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U.S. Department of State

Diplomacy in Action

I. Introduction

U.S. Government Assistance to and Cooperative Activities with Central and Eastern Europe
Bureau of European and Eurasian Affairs
January 2007

The political, economic, and social changes in Central and Eastern Europe that began in 1989 have created an opportunity to integrate those countries into a Europe whole, free and at peace. The Support for East European Democracy (SEED) Act, passed by the U.S. Congress that same year, has been a key instrument in working toward that goal. The sixteen countries covered by the SEED Act have made significant, and at times dramatic, progress over the intervening years. U.S. Government (USG) assistance provided through the SEED Act and other assistance accounts has played an important role in achieving these milestones. Ten SEED-recipient countries have become NATO members. The remaining six belong to NATO's Partnership for Peace, with the three newest partners - Serbia, Montenegro, and Bosnia-Herzegovina - receiving an offer to participate from the November 2006 Riga NATO Summit. Eight SEED-recipient countries are members of the European Union (EU), and two others, Bulgaria and Romania, joined the EU on January 1, 2007. Croatia is actively engaged in EU accession negotiations.

By helping move these countries towards Euro-Atlantic integration, USG assistance has created lasting partnerships and promoted long-term stability in the region. Additionally, assistance recipients contribute to broader stability as valuable partners in the fight against terrorism. Several former recipients of USG assistance have become assistance donors, using their resources and experience to help other countries transition to free-market democracy.

While eight countries - the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia - no longer receive SEED assistance due to their successful political and economic transition, the USG continues to provide assistance to most of the countries in the greater Balkans. In 2006, Montenegro peacefully gained its independence and must now take on the new responsibilities that come with sovereignty. Serbia's inadequate cooperation with the War Crimes Tribunal in The Hague has impeded the country's prospects for European integration. Albania is grappling with an economic slowdown and a tumultuous domestic political climate. Bosnia-Herzegovina's conclusion of a Stabilization and Association Agreement (SAA) with the EU depends on the country's progress in strengthening rule of law. Macedonia has obtained candidate country status from the EU, but its 2006 election campaign slowed progress on reform in some areas. Each of these nascent democracies and struggling market economies will continue to require U.S. support for some time.

In FY 2006, USG-funded programs in the region continued to help improve governance and fight corruption, strengthen civil society and an independent media, enhance market reforms, create economic opportunity, mitigate conflict, fight disease, reduce the threat of weapons of mass destruction, prevent trafficking in persons and contraband, and promote the rule of law and human rights.

USG assistance addressed critical needs 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 September 2006, the European Commission (EC) recommended that Bulgaria be admitted to the EU on January 1, 2007. At the same time, however, the EC identified reform of the judicial system, development of institutional capacity, and fighting corruption and organized crime as areas for continued attention, a view the U.S. shares. USG assistance programs enhanced enforcement of contracts and rights in the court system, promoted alternative dispute resolution in commercial matters, streamlined business registration, and provided commercial law training to judges and lawyers. The USG worked at the national and local levels with courts, lawyers, governmental organizations, and NGOs in Bulgaria. A USG-funded open government initiative launched a public procurement register compliant with EU standards to be used by all contracting authorities and businesses. Civil-society activities promoted anti-corruption awareness, monitored public administration work, and investigated corruption allegations.

Romania likewise received an invitation to join the EU at the beginning of 2007. Facilitating that outcome, USG assistance addressed the basic issues needed to support Romania's continued democratic and economic transition. USG security assistance focused on modernizing Romania's armed forces and law enforcement agencies in areas such as trafficking in persons and cyber crime. To support local government reform, USG assistance worked to improve the legislative framework that affects all local governments, disseminating good governance practices, and strengthening the capacity of local government associations to promote reforms. In response to the need for improved communication among elected officials, civil society and the public, USG assistance increased constituent outreach, improved citizen advocacy, and strengthened the representation of women in parliament. Other USG-funded programs helped NGOs increase sustainability, improve their advocacy and outreach capacity, and establish partnerships with private groups and the Government of Romania. The USG also provided emergency assistance to ameliorate the impact of more than 100 outbreaks of avian flu in domestic and commercial poultry farms and severe flooding when the Danube broke its banks.

The primary aim of USG assistance to Croatia was to support that country's journey into NATO and the EU. USG-funded programs supported transparent and accountable democratic systems based on the rule of law, an independent and responsible media, and full integration of minorities into national and local political and administrative structures. USG assistance promoted the development of a professional, modern, unbiased law enforcement community capable of cooperating effectively with counterparts regionally and internationally. Advocacy organizationssupported by USG assistance carried out three nationwide campaigns on anti-corruption, political process reform, and entrepreneurship, resulting in a draft law submission to the Croatian Government. USG assistance addressed inefficient government bureaucracy through programs focused on regulatory reform, quality standards, tax simplification, and private sector advocacy. Other activities helped reduce corruption by creating an on-line registry of all regulations and procedures effecting businesses, thereby eliminating the discretion of functionaries to exact extra-legal payments. USG-supported humanitarian de-mining activities promoted the return of refugees and the economic development of war-affected communities.

The progress made by states of the western Balkans towards Euro-Atlantic integration varies. The region is still challenged, to varying degrees, by interethnic tension, high unemployment, inadequate legal structures, widespread corruption, and low government capacity. Assistance to Kosovo addresses both the underlying causes of ethnic tension and the implementation of the standards that will be the basis for Kosovo's future status.

Albania has committed to carrying out the political, legal, economic, military, and social reforms necessary to integrate into Euro-Atlantic institutions. Staunchly pro-American, the country has been a steadfast partner on issues of crucial importance to the U.S., committing troops to missions in Iraq, Afghanistan, and Bosnia-Herzegovina and providing unwavering support in the fight against terrorism. While Albania has made substantial progress in developing military interoperability with Euro-Atlantic forces and creating macroeconomic stability, its economic indicators are among the lowest in the region. The Government must continue to carry out major economic reforms and invest in infrastructure, and private sector competitiveness must improve, for the country to attract the foreign direct investment (FDI) necessary to raise living standards. Politically contentious preparations for 2007 local government elections underscored the need for assistance. In FY 2006, USG assistance worked to improve law enforcement capabilities, specifically to tackle trans-national crime, combat terrorism, interdict weapons of mass destruction, and cut sources of terrorist financing. USG programs also improved the capacity of state institutions charged with implementing anti-corruption laws and helped local governments improve fiscal management, elections, and large asset transfers. USG assistance improved private sector competitiveness and helped establish regulatory and legal conditions that promote an efficient and competitive market.

More than ten years after a calamitous conflict that poisoned relations among ethnic groups and destroyed the country's infrastructure, Bosnia and Herzegovina (BiH) is largely rebuilt, economically stable, and moving toward Euro-Atlantic integration. The Office of the High Representative (OHR) prepares to transition into a less intrusive European Union (EU) presence. Nevertheless, despite significant reforms Bosnia remains burdened by porous borders, fragile relations between ethnic groups, complex and overlapping layers of government, endemic corruption, and nascent state-level government structures. The top priorities of USG assistance were to strengthen national capacity for defense, counter-terrorism, and law enforcement. Continued progress in the economic and governance spheres, however, is essential to ensuring that BiH remains on the path toward multi-ethnic democracy, as well as toward European and Euro-Atlantic integration. The USG provided training and equipment to BiH law enforcement institutions to strengthen their counter-terrorism capacities and professionalize domestic law enforcement, thus increasing public trust in the institution. USG assistance also helped BiH reform its constitution, laws and legal institutions; increase the effectiveness of its political processes; and enact local government reform and decentralization at the canton and municipal level. USG assistance helped reduce corruption and strengthen justice sector capabilities and judicial independence through police training, technical assistance, and secondment of prosecutors. The USG also provided technical assistance to improve the enabling environment for trade and investment.

Since gaining independence in 1991, Macedonia has struggled to overcome a legacy of socialism and to deal with challenges to its stability. Although its resources and capabilities are still limited, the country is committed to continued transformation and has proven to be a staunch supporter of the U.S. in international fora and the fight against terrorism. Continued engagement by the U.S. will support Macedonia's stability and facilitate its integration into the Euro-Atlantic community. In FY 2006, USG assistance helped the Macedonian Government carry out economic, democratic, and military reforms to build strong, stable political institutions and constructive relations with neighbors, as well as to prepare the country for NATO and EU membership. USG assistance promoted economic growth by encouraging business formation, addressing high unemployment, improving private sector productivity, increasing value-added exports, and attracting foreign investment. Law enforcement programs assisted in better prosecution of major criminal cases, provided training in crime investigation and undercover techniques, improved application of police resources, expanded community outreach, and countered illicit trafficking in conventional weapons. USG assistance for political parties and processes improved governance; while other programs helped local governments build capacity. In the field of education, the USG supported the expansion of affordable, accessible broadband internet to the entire country, including 550 schools and other education institutions, and provided support to Roma students to enter and remain in school.

In June 2006, the U.S. formally recognized Montenegro as an independent nation. With that status, Montenegro now faces new responsibilities toward its people and neighbors, and as a member of the community of nations. The U.S. now assists Montenegro to advance its role as a force for regional stability and to promote its integration into the Euro-Atlantic community. A threat to the stability of this tiny nation (pop. 600,000) is its impoverished and majority ethnic-Serb northern territory. As a result, job creation, infrastructure investment, and economic revival, particularly in north, will be a key to maintaining stability and deterring ethnic discord. To move forward as a democracy, Montenegro must drastically reduce the twin threats of organized crime and corruption, and further develop its civil society. To that end, USG assistance focused on strengthening the rule of law through further reform of the justice system, addressing corruption, and strengthening civil society's role. Other USG efforts helped Montenegro counter illicit trafficking in weapons of mass destruction (WMD) and conventional weapons as well as to secure border crossings and seaports. The USG also assisted Montenegro to combat organized crime and corruption, reduce trafficking in persons and migrant smuggling, promote law enforcement reform, and restructure police training to investigate and prosecute crimes.

The size, location, ethnic composition, and economic potential of Serbia make it a linchpin for durable stability in the Balkans. Resolving regional conflicts and improving regional stability requires, with USG assistance, a series of mutually reinforcing economic, democratic, and security sector reforms that will help advance Serbia toward membership in the Euro-Atlantic institutions. Serbia must work hard to overcome a legacy of ethnic division and economic decline, and to overcome the isolation of the international community. The USG has worked to minimize negative political fallout in Serbia from the Kosovo status process. In FY 2006, for example, USG assistance devoted particular attention to the vulnerable, multi-ethnic areas of Sandzak, Vojvodina, and southern Serbia. USG-funded programs supported economic growth by helping to reform the financial and business sector environments, creating more inclusive financial markets and strengthening increase micro-enterprise productivity. Other USG assistance strengthened democratic political parties, the legislative function and local government, and promoted civil society, media freedom, and freedom of information. The USG worked to improve the effectiveness of the Serbian judiciary through programs on constitution, laws and legal institutions; judicial independence; human rights; anti-corruption reform; and the justice system. To combat the potential proliferation of weapons and radioactive materials, USG assistance helped improve border security for Serbia through better law enforcement, reform, restructuring, and operations.

The USG supports Kosovo's transformation into a stable, democratic society, fully respecting the rights of its minorities, at peace with its neighbors and on an irreversible path to European integration. The political process carried out under the auspices of UN-Special envoy, Martti Ahtisaari, to determine Kosovo's status advanced in FY 2006, though the greatest challenges still lie ahead. USG assistance programs assisted the Kosovo Police Service through training and capacity-building. Other projects targeted the development of Kosovo's security sector, ensuring that Kosovo's current and future security institutions develop democratically, with international standards of professionalism and accountability. To promote the development of a robust private sector and reduce poverty, additional USG programs supported Kosovo's regional and international integration by working to incorporate international standards into the public and private sectors. To build confidence in central and local authorities and promote the rule of law, USG-funded programs built more effective local government through decentralization, strengthening and solidifying an independent judiciary, supporting the continued development of political parties, and assisting civil society. Other USG programs aimed at higher education helped Kosovars develop the skills, attitudes, and behaviors needed to create robust governance institutions, and to support increased economic activity.

USG regional assistance works to help stabilize Southeast Europe by encouraging countries in the region to work together on common concerns, restore the economic and democratic links needed to make the transition to democracy governments and market-based economies sustainable, and to address cross-border problems such as organized crime. The USG also provides voluntary contributions and related expenses to the Organization for Security and Cooperation in Europe (OSCE).

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

This report includes two charts that provide snapshots of country progress on economic and democratic reforms, the first from 1998 and the second from 2005. The charts reflect the overall progress made by each SEED recipient country in economic and democratic reforms relative to other East European and Eurasian countries, as well as to the European Union. The following sections provide statements of U.S. interests in each country, an overview of USG-funded assistance programs, sections on assistance priorities and sector assessments, and illustrative examples of program performance.

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