| U.S. Government Assistance to and Cooperative Activities with Eurasia -FY 2004 Released by the Bureau of European and Eurasian Affairs January 2005 III. Regional Programs and Regional Budget Charts NUMBERS OF PARTICIPANTS IN U.S.-BASED TRAINING AND EXCHANGE PROGRAMS In FY 2004, over 5,800 citizens of the Eurasian countries 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, Education, Justice and State.
Since 1993, the USG has brought more than 115,000 people from the Eurasian countries to the United States on training and exchange programs in fields ranging from management to social service provision to NGO development. These programs have proven to be our most effective tool in reaching out to the next generation of Eurasian leaders to give them first-hand experience with the day-to-day functioning of a market-based, democratic system.
NUMBER OF PARTICIPANTS IN U.S. GOVERNMENT-FUNDED TRAINING AND EXCHANGE PROGRAMS WITH EURASIA, FY 2004
The vast majority of USAID-funded assistance activities are conducted bilaterally; however, some activities are conducted across two or more Eurasian countries and promote regional stability in Eurasia, a region critical to U.S. national interests and the war on terrorism. In FY 2004, USAID continued to support the transition of formerly authoritarian, centrally planned societies towards participatory democracies with strong market-based economies. Policy reform, institutional development, and broad-based citizen participation are central goals of USAID's regional programs.
USAID regional assistance focuses on cross-border cooperation and regional integration in information technology, health, financial development, infrastructure development, micro-enterprise, environment, energy, anti-corruption, and rule of law. USAID's cross-border activities in Eurasia include conflict mitigation programs designed to contribute to a better climate for reform, social-sector initiatives designed to broaden the benefits of reform, and anti-corruption initiatives. Some examples of USAID regional programs are provided below. ENTERPRISE FUNDS
The USG-funded Enterprise Funds seek to promote private-sector development, including the small business sector, joint ventures and the agricultural sector. Funds provide loans, grants and equity investments, and support feasibility studies, technical assistance, training, insurance, guarantees and other mechanisms. The Enterprise Funds have provided venture capital and long-term financing in countries whose financial markets are still evolving and the business environment remains fragile with local banks and foreign investors reluctant to commit funds to small and medium-sized enterprises. The programs offered by the Funds range from venture capital to lending for micro-enterprises. The Funds have also assisted enterprises by providing limited technical assistance and training. The majority of the Enterprise Funds have now privatized their management companies in order to attract new private investment capital and provide future incentives for their employees. In addition to their efforts in making equity investments and long-term loans to small and medium-sized businesses, the Funds have introduced home mortgage lending, mortgage securitization, credit cards, pension funds, mezzanine financing, leasing, and investment banking. These initiatives are testament to the initiative and positive reputation that the Funds' management teams have earned. Moreover, each Fund has become a resource to which other investors have turned for information on the business climate in the countries of operation. Private boards of directors set policy and oversee the management of the Funds. Some boards have performed extremely well, while others have had mixed results. The table below shows the basic financial status of the Enterprise Funds and European Bank for Reconstruction and Development (EBRD) Small Business Funds operating in the Eurasian region as of the end of FY 2004. Financial Status of U.S. Government-Backed Eurasia Funds as of September 30, 2003 Fund Funds Authorized Funds Obligated Funds Expended Enterprise Funds The U.S.-Russia Investment Fund (TUSRIF) $440m $329m $303m Western NIS Enterprise Fund (WNISEF) $150m $144m $114m Central Asian-American Enterprise Fund (CAAEF) $150m $106m $106m Subtotal $740m $565m $523m EBRD Regional Venture Fund - Lower Volga Regional Venture Fund $20m $20m $15.5m Total $760m $585m $538.5m THE U.S. RUSSIA INVESTMENT FUND (TUSRIF) The U.S.-Russia Investment Fund (TUSRIF) was created in April 1995 as the result of the consolidation of the Russian American Enterprise Fund (RAEF) and the Fund for Large Enterprises in Russia (FLER). The planned capitalization for TUSRIF was $440.0 million. To date USAID has provided $328.9 Million and this is expected to be the full amount of USAID funding for this activity. TUSRIF has offices in New York, Moscow, Yekaterinburg (Urals), Khabarovsk, Yuzhno-Sakhalin, Vladivostok (Russian Far East), Rostov-on-Don (Southeast Russia), and St. Petersburg (Northwest Russia). TUSRIF established a private management company, Delta Private Equity Partners, to raise funding from private sources and from International Financial Institutions (IFIs). TUSRIF makes direct equity investments and provides financial services to small and medium-sized Russian firms through five subsidiaries: a wholly owned bank and four financial services. As of September 30, 2004, TUSRIF had directly invested $294 million in 44 small and medium sized companies and had provided over $55 million in loan capital through 60 branches of private Russian bank partners in support of 6,000 small companies. In addition to the $328 million in funding provided by USAID, TUSRIF has mobilized an additional $470 million in financing from International Financial Institutions and private investors for their clients and the four financial services companies created by TUSRIF (consumer finance, home mortgages, equipment leasing and auto leasing). In July 2004 TUSRIF had an initial closing for their first private equity fund, Delta Russia Fund, LP. $31.4 million in private capital was signed up at that time. Since July private investors have committed an additional $35 to 40 million to Delta Russia Fund, LP. Including the TUSRIF participation this will cap Delta Russia Fund, L.P. at $100 million in capitalization. In the future, TUSRIF will only be investing USAID Grant resources for follow –on investments in the existing portfolio. New investment opportunities will be funded from the new private equity fund. Since 2001 TUSRIF has had considerable success in exiting from a number of its investments. In August 2004 TUSRIF had its most successful exit from an investment, when General Electric Consumer Finance agreed to buy Delta Bank (a consumer finance bank created by TUSRIF) for four times book value or $100 million. WESTERN NIS ENTERPRISE FUND (WNISEF) The WNISEF was established in 1994 to accelerate private sector development in the three Western NIS countries, Ukraine, Moldova and Belarus, by providing technical assistance and capital to small and medium-sized enterprises (SMEs). Of the $150.0 million originally authorized, $142.9 million has been obligated. In the interests of conserving resources, WNISEF closed its representative office in Minsk in September 2003 but continues to monitor the country through the Kiev office in Ukraine. For both Ukraine and Moldova, 2003 was the fourth consecutive year of consistent GDP growth. For the nine months ending September 30, 2003, Ukraine witnessed real GDP growth of 7.8%, while Moldova enjoyed 6.5% growth during the same period. The macroeconomic and fiscal stability in the region has given business the opportunity to develop new products and services, expand with confidence, as well as increase the wealth of employees, consumers and the state through taxes. A number of reforms have deepened the sophistication of regional financial markets. In Ukraine, the adoption of an insightful mortgage law, and a law on privatization of pension funds, opened up an entirely new area for capital development, freeing up both substantial sums of capital locked up in real estate, and promising competitive alternatives fro the investment of capital. Concurrently, the Ukrainian corporate bond market’s rapid growth proves that investors are prepared to invest in new financial securities and diversify their portfolios. The Fund’s investment strategy has taken advantage of this improved investment climate. WNISEF’s sale of Vitanta-Intravest, Moldova’s leading brewery and soft-drink maker to the Turkish Efes Beverage Group provided the Fund with a 20% internal rate of return. Vitanata, a well-managed, profitable company provided over 400 stable jobs, and with good corporate governance, all Vitanta shareholders including individuals benefited from the transparent sale of this company. In March 2004, WNISEF completed the sale of its 100% stake in SBK to clients of Raiffeisen Bank. SBK is he leading manufacture of quality ceramic brick in Ukraine and the $13.5 million sale represented one of the largest exits of a private equity company. These successful transactions strengthen WNISEF’s leadership position in the market and enhance the Fund’s reputation as a value-added investor for potential investors. During the year, WNISEF committed $12 million to three companies in fast-growing sectors of the economy: 1) Further developed" Shvydko", a fast-growing quick-service restaurant chain; 2) Developed the first private energy services company with partners from the Hostomel Group and engineering experts at Turbo Spektr; 3) Launched a retail mortgage bank that will capitalize on consumer desires to improve their living conditions and the ability to commit to long-term loans. WNISEF is working closely with Fannie Mae, Delta Credit Bank, and other regional mortgage institutions in developing their mortgage-lending program. Overall, the Fund has outstanding commitments to 15 companies totaling $55 million. These companies employ approximately 15,000 people. CENTRAL ASIAN-AMERICAN ENTERPRISE FUND (CAAEF) The Central Asian-American Enterprise Fund (CAAEF) was created in 1994 to promote the creation of small and medium-sized businesses in Central Asia. The CAAEF has a total authorized capitalization of $150.0 million with $106.0 million obligated to date. Business conditions in most of Central Asia are extremely difficult especially for equity investments, which make up the majority of the Fund's portfolio. FY 2001 was a particularly difficult year for the CAAEF. By the end of year, especially after September 11, 2001, investor interest and business conditions in Central Asia deteriorated dramatically. The Fund is in the process of winding down its operations and has liquidated the Fund’s investments. Liquidation proceeds amount to approximately $16. million.
LOWER VOLGA REGIONAL VENTURE FUND (LVRVF) The LVRVF is one of twelve EBRD Russian regional venture funds. The LVRVF is part of an initiative agreed upon by the G-7 governments and the European Union at the Tokyo Summit in July 1993 to support small and medium-sized enterprise development in Russia. The LVRVF opened for business in May 1995 with a $30.0 million capital commitment from the EBRD, a $3.0 million commitment from the fund manager, and a pledge of $20.0 million from USAID to cover technical assistance and operating costs during the ten-year life of the fund. The LVRVF has adapted an early-stage venture capital investment strategy that actively participates in corporate governance and invests in above-average-growth companies in the Volgograd, Samara and Saratov regions. As of September 30, 2004, the LVRVF’s cumulative investment were $30 million in twelve investments, with $15.5 million of the USAID grant utilized for operating expenses and technical assistance to firms. USAID ESSENTIAL TO GLOBAL FUND SUCCESS
The Global Fund to Fight AIDS, Tuberculosis and Malaria has dramatically increased the resources available to fight those three diseases in Europe and Eurasia. Through round four, eleven Eurasian countries have received awards totaling more than $570 million. USAID’s regional funding provided assistance that was critical to grant application success for many of those countries.
ANALYSIS OF HIV/AIDS AND TUBERCULOSIS IN RUSSIA AND UKRAINE
Regional funds supported research by Dr. Murray Feshbach, an expert on health and demography in the former Soviet Union, to analyze the HIV/AIDS and tuberculosis epidemics in Russia and Ukraine. Through presentations, written reports, and numerous media articles, Dr. Feshbach’s research resulted in a better understanding of and increased international attention to the epidemics, including evidence that adult HIV prevalence has reached roughly 1% in both countries and is increasingly being spread through heterosexual contact.
IMPROVED STRATEGY FOR HEALTH ASSISTACNE IN EUROPE AND EURASIA
USAID updated its strategy for health-related assistance in Europe and Eurasia (E&E), based on regionally funded assessments and dialogue with partners. Analysis of the decline in health status in E&E revealed both immediate, urgent threats and long-term, chronic threats to economic and political transition. The new strategy addresses both, preserving a focus on HIV/AIDS, tuberculosis, and reproductive health, while explicitly recognizing the enormous deleterious effect that chronic disease has on E&E’s workforces and families. The strategy also recognizes the importance of health systems reform to assure affordable, sustainable, high-quality health care for men, women, and children in the region.
GAINS IN WOMEN’S HEALTH THROUGH FAMILY PLANNING
A December 2004 external evaluation of USAID reproductive health/family planning programs in the E&E region found that USAID had successfully promoted the use of modern contraception as an alternative to abortion. These programs helped change national policy, increased the availability of reproductive health/family planning services, provided women with an alternative to abortion, and reduced maternal mortality. This regionally funded assessment identified several examples of successful use of RH/FP funding in the Eurasia region: Contraceptive Social Marketing including development of a sustainable commercial market for contraceptives in Kazakhstan; the integration of FP into family-centered maternity care in Russia; bringing community involvement and outreach to FP in Armenia; and development of new standards and protocols in FP in Kazakhstan.
Recent survey data from Armenia, Kazakhstan (and Romania) show that the general abortion rate has fallen in all three countries since 1991. Between 1991 and 1998, Kazakhstan’s abortion rate fell by nearly 50 percent while the percentage of currently married women using modern contraception rose from 26 to 39 percent. In Armenia, family doctors receive basic training in RH/FP and provide integrated services, particularly in rural areas. In Kazakhstan, an effort to train family doctors in diagnosing and treating sexually transmitted diseases (STIs) through syndromic management also proved to be cost effective.
CAPACITY-BUILDING FOR TUBERCULOSIS CONTROL
In FY 2004, USAID supported the translation, testing and dissemination of the Brief Guide to TB Control, a key document for primary health care providers in 15 countries with high TB burdens, including all 12 Eurasian countries. USAID also supported TB drug management training courses to address critical gaps in national TB control programs in the region. In July 2004, participants from National TB Programs in the Caucasus attended a regional workshop that has prompted follow-on monitoring and evaluation activities. Thirty-four participants from 23 E&E countries attended a TB drug management course held in October, as part of the USAID-supported WHO/KNCV Regional Training in Tuberculosis Program Management.
ADDRESSING IODINE DEFICIENCY
Iodine deficiency disorder (IDD) is the world’s leading cause of preventable mental retardation. Populations with even modest IDD show reductions in children’s IQs of 10% to 15%. Approximately 70 percent of the world’s people now have access to iodized salt, but far fewer people in the Europe & Eurasia region. Recently, the program has achieved dramatic results in the region: the percentage of E&E households consuming iodized salt has increased from 26% in 2000 to 43% today and in 2004 Turkmenistan was certified as one of only five countries worldwide to have achieved Universal Salt Iodization.
USAID also has encouraged UNICEF to quantify the IDD work remaining to be done and the USG contributions needed to complete the job. UNICEF now projects that USI will be achieved in 12 E&E countries by the end of 2005, with an additional 8 achieving USI by the end of 2007 (Russia and Ukraine may lag). It is ironic that, as UNICEF is achieving and programming strategically in accordance with our guidance, USAID is forced to substantially reduce its assistance. Over the next few months E&E will encourage bilateral USAID missions to help fund IDD activities in specific countries. The results of such appeals are unknown.
QUALITY PROMARY HEALTH CARE WITH UPDATED TECHNOLOGY
With FSA regional funding, Carelift International has concluded a five-year program to provide "harvested" medical equipment, supplies and related training to several Eurasian countries. Working largely through the AIHA Health Partnerships program, Carelift has increased the appropriateness, effectiveness and sustainability of medical equipment, thereby improving the delivery of quality primary health carein the region. Through 2004, Carelift had shipped/delivered more than $14 million worth of goods, services and in-kind donations to 70 recipient organizations in Eurasia (a little better than 2 to 1 match). Additional results include training sessions in equipment operation and maintenance, 12 training sessions in appropriate disposal of medical waste and the refurbishing and reequipping of the pediatric cardiac surgery unit in Tashkent.
PREVENTION OF HIV TRANSMISSION FROM MOTHER TO NEWBORN EURASIA HEALTH HIV/AIDS KNOWLEDGE LIBRARY HOSPITAL NURSING QUALITY IMPROVEMENT HUMANITARIAN ASSISTANCE IN NAGORONO-KARABAKH The USG also provides humanitarian assistance to the victims of the Nagorno-Karabakh conflict residing in Nagorno-Karabakh. Continued humanitarian assistance programs in Nagorno-Karabakh include support for housing and school repairs, primary health care, irrigation, potable water/sanitation, subsistence agriculture, microfinance, and humanitarian demining. In Askeran region, engineers have completed designs for 52 shelters out of 75 targeted for renovation/repair and completed construction on 52 houses. Drinking and irrigation water projects and renovation of 20 health posts in target communities began in August 2004. Micro-loans and business training was provided to women, women’s groups, and families in 42 communities in Askeran, Hadrut, Martakert, and Martuni regions. Of the loans extended since 2001, 97% are small size loans, on average $390. With regard to humanitarian demining, in FY2004 MRE training was provided in 97 villages, reaching over 5,000 people, most of them children. As of September 2004, of the area surveyed and determined to require clearance, 45% of the minefield area was cleared with USG and other donors’ support. U.S. DEPARTMENT OF AGRICULTURE (USDA) – FOOD ASSISTANCE PROGRAMS In FY 2004, USDA provided approximately $38.27 million in humanitarian aid to the Eurasian countries, including $25.38 million in targeted direct-feeding and food-aid monetization programs implemented by private voluntary organizations (PVOs). An overview of these programs is provided below.
*Allocations and metric tons are based on initial USDA FY 2004 budget figures. U.S. DEPARTMENT OF AGRICULTURE (USDA) – EXPORT CREDIT GUARANTEE PROGRAMS In FY 2004, USDA allocated approximately $45 million in export guarantee programs to the Eurasian countries. These programs include the GSM-102 Program (GSM-102), GSM-103 Program (GSM-103), Supplier Credit Guarantee Program (SCGP), and the Facility Guarantee Program (FGP). These programs encourage U.S. agricultural exports to buyers in countries where credit is necessary to maintain or increase U.S. sales, but where financing may not be available without such credit guarantees. Two programs underwrite credit extended by the private banking sector in the United States to approved foreign banks using dollar-denominated, irrevocable letters of credit to pay for food and agricultural products sold to foreign buyers. The GSM-102 Program covers credit terms up to three years. The GSM-103 Program covers longer credit terms up to ten years. The SCGP helps U.S. exporters offer competitive, open-account financing to foreign buyers. Under this program, USDA reduces the financial risk to exporters by guaranteeing a large portion of the payments due from importers on short-term credit extended by the exporters or U.S. financial institutions. The FGP is designed to expand sales of U.S. agricultural products to emerging markets where the demand for such products maybe constrained due to inadequate storage, processing, or handling capabilities. The program provides payment guarantees to facilitate the financing of manufactured goods and services exported from the Untied States to improve or establish agriculture-related facilities in emerging markets. A country-by-country overview of these programs is provided below.
U.S. DEPARTMENT OF STATE – COORDINATOR’S OFFICE HUMANITARIAN ASSISTANCE Continuing in FY2004, humanitarian programs implemented by the Humanitarian Division of the Office of the Coordinator of U.S. Assistance to Europe and Eurasia provided critical medical and emergency help to refugees, IDPs, and other impoverished persons in underserved and remote areas throughout Eurasia. U.S. Private Voluntary Organizations working for the office of the coordinator in partnership with local governments and local non-governmental organizations administered basic medical services and provided essential medicines, clothing and food to refugees, IDPs, children, the elderly, and other vulnerable populations. This assistance has proven to be essential in alleviating poverty, responding to emergency situations and preventing widespread health problems and suffering in populations beyond the reach of limited local government social welfare programs. In FY 2004, these programs delivered over $186 million in privately donated and U.S. Defense Department excess commodities to Eurasian countries at a cost to the USG of just over $11.5 million.
REGIONAL BUDGET CHARTS Caucasus - Regional
Central Asia - Regional
Eurasia - Regional
OSCERegional
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