Citizens and NGOs are pursuing, and often prevailing in, legal challenges to activities that have caused, or would cause, environmental damage. As a result of NGO advocacy, there have been reversals of government policy that had previously been determined to be outside the interest of the citizens. Courts have ordered damage awards to citizens whose legal rights had been violated, such as the case in which the courts ordered an enterprise to reinstate and compensate the chairman of an independent trade union who had been fired for his union activities. Public policy journals and public opinion polls are being published, a popular political TV program is produced by an influential public policy NGO, and human rights and freedom of press violations are being monitored and publicized by watchdog NGOs.
Specifically with regard to women's issues, with USAID support the number of active women's NGOs has doubled since 1996. Unbiased public information on human rights, legal defense, health, access to western scholarships and grants, and advocacy issues is being utilized by an increasingly wider
network of Ukrainian women. Three women's credit unions have also been created to support rural women entrepreneurs and farmers. Unemployed women, representing over 70 percent of Ukraine's unemployed workforce, are becoming small business owners, contributing to privatization of the economy. As follow up to the Fourth World Conference on Women in Beijing, representatives of a consortium of Women's NGOs drafted a Ukrainian National Platform for Action which was adopted by the Ukrainian Parliament as a Resolution on September 8, 1997. As a result of the Consortium's advocacy efforts, many Ukrainian women's organizations now sit on national and local level advisory boards that are implementing the articles of the Platform. Each implementor promotes interaction and coalition-building among nongovernmental organizations to help build a civil society in Ukraine.
Description: USAID is assisting Ukraine in the development of a professional, independent, and pluralistic mass media by encouraging journalistic reform, helping raise professional standards and increasing the flow of information in and out of Ukraine. USAID is also working with the government, political parties, candidates, NGOs, and the general public to strengthen the electoral process and a representative form of government, seeking to promote public understanding of, and confidence and participation in, Ukraine's electoral system. Through public service announcements, town hall meetings, candidate debates, and other media, citizens are given the opportunity to learn more about candidates and the electoral process, and are encouraged to take full advantage of their rights in a representative system. USAID-funded activities support various public-policy, advocacy, human rights, and “think tank” organizations to promote a more effective and sustainable role in the political process. These activities also strengthen Ukraine's civil society by increasing public awareness of and participation in, the processes of political and economic reform. This is especially important given the pervasive public cynicism toward government and failure to engage the legal system or public policy debate due to lack of trust and confidence in political processes.
Host Country and Other Donors: USAID works in concert with the Central Election Commission, committees of the Parliament (Rada), the Eurasia Foundation, the EU, United Nations Development Program, the Canadian International Development Agency, and the British Know How Fund. The Renaissance Foundation is also active in citizen participation activities.
Beneficiaries: The Central Election Commission, Ukrainian NGOs, political parties, independent media and trade unions all benefit from USAID support for and promotion of citizen participation and education activities. Ukrainian citizens also benefit from system improvement as a more informed electorate.
Principal Contractors, Grantees, or Agencies: USAID programs in this area are implemented by Freedom House, Internews, the Free Trade Union Institute, the National Democratic Institute, the International Republican Institute, IREX, NIS-US Women's Consortium, Eurasia Foundation and the International Foundation for Electoral Systems.
Major Results Indicators: Baseline Target Percentage of people who believe they 6% (1996) 15% (1999) could do something about an infringement of rights by the government Percentage of people who believe that 7% (1996) 15% (1999) legal protection in defending their rights and interests is sufficient Number of medium and large cities 3 (1995) 10 (1999) (population greater than 250,000) with coverage of national news by non- government stations
ACTIVITY DATA SHEET
PROGRAM: UKRAINE
TITLE: Legal Systems, 110-S002.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $2,500,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2005
Purpose: Legal systems that support democratic processes and market reforms.
USAID Role and Achievements to Date: USAID assistance supports the development of a new legal framework for Ukraine, advancement of constitutional and legal reform, establishment of a professional and independent judiciary, and greater public knowledge of legal rights and the legal system. USAID activities inherently promote efforts to combat crime and corruption and promote transparent and ethical government conduct.
USAID provided key support to Ukraine in the process of adopting a new Constitution in conformity with Western norms. USAID-sponsored conferences, publications, and TV shows kept policy-makers, legislators, students and the general public informed of the constitutional drafting process. USAID was responsible for the introduction of pro bono legal clinics at law schools where students get course credit while providing free legal advice to pensioners and others unable to afford private legal counsel. USAID supported a judicial training center to teach new legislation and court procedures, and provided training to lawyers, judges and the public on the substance and procedures of legal challenges concerning environmental impact. USAID support to law schools resulted in the addition of 26 new subjects to law school curricula at top law departments. USAID has conducted training for hundreds of judges from the General, Arbitration and the Constitutional Court on judicial reform and new Ukrainian legislation. USAID funded the procurement of computer and printing equipment for the Supreme Court and Supreme Arbitration Court to facilitate access to legal databases, printing of court decisions and educational materials, and the establishment of in-house continuing education for all judges; and provided each of the five largest law schools, representing 80 percent of law students, with in-house publishing equipment allowing them to reproduce new course curricula.
Description: USAID-funded legal assistance activities include legislative drafting support to the Rada, presidential administration, and Ministry of Justice related to the civil code, administrative law reform, an ethics code for government officials, a freedom of information law, and other key legislation; training and exchange programs for judges; procurement of computers and databases for the Courts giving judges timely and reliable access to current legislation and records of court decisions, court gazettes, and training materials; training for public prosecutors in their new role under the new Constitution; assistance revising law school curricula and texts to provide students with post-Soviet study materials; acquisition of Internet access at law schools; formation of an Association of Law Schools that will promote reforms in legal education and strengthen standards for law school accreditation; development of an independent National Bar Association; continuing legal education programs for lawyers; introduction of pro bono legal clinics at law schools; support to the Ministry of Justice in designing information systems, and strengthening its ability to review normative acts and procedures as required by law; grants to human rights, legal, and legal advocacy NGOs; support for mediation groups and alternative dispute resolution mechanisms; and support for programs related to crime and corruption.
Host Country and Other Donors: The Ministry of Justice, Presidential Administration, the National and Subnational Radas and the secretariat, and the courts are all actively engaged in the reform process. USAID coordinates its activities with those of EU, the Government of the Netherlands, Canadian International Development Agency, the British Know How Fund, and other international donors, as well as the Ukrainian Legal Foundation. USAID is also coordinating efforts with the World Bank to ensure complementarity with the Bank's planned Legal Reform loan.
Beneficiaries: The Ministry of Justice, Supreme Court, Higher Arbitration Court, law schools, students, judges, lawyers, legislative drafters, and the National and Subnational Radas 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 Associates in Rural Development (ARD), Checchi, American Bar Association/Central and Eastern Europe Law Initiative (ABA/CEELI), Indiana University/ US - Ukraine Foundation, Search for Common Ground, Management Systems International, and the U.S. Association of Former Members of Congress.
Major Results Indicators: Baseline Target Administrative Law Code None (1995) Implemented (1999) Number of oblast courts of general 0 (1995) 200 (1999) jurisdiction with access to current text of laws Percentage of shareholders polled 11% (1995) 22% (1999) indicating familiarity with basic enterprise shareholder rights (responding "excellent" or "good")
ACTIVITY DATA SHEET
PROGRAM: UKRAINE
TITLE: Local Government, 110-S002.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $5,500,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2005
Purpose: More effective, responsible and accountable local government.
USAID Role and Achievements to Date: USAID's major priorities in municipal development are: increased participation and access by the majority of Ukraine's population to information about government operations; improved organizational skills among non-governmental organizations, and increased access to decision-making fora; improved financial planning and municipal service delivery; improved local government capacity and increased local authority; and greater transparency of government operations through increased publications of fiscal activity.
USAID has provided local governments with training and technical assistance in management, financial planning, municipal operations, and budgeting through both in-country and cross-border exchanges with public and private organizations. Dramatic improvements in some communities' transportation services have resulted in significantly improved public perception of local government. Four cities also adopted financial analysis methods and operating/capital budgets to help exercise their new authority to raise revenue and plan expenditures. USAID-sponsored activities have promoted more open and responsive city government operations, public accountability of local officials, and increased citizen participation. Open, competitive procurement procedures, budgeting processes, distribution of annual reports, and public hearings have been introduced. A zoning manual has been distributed, and five cities also have developed zoning rules and enlarged boundaries and schemes of planning restrictions. Ten local governments were assisted in instituting and implementing computerized titling and registration. Laws on Local Self-Government and on local State Administrations were passed. The USAID-supported Ukrainian Association of Cities (UAC) assisted in drafting the Local Self- Government bill, and continues to work on local tax, budget and fee issues, as well as lobby the central government for greater decentralization.
The process for housing sector reforms has been documented in how-to manuals and model legislation and disseminated to 4,200 officials and thousands of residents in 196 localities throughout Ukraine. In late 1997, responsibility for this program was transferred from the American firm PADCO to a new Ukrainian NGO formed by Ukrainians who formerly worked for PADCO. At the end of FY 1997, 70 separate residential building maintenance contracts with private firms were in process, affecting more than 210,000 families in 35 cities. Residents of an additional 1,110 buildings have formed and registered condominium associations (or were nearing completion of this process) covering 102,500 more families.
The Urban Water Project in Lviv introduced a successful model for financially viable and sustainable vodokanals. The USAID-funded Ukraine Council to Promote Sustainable Development endorsed institutional, management and tariff reforms for Ukraine's urban water/wastewater sector which were included in the new Law on Taxation of Profit of Enterprises. The Lviv Pasichna water distribution pilot project was completed successfully, after increasing water output to 35,000 residents by 75%. In demonstration projects initiated in FY 1997, 42 compact, cost-effective water purification units are being installed in institutions such as hospitals where the lack of potable water poses a great risk to public health.
Description: USAID's municipal development program is focused on: improving local government management and administrative capacity (particularly in the areas of financial planning and management, budgets, performance monitoring, and management); municipal service delivery (including the longer term goal of economic development); housing, land management, and development (including zoning issues); supporting efforts of local governments to be more effective, responsive and accountable on a sustainable basis; developing and disseminating models of good practice for local government; building and strengthening Ukrainian institutions, including NGOs, as
well as using Ukrainian and Polish professional and institutional resources; increasing citizen knowledge and participation in government; and improving transparency.
The Parliamentary Development Project, implemented by the USAID-supported Indiana University/U.S.-Ukraine Foundation, is working with UAC, the President's Foundation on Local Self Government and the Association of Democratic Councils of Ukraine to train targeted local councils on legislative procedures, committee structures and operations, citizen relations, budget processes, and legislative-executive relations. The UAC will also continue to work toward future legislation needed to implement the constitutional mandate to redefine municipal functions, finance, control over property, and intergovernmental relationships.
The USAID-supported Housing and Municipal Reform Support Center continues to promote an emerging industry of private service companies that are more responsive to residents' needs. Also, now that the mechanism is in place, the emphasis will be on encouraging residents to form and register an unlimited number of associations in the years to come.
Building on the success of the Lviv Urban Water Project, two pilot roll-out projects are planned within the next half year, followed by up to 10 cities over the next three years as part of a proposed World Bank project. The success of this effort hinges on building local institutional capacity to enable vodokanals to establish tariff bases that fully cover operational, capital repair, and investment costs.
Host Country and Other Donors: The EU has a technical assistance project in the area of self government and a city twinning program focusing on cooperation between cities and the EU; the UN Habitat II program conducts training courses for self-governance leaders in management; the World Bank reviews intergovernmental finances and sector loans and has an Urban Coal Pilot and Social Protection Support Projects; The Canadian International Development Agency assists the Ukrainian Academy of Public Administration in becoming a self-sustaining institution; Polyp Orlyk Institute for Democracy supports local government officials in Ukraine under a Pew Grant; and the British Know How Fund is strengthening regional government in Crimea.
Beneficiaries: Mayors, city administrators, local government officials and policy makers are the primary beneficiaries of these programs through increased local authority and improved management. The secondary beneficiaries are the citizens through improved services and greater transparency of government operations.
Principal Contractors, Grantees, or Agencies: Research Triangle Institute, U.S.-Ukraine Foundation, Academy for Educational Development, IREX, USIA, Eurasia Foundation and ACCELS.
Major Results Indicators: Baseline Target Increase in number of 14,321 (Lviv) 1996 5,000 new businesses registered in Lviv 19,916 (Kharkiv) 1996 businesses registered (1998) and Kharkiv Number of cities using market- 0 (1995) 25 (1999) oriented financial analysis methods Law on local self-government drafted, No action (1995) Enforced (1999) submitted, passed, implemented, and enforced Number of cities with annual financial 3 (1996) 25 (1999) reports made available to public
ACTIVITY DATA SHEET
PROGRAM: UKRAINE
TITLE: Social Benefits, 110-S003.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $9,900,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2005
Purpose: Improved sustainability of social benefits and services.
USAID Role and Achievements to Date: USAID is supporting reform of the Ukrainian social service sector with a twin strategy: first, restructuring the social service sector to meet long-term needs of society, and second, meeting the immediate needs of vulnerable populations. This work involves restructuring the respective roles of government and private sector, with a special effort being made to support and develop NGOs, which already are serving vulnerable groups and which have a long-term role to play in a restructured social services sector.
Since 1993, USAID's Counterpart Humanitarian Assistance Program (CHAP) has provided more than $43 million worth of humanitarian aid to government social service institutions and local NGOs providing needed social services. Since August 1996, this program has provided approximately $10 million worth of clothing, bedding, footwear, furniture, and other humanitarian assistance to all 280 orphanages and boarding homes for the elderly and severely disabled under the Ministry of Social Protection. In addition to providing humanitarian support to government social service institutions, USAID provides humanitarian aid to the most needy through local social service NGOs. Since 1995, over two million needy Ukrainians have been reached through more than 300 local NGOs.
USAID's Counterpart Alliance for Partnership Program (CAP) provides technical and financial support to Ukrainian social service and public policy NGOs. In partnership with four American and one Ukrainian organization, CAP assists local NGOs to address the needs of the elderly, disabled, and disadvantaged children. CAP is also working to improve the legal and regulatory environment in which Ukrainian NGOs operate. Since October 1997, CAP has awarded 35 grants totalling about $400,000. In addition, 700 Ukrainian NGO leaders have received training locally.
With USAID assistance, the GOU has created the first means-tested social benefits program, the housing subsidy program, in which five million families have received housing subsidies so that no family pays more than 15% of its income for housing and communal services. The program has been very successful, increasing revenue to the GOU by approximately $1 billion a year as families with higher incomes pay more for their housing and communal service costs, and showing the GOU the benefits of reforming its social sector programs.
USAID's health financing reform program has enabled health care leaders in Lviv and Odessa to undertake reforms resulting in a more efficient allocation of their scarce health care budgets, initiation of cost recovery, and implementation of cost accounting and cash management systems. In 1997 alone, over 150 health care administrators and practitioners were trained in financial management, health care system restructuring, and family medicine. Ukraine has also begun accrediting hospitals, which is improving the quality of services delivered.
Description: USAID is providing technical assistance to the Government of Ukraine and humanitarian assistance to the people of Ukraine in order to reduce human suffering by providing disaster relief and humanitarian assistance to address the critical needs of vulnerable groups, particularly children, the disabled, and the elderly. USAID is also working to strengthen the development of NGOs through partnerships between U.S. private voluntary organizations and local NGOs so that sustainable NGOs can provide needed social services and advocacy for citizens where the government and the private sector cannot. An important part of USAID's NGO strengthening program is improving the legal and regulatory environment under which NGOs operate, given that the legal status of NGOs in Ukraine is not well defined. USAID is also improving the capability of the GOU to provide social benefits and services that are fiscally sustainable and targeted to provide assistance to the neediest families. This includes 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. The 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. USAID's work in social sector restructuring includes assisting the GOU to reform their pension and unemployment systems and with implementation of a national social protection data collection and monitoring system.
Host Country and Other Donors: Activities to help Ukraine develop a sustainable NGO sector are on the agenda of many international donors and organizations active in Ukraine, including the EU, Canada, Great Britain, Germany, SOROS Foundation and MOTT Foundation. Price increases for housing and communal services are a requirement of Ukraine's agreement with the IMF.
Beneficiaries: Low-income Ukrainian children, and adults (especially pensioners and women) at selected sites in Lviv, Odessa, Donetsk and Kiev are among the beneficiaries. Ukrainian NGOs and charity organizations, hospitals, orphanages, boarding houses, invalids, the elderly, and most other vulnerable groups benefit in some way from USAID activities in this area.
Principal Contractors, Grantees, or Agencies: Chemonics, The Bancroft Group, Planning and Development Collaborative International, FMI, Smith-McCabe, Abt Associates, Counterpart Foundation, World Learning, and Eurasia Foundation.
Major Results Indicators: Baseline Target GOU spending on social benefits/services 26.7% (1995) 20% (1999) as % of GDP Percentage of housing and facilities costs 4% (1995) 100% (1999) recovered as a % of total cost Public support for targeting 45% (1995) 75% (1999) subsidies for the poor vs. for all citizens
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