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Diplomacy in Action

I. Introduction


U.S. Government Assistance to Eastern Europe under the Support for East European Democracy (SEED) Act
Bureau of European and Eurasian Affairs
January 2005
Report
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In the fifteen years since the fall of the Berlin Wall, the countries of Central and Eastern Europe have made great progress in their transition to stable, prosperous democracies. Programs and activities financed under the Support for East European Democracy (SEED) Act have played an important role in making this progress possible. By helping move these countries in the direction of democracy and market-based economies, SEED programs promote long-term stability in the region and help realize the U.S. Government's (USG) goal of a Europe whole, free and at peace. Of the fifteen countries covered by the SEED Act:
  • Ten have already become NATO members; of these, Bulgaria, Romania, Slovakia and Slovenia joined NATO in 2004. 

  • Eight SEED countries are now also members of the European Union (EU) and no longer receive SEED assistance; of these eight, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia joined the EU in 2004. 

  • Bulgaria and Romania are expected to join the EU in 2007; while lagging behind the other two on accession to NATO and the EU, Croatia is catching up quickly and in many respects is a regional leader economically. SEED assistance to these three countries will be phased out within the next two years. 

  • The remaining SEED countries are in the western Balkans, where fragile democracies and struggling market economies will continue to require U.S. support for some time.

In FY 2004, SEED assistance filled critical gaps in Bulgaria, Romania and Croatia, especially in such areas as strengthening the rule of law and healthcare reform, supporting civil society, and anti-corruption. In Bulgaria, our main priorities for democratic reform assistance continued to be the rule of law, strengthening local governance, and supporting civil society by building the capacity of independent media, non-governmental organizations (NGOs) and encouraging public-private partnerships as an approach to address community issues.

Romania made significant progress in 2004: it was granted EU Functioning Market Economy (FME) status and has closed all remaining EU accession chapters. U.S. assistance programs have contributed to Romania's enhanced economic situation through the privatization of two electrical and two natural gas distribution companies, rehabilitation of wastewater plants, a new fiscal code that reduces legal constraints to private sector development, and an expanded small-business lending program. U.S. assistance also reduced by 15 percent the number of children in institutional care and supported draft legislation for new child welfare services. USG-funded programs strengthened civil society organizations by training them in civic activism; the media by developing responsible and independent reporting; and local governance by training municipal leaders in capital improvement management.

In Croatia, SEED assistance continued to support a broad range of democratic institutions focused on improving good governance and civil society with the aim of moving Croatia closer to Western levels of democratic freedoms; SEED programs strengthened local governments by addressing the most urgent needs of cities, towns and municipalities as they assume greater responsibilities in the management of budgets, culture, health and education. The goal of assistance in the economic sector was to generate employment and higher incomes for more Croatians by spurring the growth of a dynamic and competitive private sector through training and technical assistance.

The overarching focus of SEED assistance to the western Balkans is to help prepare them politically, economically, and socially for eventual full integration into Euro-Atlantic structures. Assistance to Kosovo also addresses both the underlying causes of ethnic tension and the implementation of the standards that will be the basis for Kosovo's future status.

Governments in the western Balkans -- Albania, Bosnia and Herzegovina, Macedonia, and Serbia and Montenegro and Kosovo (under United Nations administration) -- are all committed to European integration, but some are farther along in that process than others. All are still challenged, to varying degrees, by interethnic tension, high unemployment, inadequate legal structures, widespread corruption and low government capacity. In fiscal year (FY) 2004, SEED-funded programs continued to help advance good governance and fight corruption, strengthen civil society and an independent media, enhance market reforms, create economic opportunity, mitigate conflict, fight disease, reduce threats of weapons of mass destruction, prevent trafficking in persons and contraband, and promote the rule of law and human rights throughout the region.

In Albania, corruption remains a major obstacle to political and economic reform. Increasing public awareness of corruption is an important U.S. assistance priority. SEED programs strengthened the Albanian Coalition Against Corruption; more aggressive investigative journalism training programs targeted transparency in public administration and raised public awareness about corruption and civic responsibility. SEED assistance also helped prevent an upsurge in child trafficking to Greece during the summer Olympics.

Bosnia and Herzegovina's economic and democratic reform processes continued full speed ahead in 2004, with Bosnians holding the first direct election of mayors in October. Targeted U.S. assistance helped develop state-level institutions: on the security side, a state-level Ministry of Defense and Security, a State Investigative and Protection Agency, and a Special War Crimes Chamber were established. In the economic sector, USG-funded programs helped establish a state-level Bankers Association, the merger of banking supervision into the state-level Central Bank, and passage of several state-level accounting, banking, and taxation laws to strengthen the economy and investment climate. While this progress is impressive, much remains to be done to eliminate the multiple levels of government (cantonal, municipal, entity, state) that burden Bosnia's development. Established state institutions and cooperation to bring war criminals to justice are prerequisites to Bosnia and Herzegovina's path to EU integration.

In Macedonia, the legislative elements of decentralization are now in place, which should lead to full implementation of the central aspect of the 2001 Ohrid Framework Agreement. SEED assistance supported the drafting of key laws to create the statutory basis for true decentralization; all these laws were enacted during FY 2004.

In accordance with Congressional certification requirements, Serbia's robust FY 2004 assistance package was cut by over $16 million due to the Serbian Government's non-cooperation with the International Criminal Tribunal for the Former Yugoslavia (ICTY). SEED programs helped strengthen grassroots democracy, supported private sector growth, and assisted with a get-out-the-vote campaign. USG-funded assistance for Serbian domestic criminal and organized crimes courts enabled Serbia to undertake high-profile cases, including the assassination case of former President Djindjic. SEED assistance also helped the Government of Montenegro make the transition from military to civilian control over border security. Over $3 million of training and equipment enabled Montenegrin border police and customs authorities to combat smuggling; trafficking and other cross-border crime along land, sea, lake and river borders. The SEED-supported Opportunity Bank in Montenegro disbursed more than 8.3 million Euros in loans to small and medium-sized enterprises (SMEs) over the last 12 months, which led to creation of over 350 jobs and maintenance of over 1,700 jobs.

U.S. assistance to Kosovo focused on effective implementation of the Standards for Kosovo, which will undergo a formal review by the Contact Group in mid-2005. Although much remains to be done in the areas of security and law enforcement, as illustrated by the tragic violence of March 2004, the United States continued to strengthen the Kosovo Police Service (KPS) through support to the Kosovo Police Service School, which surpassed expectations by training a diverse pool of over 7000 officers by the end of 2004. In addition, in 2004 USAID began the Local Government Initiative, which will work with targeted municipalities to improve the effectiveness, responsiveness, transparency, and accountability of local government.

None of the eight SEED "graduate" countries -- the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia - received any SEED assistance funds in FY 2004, but some programs were continued with remaining prior-year funding.

The Enterprise Funds were created in the early 1990s with SEED funds as public-private partnerships for the purpose of investing USG funds to support the private sector and nascent economies of Albania, Poland, the Baltics, Bulgaria, Hungary, Romania and Slovakia. As each of the Funds reaches maturity, repatriation of the original grant funds, together with surplus reflows, will be directed to legacy programs, such as scholarship funds in these countries.

SEED programs are increasingly focused on providing the technical and financial means to governments to make their borders more secure, target illegal activities that may be linked to terrorism, and improve law enforcement in accordance with democratic norms. As governments become stronger in these areas, the United States is more secure as well. The SEED countries have been valuable partners in the Global War on Terrorism.

This year, the Coordinator's Office completed an interagency review of the countries in the region currently receiving SEED-funded assistance, to determine target dates for the phasing out of SEED assistance. Using widely accepted data from credible, non-U.S. Government sources (e.g., the European Bank for Reconstruction and Development (EBRD), World Bank and Freedom House), an interagency meeting was convened on each country to discuss phase-out targets for four sectors where we are currently providing assistance: economic reform, democratic reform, social reform (primarily health and education), and law enforcement assistance. We anticipate that by FY 2007 SEED assistance will have been phased out in all SEED countries/entities except Albania, Bosnia, Macedonia, Serbia and Montenegro and Kosovo. The Coordinator's Office will continue to monitor each country's performance in the four sectors, and will periodically reassess to determine whether progress is being made as planned and whether the planned phase-out dates are still realistic. If the performance is slower or faster than expected, we may revise the phase-out dates accordingly. The target dates do not convey any commitment to specific funding levels.

Following this introduction, two charts are included that provide snapshots of country progress on economic and democratic reform, the first from 1998 and the second from 2004. The charts reflect the overall progress made by each SEED country in various economic and democratic reform areas relative to the other East European and Eurasian countries, as well as to European Union levels of performance. The following section provides a brief statement of U.S. interests for each country receiving bilateral assistance, an overview of USG-funded assistance programs, sections on assistance priorities and sectoral assessments, and a section on country performance measures.

There is no question that as a result of the SEED Act, all of Central and Eastern Europe is much closer today to being part of a Europe whole, free, and at peace. While the job is not yet finished, these countries, the authors of the SEED Act, and all who have participated in SEED programs have much to be proud of.


Thomas C. Adams
Coordinator of U.S. Assistance to
Europe and Eurasia

Economic and Democratic Reforms in 1998

Economic and Democratic Reforms in 1998

 

USAID drawing from Freedom House, Nations in Transit 1998, Freedom House Freedom in the World 1998-1999 and EBRD Transition Report 1998 November 2004. (1-lowest, 5-hightest; data based on previous calendar year)
 
Economic and Democratic Reforms in 2004
 
 
Economic and Democratic Reforms in 2004
 
 
USAID drawing from Freedom House, Nations in Transit 2004, and EBRD, Transition Report 2004, November 2004. (1-lowest, 5-hightest; data based on previous calendar year)



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