• $42.34 million in democratic reform programs (including Public Diplomacy exchange programs) 
  
  
• $24.88 million in economic reform programs; 
  
  
• $57.36 million in security, regional stability and law enforcement programs; 
  
  
• $18.69 million in social-sector reform programs; 
  
  
• $1.33 million in humanitarian programs; 
  
  
• $790,000 in cross-sectoral and other programs; and 
  
  
• privately donated and U.S. Defense Department excess humanitarian commodities valued at $15.67 million.

In FY 2004, some 764 Ukrainian citizens traveled to the United States on USG-funded training and exchange programs implemented by the Open World Leadership Center, USAID and the U.S. Departments of Agriculture, Commerce and State, bringing the cumulative number of Ukrainian participants in such programs to over 20,000.

U.S. ASSISTANCE PRIORITIES

Democratic Reform Programs: In FY 2004, prior to the presidential elections that represented a historic choice for Ukrainians, the FREEDOM Support Act (FSA) funded democracy assistance focused on helping Ukrainians carry out and participate in a free and fair Presidential election process. U.S.-funded programs worked to strengthen civil society organizations, helped political parties represent citizens’ concerns, sought to improve the credibility and competitiveness of the electoral process, and increased the availability of objective information through Internet access and independent media. Quality governance programs worked to develop more autonomous and responsive local government bodies; to develop a more effective, independent, and representative legislature; and promoted adherence to the rule of law. The Next Generation Initiative reached out to Ukraine’s future leaders, sending a large number of Ukrainian high school, undergraduate, and graduate students to the United States on exchange programs.

Economic and Social-Sector Reform Programs: With Ukraine posting one of highest GDP growth rates in the world, USG economic reform assistance focused on making that strong economic performance sustainable in the long term by increasing trade and investment. This was completed through market-opening international agreements and promoting Ukraine’s further integration into the global trading system, as well as by increasing the growth of small and medium-sized enterprises (SMEs) and the agricultural sector. U.S. assistance in establishing a legal framework for commercial transactions and support for more transparent and efficient budget and tax policies has helped to improve Ukraine’s investment climate. USG social-sector programs addressed the needs of vulnerable groups such as the elderly, women, children, orphans, and HIV-positive citizens. While more equitable economic growth will improve the quality of life for Ukrainian citizens in the long run, shortcomings in the social and health sectors prevented the immediate needs of some sectors of the population from being met, despite economic gains.

Security, Regional Stability and Law Enforcement Programs: Ukraine is both a source and transit country for weapons and destabilizing criminal activity. In FY 2004, USG security-related assistance worked to dismantle Ukraine’s remaining WMD systems and prevent proliferation of these weapons, their delivery systems and related expertise to rogue states. USG-funded nuclear safety assistance addressed safety and security issues at nuclear plants throughout Ukraine and the USG contributed to the international effort to construct a new shelter at the Chornobyl accident site, as tenders for the project were finalized. The USG helped Ukraine enhance interoperability with NATO forces, by providing the Ukrainian Government with $5.0 million in Foreign Military Financing (FMF) and $1.8 million in International Military Education and Training (IMET). In law enforcement, the USG worked to strengthen Ukraine’s institutional capacity to stop human trafficking and to strengthen export controls and border security. The USG helped Ukraine establish an effective financial intelligence unit to combat money laundering resulting in the removal of Ukraine from the FATF non-Cooperating country list and facilitating Ukrainian entry into the Egmont group.

SECTORAL ASSESSMENTS

Democratic Reform

In FY 2004, the overwhelming challenge in this sector was to promote free and fair presidential elections in Ukraine. While the run up to the election campaign saw unprecedented pressure on independent media in Ukraine, while new attacks on NGO’s received western financial support, it also saw a strong increase in civic activism, with U.S. supported NGOs playing critical roles in effectively mobilizing public support for a free and fair election process. Further, many journalists began to take a firmer stand in resisting pressure to distort the news.

The USG provided $18.3 million in assistance to support free and fair elections in Ukraine through the third round of balloting on December 26. This is part of a broader USG democracy assistance effort in Ukraine that is working to promote independent media, local government reform, rule of law, civil society development, and open and transparent political processes.

The focus of U.S. assistance was on fostering a democratic process; therefore, our assistance was administered in a non-partisan manner. Concentrating on the pre-election environment as well as on the election day, USG assistance programs increased civic participation in the electoral process, worked with the media and NGOs to educate the public on election issues, provided non-partisan training for political parties and candidates on message development and constituent outreach, supported the work of domestic and international election monitors, and sought to improve election administration.

Before the balloting began on October 31, the USG programs helped to improve the administration of the elections by working with Ukrainian Central Election Commission on the voter registry and election procedures and providing training for elections officials and judges. To increase public awareness of election and campaign issues, the USG provided training for print and broadcast journalists on election coverage; funded public service announcements, newspaper inserts, and voter education activities; and supported watchdog groups. A key component of USG elections assistance was support for nonpartisan domestic and international election monitoring, parallel vote tabulations, and exit polling, all of which were key to spotlighting electoral fraud. Nonpartisan political party training programs reached out to all major political parties in Ukraine, providing training on election monitoring, voter outreach, and message development. Grants also supported the work of local NGOs to launch voter education and get-out-the-vote campaigns, and think tanks to conduct election-related research and opinion polling. Funding was also used to support training on the election law for judges and party lawyers, pro bono legal advocacy centers and hotlines, and a voter rights campaign.

The unprecedented level of public civil action in Ukraine following the Presidential Elections in October-November 2004, led by youth-oriented non-governmental organizations, testifies to the growing strength of Ukrainian civil society. The recent surge in civic activism took place against a backdrop of discouraging trends in democracy and governance over the past year. In its annual assessment of Ukraine, Freedom House’s Democratization Rating– a broad indicator of democratic transition – worsened, moving from a composite rating of 4.3 in 2003 to 4.5 in 2004, reflecting mostly on 2003, when public frustration with worsening political trends in Ukraine had not yet found its focus. The overt violations in the elections channeled this dissatisfaction into action, moving much of the Ukrainian population from apathy to activism.

USG programs helped fuel an upswing in public participation and provided a solid foundation to build on the momentum of Ukrainian civil society. In 2004, NGO advocacy campaigns strengthened several areas of Ukraine’s political, social, and economic system. USG assistance was critical to developing Ukrainian NGOs’ capacity to foster civic initiatives, advocate for increased government accountability, and play a greater role in the 2004 Presidential elections. The growing numbers of NGOs were complemented by qualitative improvements; according to USAID’s NGO Sustainability Index, key sub-indices within Ukraine’s NGO development improved.

Ukrainian media operated in a difficult environment, with a 2004 presidential election campaign marked by a distorted advertising market; political consolidation of media; a legal environment without adequate protections; costly, complicated licensing procedures; harassment of journalists and media entities; self-censorship and pre-election pressures such as "temnyki" (government approved information sent to media outlets) and "tax inspections." In FY 2004, USG assistance educated over 1,700 Ukrainian journalists. USAID-supported Ukrainian organizations produced and broadcasted 1,500 radio segments with 210 hours of airtime, and 67 TV news programs with 116 hours of airtime. A USAID-funded Ukrainian NGO now manages a network of 24 regional press clubs established in 1994. Fourteen press clubs registered as independent media NGOs provide premises for media events, free internet access, professional libraries, training, and legal support for journalists. Some 940 meetings of national and local Press Clubs resulted in almost 5,000 regional press articles. Additionally, public awareness of reform issues among Ukrainian citizens reportedly rose from 46.13 percent in 2003 to 48.65 percent in 2004. Internews and its partners helped to bring about more vibrant media landscape, which will be sustained by improved management practices. The USG-supported Ukrainian NGO, Telekritika, published the first six editions of a pioneering publication that helped to galvanize and focus journalists’ growing disgust with government pressure to report the official line, resulting in over 300 journalists signing a petition drafted with help by Telekritika against government pressure on media during the elections, sparking a mini-revolution in Ukraine’s media scene.

In FY 2004, political party development was critical to ensure competitive Presidential elections. The International Republican Institute (IRI) and the National Democratic Institute (NDI) worked with major political parties, in order to train party observers and commissioners, as well as women and youth on a non-partisan basis. NDI added 14 political parties to its traditional partners. As a direct result of IRI training, fourteen Ukrainian political parties released party platforms to the public after open deliberations at party conventions. In FY 2004, USG funded partners to help craft elections legislation, which passed. Also during FY 2004, IRI trained 4,095 people in Ukraine, while NDI trained 1,794 political party activists, contributing to the improved organizational capacity and public outreach of parties. IRI emphasized training locally elected officials, women, and youth. Over 480 young people received such training via the School of Young Political Leaders. IRI conducted roundtables for multi-partisan student human rights watchdog committees that harnessed nationwide opposition to GOU administrative pressures during the election campaign. USG assistance, through NDI, enabled The Committee of Voters of Ukraine (CVU), which is the leading NGO whose purpose is monitoring elections, to issue many reports regarding government transparency and parliamentary activity that resulted in high-level debates. CVU fielded 10,000 domestic monitors (accredited as journalists) for each round of the 2004 Presidential elections. Observation efforts by USAID partners documented deviations from the legal standards, providing the basis for the international condemnation of fraudulent incidents compromising the integrity of elections.

Knowing the 2004 Presidential and 2006 Parliamentary elections would be pivotal for Ukraine’s democratic development, USAID focused on essential elements of a transparent and free electoral process such as legal and regulatory framework. In FY 2004, new legislation was passed governing local, parliamentary and presidential elections in addition to the establishment of Ukraine’s Central Election Commission (CEC). USAID projects also provided advice and consultation to the drafters. To help Ukraine implement new, complex legislation, ABA/CEELI, the Organization for Security and Cooperation in Europe (OSCE) and Development Associates (DA), trained lawyers and judges. DA, with the approval of the CEC, trained 4,556 territorial election commissioners in 24 oblasts and supervised Ukrainian NGOs’ training of 90,000 polling station commissioners. Complete with reference manuals, the seminars gave commissioners the information to fulfill their legal responsibilities.

USAID projects apprised citizens of their rights under the new election law. Freedom House, NDI, IRI and the U.S.-Ukraine Foundation, with local partners, conducted interactive voter education activities encouraging people to exercise their political rights, thus dispelling rumors that a citizen’s voting privacy could be compromised. CURE dedicated radio programs to explaining the electoral process to listeners while Internews produced a series of public service announcements that discussed voters’ rights and how to use them. Freedom House and Internews publicized substantive issues on a non-partisan basis during the campaign so citizens could make an informed choice in the voting booth. ABA/CEELI, in conjunction with OSCE, made pro bono legal services available to citizens throughout the campaign period. Lawyers represented students subjected to academic pressure for participation in election-related activities, assisted voters with adding their names to voter lists, and provided legal assistance for claims on Election Day. Hot lines were established so that citizens could get legal advice or anonymously report violations.

USG-assisted projects used international non-partisan observers, exit polling, and parallel vote tabulation to monitor the integrity of the elections. U.S.-Ukraine Foundation hosted 4 visits by former Congressmen who met with local officials, journalists, and party representatives assessing the extent to which the law was being adhered to throughout Ukraine. For the November 21 run-off election, Freedom House, with NDI and IRI, staged the largest international observation mission in Ukraine, supporting more than 1000 observers from the European Network of Election Monitoring Organizations (ENEMO). In addition, 25 observers arrived before the first round and monitored regional activities in the 3 weeks between the first round and the run-off. The ENEMO observation mission visited 4,392 polling stations and more than 200 of the 225 territorial election commissions during the run-off election. Their documentation of election law violations served as key contributions to the international community’s condemnation of the elections as fraudulent. Given the political upheaval after the run-off, long-term observers remained in the field well beyond Election Day, monitoring developments. Through NDI, the Committee of Voters of Ukraine conducted a parallel vote tabulation that reinforced the conclusions reached by the observers – that the results announced did not reflect the people’s will.

USG assistance contributed to a more effective, independent, and representative Verkhovna Rada, the Ukrainian Parliament, by helping to strengthen aspects of the Rada’s legislative process and professionalism. During FY 2004, USAID’s Democratic Parliamentary Strengthening project provided consultative and analytical assistance to parliamentary committees, including comparative analyses of draft legislation, participating in legislative working groups, and expertise on the conduct of committee hearings. The project worked with Rada staff, the Ministry of Justice, and Ukrainian NGOs to develop a unified approach to drafting legislation that formed the basis for internal Ministry of Justice legislative drafting guidelines. The Ministry of Economy has been using the guidelines since June 2004. Strengthening its oversight function and increasingly asserting itself to counterbalance the Executive Branch, the Parliament passed several key pieces of legislation that had USAID drafting support in FY 2004, including the Civil Court Procedures Code, the Law on Tertiary (Arbitration) Courts, and the Law of Ukraine on Separation of State and Municipal Lands. A parliamentary internship program continued, providing legislative process, policy research and analysis training to young professionals—nearly thirty percent of who joined the Parliament’s permanent staff. The Rada Chairman created a Public Advisory Council, increasing consultation with the Rada leadership by Ukrainian NGOs. The Rada played a major, constructive role in resolving Ukraine’s post election political crises, demonstrating institutional maturity, partly, we believe, because of USAID’s Parliamentary Development project.

In order to strengthen local governments, FSA assistance helped 82 Municipal Communal Services Enterprises improve utilities management, involved citizens in identifying problems, and set rational prices for services that allowed for capital improvements, resulting in the delivery of improved, cost-effective municipal services. The USG-supported Association of Ukrainian Cities (AUC) has become an effective, financially self-sustaining model for municipal associations. In the electoral crisis, cities again demonstrated their collective opposition to the authoritarian central government when 200 city councils adopted resolutions declaring the presidential election to be fraudulent. Though elected officials carried out municipal activities more transparently due to increased mobilization of a better-informed citizenry, local governments continued to need legislative support to bring about more substantive fiscal and political autonomy.

Economic and Social-Sector Reform

In 2004 Ukraine experienced a high rate of economic growth, expected to reach twelve percent by year’s end. A combination of factors contributed to this growth including strong global demand for Ukraine’s key exports in the metals and chemical sector, increased demand from Russia driven by high oil prices, and increased domestic demand driven by rising personal incomes. Despite high economic growth, structural reform lagged, particularly in key areas such as agriculture and energy. FSA-funded assistance is focused on Ukrainian institutional weaknesses that constrain economic development, such as the lack of an independent court system, shareholders’ inability to defend their rights, an inadequate legal framework, weak budget and tax systems, and weak financial-sector regulation.

In FY 2004, the USG-funded Commercial Law Center (CLC) trained commercial law professionals in arbitration, mediation, bankruptcy, enforcement of judgments, and legislative drafting. USG assistance continued to work with parliamentary committees to resolve differences between the progressive new Civil Code and the anti-market-oriented Economic Code to make it easier for investors to operate in Ukraine. In the area of corporate governance and effective regulation, an USG-funded banking supervision project facilitated the adoption of risk-based supervision at the National Bank of Ukraine, Ukraine’s central bank. Based on a successful pilot program, the project introduced the new methods to more than 800 bank examiners in FY 2004.

In FY 2004, the USG provided assistance on Ukraine’s accession to the World Trade Organization (WTO), funding two U.S. advisors, one on the overall process and one focused on improving Ukraine’s sanitary and phytosanitary (SPS) regulations. As a result, Ukraine made significant progress on its WTO accession negotiations, holding two productive working party meetings that resulted in progress on drafting the Working party report. The USG helped Ukraine analyze the impact of a new agricultural subsidy law on Ukraine accession process.

USAID’s programs to accelerate Ukrainian agriculture and SME growth in FY 2004 increased the volume of processed fruits and vegetables (F&V) traded by twenty-five percent and estimates that F&V trade could increase to $1 billion within five years. USAID’s agricultural programs created 3,000 new seasonal and full-time jobs with a net gross wage value of $1.5 million. USAID's activities to accelerate agriculture were especially cost effective: $3 to $867 returned to Ukraine's economy for every U.S. foreign assistance dollar spent, depending on the project. In FY 2004 USAID’s agricultural projects helped increase grain and oilseed productivity by at least twenty-five percent and productivity of major fruits and vegetables by at least fifty percent for 84,291 beneficiaries in 21 oblasts. The value of this increased production efficiency was approximately $550 million. By inference, FSA assistance can take substantial credit for the fact that Ukraine’s average farm profitability jumped from zero percent in 2003 to thirteen percent in 2004. A USG-funded agricultural policy project facilitated the passage of enabling legislation for a grain warehouse receipt program, paving the way for the European Bank for Reconstruction and Development (EBRD) to provide a $10 million line of credit to two Ukrainian commercial banks; with the promise of $100 million once the program is completed. A USG-funded grain warehouse receipt project made progress in 2004: financial markets provided approximately $267 million of private financing for grain purchases at a cost of only $800,000. The project provided storage receipts to grain traders who used them as collateral for commercial loans. Under the USG-funded agricultural reform program, 238,000 land titles were issued to new owners and 708,800 land titles are close to issuance. USAID established legal centers in 19 oblasts to encourage land registration and assist with legal requirements, which resulted in resolution of 21,202 land disputes.

Small business development is improving in Ukraine: more than 130 cities across Ukraine are adopting improved procedures for business registration, while 70,000 enterprises have used FSA-funded business hotlines to receive critical information on regulatory issues, taxes, registration, and other issues. The average cost of business registration fell by fifty-five percent while the average time required registering and obtaining business licenses and permits fell about fifty percent. On average, corruption related to business registration reportedly decreased by eighty-four percent. Over 378 regulations that constrained business development in the regions were changed. Consequently, the survival rate of new enterprises increased eighteen percent, and twenty-five percent of training beneficiaries reported an increase in personal income.

Improving access to credit is a key goal of USG assistance. In 2004, USAID projects increased access to credit by making 97,507 loans valued at $298 million. USAID-assisted financial institutions made more than 215 thousand loans with a cumulative value of $1 billion. Specifically, USAID’s SME and agricultural credit projects enabled two Ukrainian USAID-DCA partner banks to issue an estimated 2,315 loans valued at $12, 5 million. A multilateral micro-lending program in which the USG is the major donor disbursed about 6,400 micro credit loans, totaling $32.0 Million. USAID signed Municipal Credit DCA guarantee agreements with Nadra Bank and UkrSibBank to help local governments improve the delivery of municipal services to local citizens and industries through increased access to credit for infrastructure improvements. An estimated 10-15 municipal enterprises will receive loans to increase the quality of water and district heating services in 2005-2006. Due to USAID-financed legal assistance to enact Ukraine’s recent mortgage and leasing laws, mortgage and financial leasing loans increased rapidly in the third quarter of 2004. In 2004, $97 million of direct investments, loans and leases occurred through USAID's support to the West NIS Enterprise Fund.

The USAID-funded Eurasia Regional Certified International Professional Accountants (CIPA) program of training, examination and certification of accountants has attracted the participation of the world’s leading accountancy bodies (IASCF, IFRS, and AICPA) and is an excellent model of public-private partnerships. Since May 2002, CIPA’s Examination Network has administered nearly 10,000 exams in Ukraine, with 2,000 exams administered in November 2004. Nearly 1,000 of an anticipated 3,000 accountants have earned the Certified Accounting Practitioner (CAP) certification and prepare internationally acceptable financial statements for hundreds of Ukrainian businesses.

In FY 2004, USG social-sector assistance priorities were to prevent trafficking in persons and to protect victims, to provide family-care options for orphans and vulnerable children, and to implement a three-pillar pension system. Almost thirty percent of Ukraine’s population lived below the poverty line, a factor that contributed to low birth and life expectancy rates and rising rates of infectious diseases (especially HIV/AIDS and tuberculosis), alcoholism and substance abuse. Domestic violence and human trafficking remain serious concerns, as does the vulnerability of children and youth who live on the streets, in institutions, or in dysfunctional families. USAID assistance gives priority in health to preventing and controlling tuberculosis and to reducing high rates of abortion and maternal mortality.

In 2004 USAID extended its maternal health and nutrition coverage. At one site, deliveries involving an episiotomy fell from 21.5 to 11.5 percent, and caesareans dropped from eighteen to eleven percent of deliveries. The average daily weight increase per baby grew by seven grams, and hypothermia among newborns was virtually eliminated from rates as high as sixty-three percent. USAID helped the Ministry of Health (MOH) develop and adopt a new order on inpatient obstetric-gynecologic and neo-natal care based on rational childbirth management and safe motherhood principles. USAID support enabled family medicine and women’s wellness centers to adopt evidenced-based diagnostic, counseling and patient education practices. In FY 2004, 18 primary care guidelines were developed for clinical diagnoses, a system to analyze outcomes of care to improve service quality, and curricula for patient lifestyle education and training nurses. USAID trained 13,502 specialists in neonatal resuscitation, contributing to a reduction in infant mortality of thirty percent over the project’s five years. USAID helped the MOH evaluate the implementation and impact of the first National Reproductive Health Plan 2001-2005, and develop the goals, objectives and approaches for the second national program. USAID funded the development and dissemination of the first Reproductive Health Guide for specialists. The abortion rate continued to fall, reaching 26 per 1,000 women of fertile age. USG assistance helped establish birth registries and a birth defects surveillance system in five pilot regions to target prevention programs.

Ukraine is an "intensive focus" country for U.S. HIV/AIDS programs, and implementation of the strategy will provide information and services to at least sixty percent of high-risk groups in select high-prevalence regions. The USG’s five-year HIV/AIDS strategy for Ukraine focuses on improving information and services delivery to high-risk groups, reducing stigmatization and discrimination, and keeping HIV prevalence to less than five percent by 2008. USAID assistance was crucial during FY04 in correcting mismanagement issues with the Global Fund Against AIDS, Tuberculosis and Malaria’s (GFATM) $92 million grant to Ukraine. USAID, by alerting the Global Fund about significant delays in implementation, possible financial irregularities, and on-going conflict-of-interest issues, was instrumental in redirecting the GFATM grant to partners better able to manage the program. With GFATM and USAID support, Ukraine has gone from being a non-performer in the critical area of HIV prevention, treatment, care and support, to one of the high performance global actors actively attacking the problem. USAID provides resources for HIV/AIDS efforts in Ukraine second only to the Global Fund grant. USAID assisted the MOH to formulate the third National HIV/AIDS Prevention, Care, and Support Program for 2004-2008, the national plan for all implementing partners and the POLICY II and Synergy projects assisted the MOH to design the national HIV/AIDS monitoring and evaluating system.

DOTS (Directly Observed Treatment, Short Course), a USG-funded pilot program in the Donetsk region, increased coverage for tuberculosis control from eighty to one hundred percent, reaching a population of five million (or ten percent) of the country. Improved information, education and public awareness campaigns doubled self-referral rates, and TB case-detection rates improved from forty to fifty-two percent. Despite improved TB case-management, and a continuous supply of TB drugs in Donetsk, however, the tuberculosis treatment success rate fell only from seventy-five percent of patients in FY03 to sixty-eight percent in FY04.

The public pension system supporting Ukraine’s 14 million pensioners is funded precariously by a workforce of only 20 million workers and increases in the level of public pensions in the run up to the 2004 elections will put further financial pressure on the pension system. However, political will to reform the pension system is significant. The State Commission for the Regulation of the Financial Services Markets, which will supervise private pension funds started operations in June 2003. Support to the Commission resulted in the licensing of 26 private pension funds. In January, 2004, USAID assisted the GOU to launch the three-tier pension system and since then has conducted careful studies to design with GOU partner institutions a new, multi-year financial sector reform project to implement Ukraine’s mandatory private pension system and to provide small and medium enterprises with access to financing through the capital markets.

USAID assisted seven NGOs in operating Women for Women Centers (WWC). These centers train and support 44,000 women seeking employment, address domestic and workplace violence, and disseminate information regarding trafficking in persons (TIP). End-of-project results show that over 70,000 women used WWC hotlines, and over 12,000 women received legal counseling. More than 5,000 women found new jobs (eleven percent), over 4,700 women and girls entered re-qualification or continuing education programs (ten percent), and 1,300 cases were taken to court. Over 300 trafficking victims were assisted, and more than 18,000 women who benefited from WWC services reported they are no longer looking for work abroad.

Security, Regional Stability, and Law Enforcement

During 2004, Ukraine continued to deal with the legacy of its nuclear past and the need to complete the elimination of strategic nuclear arms (strategic bombers, air-launched cruise missiles, SS-24 intercontinental ballistic missiles) and weapons of mass destruction (WMD) infrastructure. In addition to continued support for these dismantlement activities, the U.S. Defense Department (DoD) launched a new Cooperative Threat Reduction initiative, the WMD Proliferation Prevention Initiative Program (WMD-PPI), which is designed to bolster Ukraine's capabilities in preventing proliferation of WMD or related materials across its borders. Finally, the DoD is working with the GOU towards a Biological Threat Reduction Implementation Agreement that will allow bilateral/multilateral biosecurity and biosafety cooperation.

The U.S. Department of Energy (DOE) started negotiations on the Second Line of Defense Agreement with Government of Ukraine for installation of radiation detection equipment to minimize illicit trafficking of Radioactive and nuclear materials. DOE’s National Nuclear Security Administration also provided equipment for the protective forces responsible for guarding Ukraine’s nuclear facilities. In addition, DOE is providing assistance to upgrade physical security systems at oncology clinics and research institutes for the secure storage of radiological sources. As part of this assistance, details are being finalized to enhance security at Ukraine’s six Radon facilities. DOE is also working with Kiev Institute of Nuclear Research to convert the existing highly enriched uranium core in the research reactor to a low enriched uranium core. To help prevent the proliferation of WMD expertise, the USG funded civilian research undertaken by Ukrainian scientists through the multilateral Science and Technology Center of Ukraine (STCU), through the U.S. Civilian Research and Development Foundation (CRDF) and DOE’s Initiatives for Proliferation Prevention (IPP). The STCU began to implement a strategic plan to sustain funding through public-private industrial partnerships. Under the IPP Program, several Ukrainian institutes and U.S. companies have established joint collaboration to employ Ukrainian scientists.

The USG-funded Export Control and Related Border Security (EXBS) Assistance Program has assisted Ukraine in developing and strengthening its export control system in an overall effort to halt the proliferation of WMD, their delivery systems, and other destabilizing weapons. Through the EXBS Program, the USG has also provided equipment and training for the Border Guard and Customs Service, helping to bolster enforcement capabilities at borders and ports of entry.

Given that Ukraine’s nuclear energy sector generates approximately fifty percent of country’s electricity, the USG’s nuclear safety program, which supports critical improvements in nuclear safety at all of Ukraine’s nuclear power plants, is playing an important role. Much of the equipment and hardware upgrades have already been completed, including the installation of and training of specialists in operating full-scope simulators. DOE assistance continues to address weaknesses in Ukraine’s emergency operating instructions and safety analyses. Vital upgrades for protection against sabotage are being implemented at the Zaporizhzhya Nuclear Power Plant, thus improving nuclear reactor security. The Ukraine Nuclear Fuel Qualification Project trained Ukrainian specialists and activities continued development of six fuel test assemblies, to be shipped to Ukraine in 2005.

The USG is the largest single donor to the multilateral fund for the stabilization and reconstruction of the Chornobyl Shelter, providing an additional $6.5 million in FY 2004. In addition, the Nuclear Regulatory Commission (NRC) provided support to the State Nuclear Regulatory Committee of Ukraine (SNRCU) response center.

USG assistance has contributed to Ukraine’s increasing capacity to promote regional stability through its growing involvement in peacekeeping activities. Ukraine is the fourth largest contributor of troops to Operation Iraqi Freedom (OIF), having contributed over 1,600 troops. The Ukrainian military has about 2,000 soldiers deployed in Sierra Leone, Kosovo, Lebanon, U.S. Central Command in Tampa, and in various United Nations observer groups deployed around the world. In FY 2004, Ukraine used Foreign Military Financing (FMF) funds to help develop a professional non-commissioned officer corps and to improve defense planning. Funds also helped purchase communications equipment. Work continued on programs to develop a modern cost-effective modeling and simulation training capability at key sites in Ukraine and to modernize personnel management.

To foster long-term reform of the Ukrainian military education system, the USG provided Ukraine with $1.808 million in International Military Education and Training (IMET) funds to train 74 military and defense-associated personnel. Under the auspices of the U.S. European Command’s (EUCOM) Joint Contact Team Program and the State Partnership Program with the California National Guard, a number of events were held on topics including coastal defense and port security and management.

USG law enforcement agencies worked closely with senior Ukrainian Government officials to help them develop an anti-money-laundering law and related regulatory framework that meet international standards. Since then, a Financial Intelligence Unit has been established and is functioning, the National Bank of Ukraine has developed an effective bank-monitoring capability, and Ukraine has been accepted as a member of the Egmont group. The USG also began a multi-year effort to strengthen border security controls in Ukraine by developing curriculum for the Academy and Training Centers of the State Border Guard Service to transform it by 2010 from a conscript based para-military force to a professionally staffed law enforcement agency compliant with EU standards. A similar multi-year effort continued to foster the evolution of an independent judiciary system, with success already manifesting itself in the increasing number of rulings -- even during the highly politically charged presidential electoral process -- that were based on law and not on the particular interests of politically or financially powerful groups in and out of government.

Humanitarian Assistance

In FY 2004, the USG funded the transportation of one airlift of critical medicines and medical supplies and 300 containers of surface-shipped medical equipment and supplies, clothing, food, and emergency shelter items. These programs are focused on assisting nearly 300,000 formerly displaced persons in Crimea with humanitarian commodities and providing primary health care services in the Donetsk Region. The privately donated commodities, which were valued at a total of $30 million, were transported to Ukraine at a cost to the USG of $2.76 million.

COUNTRY PERFORMANCE MEASURES

In FY 2004, actions by the Ukrainian Government to restrict the activities of political opposition figures and its use of administrative resources to influence the presidential elections indicated a continuing lack of commitment to principles of democratic society. After significant setbacks, including widespread fraud associated with the early rounds of those elections, which led to the popular "Orange Revolution," the first weeks of FY 2005 saw enormous steps forward. With the support of the Ukrainian Supreme Court, a rerun of the election concluded with the election of Viktor Yushchenko and a reaffirmation of Ukraine’s commitment to reforms.

Economic & Democratic Reforms, 1991-2004  

Data are drawn from EBRD, Transition Report (November 2004) & Freedom House, Nations in Transit 2004 & Freedom in the World 2004. Ratings are based on a 1 to 5 scale with 5 representing the most advanced.
Latest-year observation refers to 2004 economic reform data and 2003 democratic reform data; i.e., 2004 data for democratic reforms are not yet available.

Ukraine has made significant advances in privatizing the economy over the past few years, including opening up markets to small and medium-sized enterprises. In contrast, social-sector reforms have been slower, and almost thirty percent of the population still lives below the poverty level. Health problems are serious and widespread, including growing HIV/AIDS and TB infection rates.

Economic Structure and Human Development, 1990-2004

World Bank, World Development Indicators 2004 (2004); UNICEF, Social Monitor 2004 (2004); EBRD, Transition Report (November 2004); and UNDP, Human Development Report (2004).

SECTORAL PERFORMANCE MEASURES

DEMOCRATIC REFORM

Performance Indicator: Political Process,Drawing from Freedom House, Nations in Transit 2004 as modified by, "Monitoring Country Progress in Eastern Europe and Eurasia" USAID/E&E/PO, #9 January 6, 2005. (1-lowest, 5-highest; data based on previous calendar year)

FY 2002 Baseline	FY 2003 Actual	FY 2004 Target	FY 2004 Actual
3.17	3.17	3.3	3.17

FY 2004 Results: Throughout FY 2004 the Ukrainian government attempted to exert undue influence on the political process. Political party development was crucial to ensuring that the presidential elections were competitive. The Our Ukraine coalition joined with the Yulia Timoshenko Bloc to support the presidential candidacy of opposition candidate Viktor Yushchenko. This political coalition remained cohesive and, supported by strong civic activism and key independent decisions of the Supreme Court, defeated the government-favored candidate in the December 26 re-run of the presidential runoff election.

Performance Indicator: NGO Development/Civil Society, Drawing from Freedom House, Nations in Transit 2004 as modified by, "Monitoring Country Progress in Eastern Europe and Eurasia" USAID/E&E/PO, #9
January 6, 2005. (1-lowest, 5-highest; data based on previous calendar year)

FY 2002 Baseline	FY 2003 Actual	FY 2004 Target	FY 2004 Actual
3.17	3.33	3.5	3.17

FY 2003 Results: Participation by Ukrainian citizens in NGOs rose significantly towards the end of the year as Ukrainians’ frustrations with manipulation of the presidential elections was channeled into increased civic activism. The quality of news produced in targeted regional outlets improved, as did public awareness of important reforms. A civic culture steeped in skepticism and distrust, and high levels of corruption continued to pose challenges. Censorship, self-censorship, and harassment of journalists continued throughout the fiscal year until the "journalists’ revolt," which followed the fraudulent result of the November 21 second round of presidential balloting, when journalists in state media insisted on reporting objectively.

ECONOMIC AND SOCIAL REFORM

Performance Indicator: Five-Year Cumulative Foreign Direct Investment per capita, Drawing from European Bank for Reconstruction and Development, Transition Report 2004 as found in, "Monitoring Country Progress in Eastern Europe and Eurasia" USAID/E&E/PO, #9 January 6, 2005. (data based on previous calendar year)

FY 2002 Baseline	FY 2003 Actual	FY 2004 Target	FY 2004 Actual
$99	$128	$150	$155

FY 2003 Results: Ukraine’s foreign direct investment (FDI) continued to grow strongly, at about twenty-two percent in 2004. FDI increased from both Western countries and Russia, but capital flight increased in the run up to the presidential election. Ukraine’s level of FDI remained well below those of its neighbors to the west and south.

Performance Indicator: Private-sector share of GDP (Source: EBRD)

FY 2002 Baseline	FY 2003 Actual	FY 2004 Target	FY 2004 Actual
65%	65%	70%	65%

FY 2003 Results: Ukraine continued its strong macroeconomic performance in 2004, with growth projected at 12.5 percent for the year. Despite the government‘s vigorous intervention to maintain the Ukrainian Hrvna’s peg to the dollar, a current account surplus led to a strong reserve position of $9.48 billion at the end of the year. Personal incomes continued double-digit growth, fuelling continued growth in the retail sector as consumption picked up. Growth remained uneven (concentrated in Kiev and a few other large cities), and pockets of severe depression remained, particularly in rural areas.

Performance Indicator: Reported HIV infections per one million population (Source: European Centre for the Epidemiological Monitoring of AIDS) (data based on previous calendar year)

FY 2002 Baseline	FY 2003 Actual	FY 2004 Target	FY 2004 Actual
7000	8756	10200	10009

FY 2003 Results: Increasing official attention to the HIV/AIDS epidemic was coupled with growing public awareness. Resources available to fight the problem were threatened when Ukrainian government mismanagement caused the Global Fund to Fight AIDS, Tuberculosis and Malaria to cancel its award in January 2004. The Global Fund subsequently reached agreement for the NGO International HIV/AIDS Alliance to manage the program, which has been done successfully.

SECURITY, REGIONAL STABILITY AND LAW ENFORCEMENT

Performance Indicator: Corruption Index, Drawing from Freedom House, Nations in Transit 2004 as modified by, "Monitoring Country Progress in Eastern Europe and Eurasia" USAID/E&E/PO, #9 January 6, 2005. (1-lowest, 5-highest; data based on previous calendar year)

FY 2002 Baseline	FY 2003 Actual	FY 2004 Target	FY 2004 Actual
1.67	1.83	1.9	1.83

FY 2003 Results: While corruption remained an extremely serious problem in Ukraine, improvements in the rule of law, increased transparency, and some economic reforms slowly reduced the space in which corruption could flourish. The Ukrainian Supreme Court began to exercise greater independence after the flawed November 21 presidential balloting.

TOTAL USG FUNDS BUDGETED: $143.93 m VALUE OF DONATED HUMANITARIAN COMMODITIES $15.67 m TOTAL FY 2004 USG ASSISTANCE: $159.60 m

FSA Total:$96.62 m Agency for Internat'l. Dev. (USAID)    Chornobyl Shelter Implementation Plan (SIP) $8.00    Democratic Reform $25.06    Economic Restructuring $4.99    Private Sector Initiatives $14.35    Social Sector Reform $12.12    Special/Cross-Cutting Initiatives $0.65    x Community Exchanges $2.00    x Enterprise Funds $2.00    x Eurasia Foundation $1.25    x Parking Fine Withholding $0.07 Total USAID: $70.49 Dept. of State    EUR Democracy Programs (incl. Dem. Comms. & NED) $2.08    Humanitarian Transport $1.33    International Information Programs (IIP) $0.03    Law Enforcement Assistance $2.10 Total State: $5.54 Dept. of Agriculture (USDA)    Cochran Fellowship Program $0.16    Faculty Exchange Program $0.19    National Agricultural Statistics Service $0.20 Total USDA: $0.55 Dept. of Commerce    Business Info. Service for the NIS (BISNIS) $0.29    Commercial Law Development Program (CLDP) $0.60    Special American Business Internship Training (SABIT) $0.30 Total Commerce: $1.19 Dept. of Energy    Nuclear Reactor Safety $15.00 Dept. of Labor    Coal Mine Safety Program $1.50 Dept. of the Treasury    Technical Advisors $0.30 Environmental Protection Agency (EPA)    Environmental Programs $0.30 National Science Foundation    Civilian R&D Foundation (CRDF) $1.10 Nuclear Regulatory Commission    Nuclear Reactor Safety $0.65

non-FSA Total:$47.31 m Agency for Internat'l. Dev. (USAID)    Child Survival & Health Programs $1.75 Dept. of State    Anti-Trafficking in Persons $0.14    Export Control & Related Border Security Asst. (EXBS) $1.50    Foreign Military Financing (FMF) $5.00    International Information Programs (IIP) $0.03    International Military Educ. & Training (IMET) $1.83    Non-Proliferation & Disarmament Fund (NDF) $1.05    Nonproliferation of WMD Expertise $3.12    Peacekeeping Operations $3.50    Public Diplomacy Exchanges $10.17    Small Arms/Light Weapons Destruction $0.64 Total State: $27.00 Dept. of Agriculture (USDA)    Emerging Markets Program (EMP) $0.00 Dept. of Defense    Destruction and Dismantlement Programs $7.10    Warsaw Initiative $0.47 Total DoD: $7.57 Dept. of Energy    Material Protection, Control & Accounting (MPC&A) $2.10    Nonproliferation & International Security Programs $2.40    Nuclear Reactor Safety $0.26    Russian Transition Initiatives (RTI) $0.89 Total DoEnergy: $5.65 Environmental Protection Agency (EPA)    Environmental Programs $0.02    Nonproliferation of WMD Expertise $0.04 Total EPA: $0.06 National Science Foundation    Civilian R&D Foundation (CRDF) $0.46 Open World Leadership Center    Open World Program $0.32 Peace Corps    Volunteers / General Operations $4.50