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U.S. Department of State

Diplomacy in Action

II. Country Assessment--Bulgaria


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

Country Facts
  • Map of BulgariaArea: 42,823 sq mi (110,910 sq km), slightly larger than Tennessee 
  • Population: 7,385,367 (2006 est.) 
  • Population Growth Rate: -0.86% (2006 est.) 
  • Life Expectancy: Male 68.68 yrs, Female 75.13 yrs. (2006 est.) 
  • Infant Mortality: 19.85 deaths/1,000 live births (2006 est.) 
  • Gross Domestic Product (GDP): $71.54 billion (2005 est.; purchasing power parity)
  • GDP Per Capita Income: $9,600 (2005 est.; purchasing power parity) 
  • Real GDP Growth: 5.5% (2005 est.)

Overview of U.S. Government Assistance

In FY 2006, the USG provided an estimated $39.47 million in assistance to Bulgaria, including:

  • $11.43 million in democratic reform programs; 
  • $6.05 million in economic reform programs; 
  • $1.05 million in humanitarian programs; 
  • $4.15 million in social reform programs; 
  • $13.89 million in security, regional stability, and law enforcement programs; and 
  • $2.90 million in cross-sector and other programs.

FY 2006 Assistance Overview

U.S. STRATEGIC INTERESTS & FOREIGN POLICY PRIORITIES

During the past fifteen years, Bulgaria has been a force of stability and a model for Euro-Atlantic integration in a region marked by recent violence, ethnic tensions, and political stagnation. The country continues to demonstrate its friendship and dependability as a strong supporter of the Global War on Terror (GWOT), a member of the North Atlantic Treaty Organization (NATO), and a participant in NATO-led and other international peace and security operations. The Bulgarian-American bilateral relationship is based on the country's strong embrace of democracy, its adherence to free-market reforms, and its responsible behavior in international affairs. Further, Bulgaria and the U.S are closely cooperating in the fight against drug trafficking, human trafficking, and organized crime.

The USG's highest priorities in Bulgaria are continuing support for the GWOT and enhanced regional stability. In this context, the overarching goals are to strengthen democracy and economic development and promote policies that ensure Bulgaria continues as a dependable ally and an active partner with the U.S. internationally while remaining an anchor of stability in the region. Specific goals include: a stable, dependable, prepared NATO ally; full Euro-Atlantic integration; a functioning rule of law; economic development; and a strong civil society.

FOREIGN ASSISTANCE PRIORITIES

The top three USG assistance priorities for Bulgaria in FY 2006 were enhancing the rule of law, supporting economic growth, and strengthening local governance. Weak law enforcement and judicial institutions, pervasive organized crime and official corruption undercut political and economic reform, lessen public confidence in democratic government, and threaten security and stability. Bulgarian criminal activity has a direct and ever-increasing impact on the U.S. Without an immediate and drastic improvement in this area, Bulgaria's economic and civil developments will be hampered.

Although its macroeconomic efforts of the past five or six years have been strong, it is estimated that Bulgaria will still need at least twenty years of continued success to reach EU averages in Gross Domestic Product (GDP). As a result, USG assistance priorities included improving economic policy, business environment, and private sector competitiveness; strengthening financial sector, and increasing access to credit.

In FY 2006, USG assistance continued to focus on strengthening local governments, civil society, and a free press. Fiscal decentralization remained key to providing efficient and accountable municipal services. USG-funded community-level activities provided increased opportunities for ethnic minorities and encouraged greater ethnic and religious tolerance, thus supporting Bulgaria's transition to a strong democratic society.

OPERATING ENVIRONMENT

On September 26, 2006, six years after accession negotiations were opened, the European Commission (EC) recommended Bulgaria's European Union (EU) entry on January 1, 2007. The Government of Bulgaria (GOB) is focused on meeting its commitments to the EU, leading to increased legislative activity to align the country with EU directives and requirements.

Behind a mixed overall assessment lies the harsh reality of Bulgaria's lack of serious progress in several key sectors. The EC identified six areas where Bulgarian reforms lag. Reform of the judicial system, development of institutional capacity, and fighting corruption and organized crime are among the biggest concerns expressed by the EC, and shared by the U.S.

The EC Monitoring report of September 2006 demonstrates the importance of USG programs, with frequent mention of progress made in areas where the USG has active programs - judicial reform, criminal justice, commercial law, anti-corruption, and fiscal decentralization. In fact, by combining and coordinating efforts with the EU, the USG continues to take advantage of the growing momentum in this positive reform environment. While USG involvement has been on target, the complexity of the reform efforts require additional time before qualitative changes will be visible.

COUNTRY PERFORMANCE MEASURES

Bulgarian Democratic Reform

The "radar" or "spider web" graphs below illustrate Bulgaria's democratic performance during FY 2005. Ratings are based on a 1 to 5 scale, with 5 representing the greatest advancement. These charts provide a disaggregated look at each of the indices and are reported to Congress on a regular basis. The gray shaded area represents 2005 performance levels, while the two dark lines indicate how each country compares in its progress vis-�-vis two standards: (1) the average of Romania's and Bulgaria's performance in each indicator as of 2002 (2002 was the year that Romania and Bulgaria - the "threshold countries" - were invited to join NATO and received favorable indications of future EU membership); and, (2) where the country stood in each indicator in 1999. Together, these charts provide a broad picture of where remaining gaps are in a country's performance, and to what extent these gaps are being filled. For more information, including a detailed explanation of each indicator shown in the graph, see USAID/E&E/PO, "Monitoring Country Progress in Central and Eastern Europe & Eurasia," No. 10 (August 2006). Found online at: http://inside.usaid.gov/EE/po/mcp.html.

Graph shows Bulgarian Democratic Reform:  Average of Romania and Bulgaria-2002, corruption, 3.0; electoral process, 4.5; civil society, 3.8; independent media, 3.3; governance/public admin, 3.3; rule of law, 3.5

The graph above shows Bulgaria's democratic reform scores in 2005* (the gray shaded area) as compared to the average of Romania's and Bulgaria's democratic reform scores in 2002 (the bold line) when they were invited to join NATO and receive favorable indications of future EU membership.

*Actual 2006 scores not yet available. 

 

Graph shows Bulgarian Democratic Reform: 1999, corruption, 3.0; electoral process, 4.5; civil society, 3.8; independent media, 3.3; governance/public admin, 3.3; rule of law, 3.5

The graph above shows Bulgaria's democratic reform scores in 2005* (the gray shaded area) as compared to its democratic reform scores in 1999 (the bold line).

 

 *Actual 2006 scores not yet available.

Bulgarian Economic Reform

The "radar" or "spider web" graphs below illustrate Bulgaria's economic performance during 2005. Ratings are based on a 1 to 5 scale, with 5 representing the greatest advancement. These charts provide a disaggregated look at each of the indices and are reported to Congress on a regular basis. The gray shaded area represents 2005 performance levels, while the two dark line indicates how each country compares in its progress vis-�-vis two standards: (1) the average of Romania's and Bulgaria's performance in each indicator as of 2002 (2002 was the year that Romania and Bulgaria - the "threshold countries" - were invited to join NATO and received favorable indications of future EU membership); and (2) where the country stood in each indicator in 1999. Together, these charts provide a broad picture of where remaining gaps are in a country's performance, and to what extent these gaps are being filled. For more information, including a detailed explanation of each indicator shown in the graph, see USAID/E&E/PO, "Monitoring Country Progress in Central and Eastern Europe & Eurasia," No. 10 (August 2006). Found online at: http://inside.usaid.gov/EE/po/mcp.html
 

Graph shows Bulgarian Economic Reform: Average of Romania and Bulgaria-2002, external debt percent GDP, 2.0; private sector share, 4.5; share of employment in SMEs, 4.5; export share of GDP, 3.5; FDI pc cumulative, 4.0; GDP as percent 1989 GDP, 3.0; 3yr avg inflation, 4.5
The graph above shows Bulgaria's economic reform scores in 2005* (the gray shaded area) as compared to the average of Romania's and Bulgaria's economic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership.

*Actual 2006 scores not yet available.

Graph shows Bulgarian Economic Reform: 1999, external debt percent GDP, 2.0; private sector share, 4.5; export share of GDP, 3.5; FDI pc cumulative, 4.0; GDP as percent 1989 GDP, 3.0; 3yr avg inflation, 4.5

The graph above shows Bulgaria's economic reform scores in 2005* (the gray shaded area) as compared to its economic reform scores in 1999 (the bold line).

 

*Actual 2006 scores not yet available.

FY 2006 Country Program Performance

Governing Justly and Democratically

Democracy in Bulgaria continued to consolidate throughout FY 2006. The Freedom House Nations in Transit (NIT) 2006 publication shows that Bulgaria's democracy score has improved from 3.18 to 2.93. According to NIT, Bulgaria has made progress in dealing with corruption, achieving improvements in the judicial system, and improving local and national governance. The scores for media, civil society and electoral process remained stagnant. Local governments' ability to influence the development, management and the very identity of their communities have improved tremendously. These governments are still seeking to gain control over their administrative and fiscal destiny, to equip themselves to make responsible choices about their future, and to act on these choices effectively and accountably. The long-awaited constitutional amendment giving municipalities the authority to set local tax rates was officially submitted to the parliament and is expected to be passed by the end of 2006. Additional commitment by the ruling coalition is required to further accelerate the process of fiscal decentralization.

The effective and sustainable integration of Roma remains a major concern. While progress in addressing issues of ethnic tolerance at local levels is visible, this issue remains problematic nation-wide and will likely remain a serious problem for many years. Key reforms in combating discrimination in education, healthcare, and housing are still pending implementation. The unemployment rate among Roma (8% to 10% of the population) is as high as 90%, living conditions in their neighborhoods are poor, and health and educational problems persist.

U.S. ASSISTANCE PRIORITIES

In FY 2006, USG democracy assistance continued to focus on strengthening local governance, supporting civil society by building the capacity of independent media and non-governmental organizations (NGOs), and encouraging public-private partnerships as an approach to address community issues. Fiscal decentralization, building the capacity of municipalities to cope with increased responsibilities, and supporting NGOs that advocate on behalf of local governments were USG assistance priorities in the local governance arena. Community-level activities provided increased opportunities for ethnic minorities and encouraged greater ethnic and religious tolerance. These activities took on added significance with an increase in ultranationalist political sentiments - a challenge to Bulgaria's tradition of ethnic and religious tolerance. Building stronger civil society organizations, strengthening parliamentary practices, and improving the professionalism and advocacy of the independent media further supported Bulgaria's transition to a strong democratic society. The USG-funded travels of political leaders, government officials, academics, and journalists sought to familiarize Bulgaria's leaders with the day-to-day functioning of a democratic, market-based system, thereby helping to build a cadre of young leaders who can spearhead reform efforts.

DESCRIPTION OF PROGRAMS AND ACTIVITIES

The USG is the only donor with a comprehensive approach towards local government, with several programs addressing the needs of the sector. The USG's local government initiative is focused on decentralization policy reform and improving the effectiveness of local decision-making. A grant to the National Association of Municipalities is designed to help strengthen the Association's role as a publicly recognized and statutory voice advocating for the interests of all 264 Bulgarian municipalities. Assistance to the Foundation for Local Government Reform is helping them to disseminate municipal management best practices and serve as a professional resource center promoting local democracy.

Two programs strengthen civil society and enhance community development in Bulgaria. Another USG program on ethnic integration works to establish sustainable mechanisms of interethnic cooperation between local municipal authorities and the Roma and Turkish/Muslim communities. A program focused on community funds and social enterprise introduces new models for financial sustainability of Bulgarian NGOs by increasing participation of businesses, citizens, and local governments in community development efforts, promoting corporate social responsibility, and piloting social enterprises and socal contracting. A USG small grants program supports NGO programs on tolerance, judicial reform, leadership training, civil society, and prevention of corruption. A media program promotes reform in key areas of Bulgarian society through media advocacy and active involvement of independent media. One hundred and sixty Peace Corps volunteers focus on English language training and organizational and youth development in over 100 Bulgarian towns, most of which are small, remote, and ethnically diverse.

OUTPUTS

USG technical assistance was crucial for the development and the adoption by the GOB of its Decentralization Strategy (2006-2015) and a program for its implementation (2006-2009). Although the constitutional amendment giving local governments the authority to set taxes is pending at the end of 2006, the USG-supported advocacy campaign of the National Association of Municipalities resulted in its internal approval by the ruling coalition and official introduction to parliament. Passage of this legislation was a noteworthy achievement. A program also assisted 14 municipalities experiencing serious financial instability through the development and implementation of several financial recovery programs specifically tailored to meet their needs.

With USG support, a demonstration team of ten municipality representatives was convened to promote and disseminate municipal best practices in effective mayor-council relations and local decision-making including municipal transparency, asset management, and service delivery. The ten municipalities also piloted an electronic voting system in municipal councils which improved transparency and created opportunity for citizens' oversight. The establishment of the first "one-stop shop" in the Sofia municipality was another example of replication of a best practice. After years of resistance by past leaders, the current Sofia city leadership, with the technical support of the Foundation for Local Government Reform, fully funded "one-stop shops" in nine districts and is committed to launch them in the remaining 15.

A USG-supported ethnic integration program is fully operational in 13 communities with Roma and Turkish populations. Three hundred seventy one minority representatives graduated from a USG capacity-building program. This training improved the skills of local minority leaders to address community issues and participate in the political process. The program also created 103 jobs in six municipalities.

Through a small grants program, USG assistance supported eight NGO programs on monitoring state institutions and election campaigns, prevention of trafficking and re-trafficking of persons, stimulating judicial reform, and fighting corruption.

PROGRAM PERFORMANCE/IMPACT

In the past year, the local government system continued to strengthen. For the first time in its history, Bulgaria will have a dedicated governing body with full responsibility for development and implementation of decentralization legislation. The USG provided technical assistance to the newly created Decentralization Council consisting of equal representation of national and local governments. The fiscal decentralization policy changes and the improved financial situation of the local governments in 2006 led to the most stable local fiscal environment in the past ten years. The share of municipal own-source revenues in the overall municipal budget reached 36.6%. Compared with 2002, the last year before the beginning of fiscal decentralization reform, the increase is more than 20%.

A successfully completed community fund and social enterprise program resulted in numerous partnerships promoting civil society and philanthropic practices in Bulgarian communities. Ten community funds and 28 social enterprises, established with USG funding, now serve as models for local development in Bulgaria. In five years, the ten community funds, which cover 18% of the country's population, have raised more than $500,000 from local sources to sponsor initiatives that directly responded to community needs. The communities with access to a community fund show higher levels of civic participation in solving locally-identified problems and increased interest in local philanthropy. In FY 2006, the Association of Community Funds launched its operations to promote common interests of Bulgarian community funds. By contracting for the delivery of services to non-profit organizations, local authorities were able to decrease the cost and improve the quality of public services while maintaining the accountability of the service provider.

The USG helped to establish a new model of inter-ethnic tolerance involving a wide-range of community stakeholders. All participants trained on cooperative planning in 13 municipalities established joint teams which developed partnership projects in the areas of educational advancement, social service improvement, and local economic development. This new vision of the nature of inter-ethnic conflicts and the opportunity to resolve these through the efforts of the local community is changing traditional perceptions and attitudes.

MEASURES OF PROGRAM EFFECTIVENESS

In order to determine how U.S. Government assistance affects a country, U.S. embassies set targets for improvement called "performance indicators." Data for these indicators are collected by research institutes, embassies and international organizations. By examining data over time, U.S. policymakers can better understand whether or not assistance programs are having the intended impact.

Please find below two important indicators in the area of Governing Justly and Democratically. In the charts, the "Baseline" refers to a starting point from which to measure progress or regression over time. The embassy and its partner organizations then agree on a "Target" figure that they hope to achieve as a result of U.S. assistance programs. The "Rank" figure is the resulting measurement. "FY" stands for "fiscal year," the period of the U.S. budget that runs from October 1 - September 30 of the following year. "CY" stands for "calendar year," or January 1 - December 31.

Note: The Governance index was last year was divided into National Governance Index and Local Governance Index in 2005. The US has decided to report from now on only on the Local Government Index, which is more relevant to USG programmatic interventions.

New Performance Indicator: Local Governance Index. This index measures the decentralization of power; the responsibilities, election and capacity of local governmental bodies; and the transparency and accountability of local authorities. (7-point scale: 1 indicates good governance, 7 indicates poor governance) Source: Freedom House, Nations in Transit 2006. (This volume covers events from January 1 through December 31, 2005). Found on line at http://www.freedomhouse.org/research/nattransit.htm.

CY 2003 Baseline

CY 2005 Rank

CY 2006 Rank

CY 2007 Target

3.75*

3.50

3.00

2.75



* Relates to the former composite Governance Index

Impact of U.S. Assistance on the Above Indicator: Local governance significantly improved in FY 2006 in part due to USG assistance. Technical assistance was instrumental in the development of the Decentralization Strategy (2006-2015) formally adopted by the GOB. The program also helped formulate an implementation plan (2006-2009) for this strategy. USG grants to the National Association of Municipalities and the Foundation for Local Government Reform helped to strengthen the capacity to advocate for municipal interests, disseminate municipal management best practices, and to serve as a professional resource center promoting local democracy.

Performance Indicator: Civil Society Index. Assesses the growth of nongovernmental organizations (NGOs), their organizational capacity and financial sustainability, and the legal and political environment in which they function; the development of free trade unions; and interest group participation in the policy process. (7-point scale: 1 indicates a very advanced NGO sector, 7 indicates a weak NGO sector) Source: Freedom House, Nations in Transit 2006. (This volume covers events from January 1 through December 31, 2005). Found on line at http://www.freedomhouse.org/research/nattransit.htm.

CY 2003 Baseline

CY 2005 Rank

CY 2006 Rank

CY 2007 Target

3.25

2.75

2.75

2.5



Impact of U.S. Assistance on the Above Indicator: A successful community fund and social enterprise program left viable partnerships promoting civil society and philanthropic practices in Bulgarian communities. While the score on this indicator remained unchanged, the ten community funds and 28 social enterprises established with USG funding have shown higher levels of civic participation in solving locally-identified problems and increased interest in local philanthropy.

Economic Growth

Bulgaria remained focused on meeting EU accession criteria in 2006, and maintained macro-economic stability with strong growth (estimated at 6.1% in the first half of 2006, and 6.6% in the second), some progress with containing inflation rates (6.8% year-to-year in August 2006), and falling unemployment (8.74% in August 2006). Bulgaria has run budget surpluses since 2003 due to the pegging of the Bulgarian Lev to the Euro and strict fiscal discipline. Despite the recent robust expansion, Bulgaria's overall economic development remains well below EU levels. Inflation is likely to rise with EU accession in January 2007.

Bulgaria continues to experience signification inflation and a large current account deficit (which is expected to reach 15% of GDP this year). Although significant, these issues are unlikely to endanger Sofia's goal of adopting the single European currency within the next several years. The privatization process gained momentum after stalling in 2005. The GOB adopted tax reforms in late 2006, setting the corporate tax rate at 10%, equal to the lowest corporate tax rate in the EU.

U.S. ASSISTANCE PRIORITIES

Bulgaria has moved rapidly to meet EU accession criteria, and U.S. assistance has targeted key areas of concern including commercial registration, energy and tax regulation, and labor market flexibility. The overarching USG priorities in this sector are to: ensure an open and transparent environment to support economic growth; and, promote economic dynamism through full inclusion of all sectors of society and through construction of a regulatory and legal framework that supports fairness and inhibits corruption. USG economic assistance covered a broad range of activities aimed at fostering a competitive, transparent, and business-friendly environment that encourages investments, private sector growth, and job creation. Private sector competitiveness was addressed through assistance in business capacity building, streamlining economic policies, and strengthening public-private dialogue. In addition, assistance activities also focused on improving access to financial resources, while ensuring the soundness and stability of the financial sector.

DESCRIPTION OF PROGRAMS AND ACTIVITIES

In FY 2006, 25 USG-assisted cities in Bulgaria were certified as "ready for business." This certification showed investors that these cities are business-friendly and are prepared to assist businesses with site identification, logistical assistance, legal and workforce/labor matters, permits, incentives, housing, and a guarantee for more transparent local government decision making. The USG also supported local economic development by empowering Bulgarian cities to develop proactive policies to improve their invesment potential and create new job opportunities in their communities.

The goal of USG-supported commercial law reform assistance was to establish a more stable and predictable business environment. Program activities 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 also helped develop energy sector legislation and regulatory frameworks, promote tariff reform, and support the independent energy regulator.

By continuing its support to the private sector, particularly small and medium enterprises (SMEs), the USG promoted sustainable growth and job creation. A USG program provided training, volunteer and consultant-based business support services to business support organizations and SMEs. Activities supported investment, development of new products and services, and quality standards in sectors with high growth potential such as tourism and information technology. Another project identified and eliminated labor market constraints on job creation, with the goal of attaining sustained employment growth, higher wages, and higher incomes. USG assistance increased the capacity of universities, training centers and the GOB to deliver qualified personnel to employers and essential services to the unemployed.

Improved access to financial resourceswas created through several microfinance and credit guarantee programs that enabled the USG to channel financial resources to marginalized communities. Further, USG assistance helped Bulgarian financial institutions manage the different risks associated with a competitive economic environment. Assistance efforts covered three major areas: improved regulation of the financial sector; anti-money laundering; and transparency of the financial system.

Farming practices, agricultural science and extension, access to agricultural credit and animal health were some of the key areas where challenges in the transition to a market based, open agricultural sector are most apparent. USG programs targeting these issues included faculty exchange and fellowship programs, rural credit, food safety, and bovine genetics.

OUTPUTS

Economic development advisory boards were established in 16 municipalities in FY 2006 to improve the business environment in the targeted cities. The position of local economic development specialist was created in 33 municipalities and a dedicated local economic development department was established in 17 municipalities.

USG programs also directly and indirectly improved domestic and foreign investment in specific municipalities resulting in new jobs and improved infrastructure. Through dedicated marketing, training and certification efforts, 120 million euros in new investments flowed into participating Bulgarian cities over the life of the program. More than 20 million euros was used to expand existing local companies and 1,640 new jobs were created.

A major FY 2006 achievement of the USG efforts to support commercial law reform was enactment of the Business Registration Act. The law removed the registration process from the judiciary, centralized it in the Ministry of Justice and made it electronic, thus easing market entry and enhancing transparency in the business sector. Additionally, business associations and NGOs in Bulgaria established four mediation centers with the program's support and a total of 70 people were trained in commercial mediation skills.

Energy assistance finalized the development of the Uniform System of Accounts (USOA) for the electricity, natural gas, and heat energy sector, which is being applied by the State Energy and Water Regulatory Commission (SEWRC) to all energy sector licensees. The program also helped the Energy and Water Regulator to establish a solid regulatory framework for the electricity generating sector and supported the privatization process of three energy utilities in the country.

A business and trade development program created an "Authentic Tourism" quality mark that establishes the benchmark for tourism products that will incorporate Bulgarian culture and tradition to attract higher-value tourists. Thirty-five hospitality providers throughout Bulgaria received the quality mark certifying high quality service in the tourism sector.

To improve insufficiently skilled labor, the USG helped establish 25 career development centers at universities and one vocational school, as well as a system for career facilitation within the Ministry of Education. A cadre of 18 master trainers, who will subsequently train more than 1,700 pedagogical advisors in secondary schools, is now in place. More than 50 teachers from 20 vocational schools in tourism participated in the first teachers' internship program at several area five-star hotels, where they gained significant practical skills.

In the area of financial sector supervision, due to the support of USG assistance, a common supervisory methodology for insurance, pensions and securities regulation, and a draft manual for conducting on-site inspections of investment intermediaries, insurance companies and pension funds were installed. A draft manual for anti-money laundering/combating financial terrorism consistent with EU and Basel standards was also completed.

The USG continued using development credit authority (DCA) guarantees as a major tool to improve access to credit. By the end of FY 2006, the cumulative use of these guarantees exceeded $89 million. Four partner banks extended over $24 million in loans under five guarantee programs. These loans mainly supported SMEs and agricultural borrowers. A municipal credit DCA facilitated municipal access to infrastructure credit by providing guarantees on loans granted for municipal infrastructure projects. From the beginning of FY 2006 through its closeout on April 30, 2006, a microfinance program extended 1,466 loans totaling approximately $3.8 million as an alternative lending mechanism to the poor and needy. After close-out, the outstanding loan portfolio was transferred to a local cooperative that is continuing to extend loans. A new micro-lending scheme was launched in 2006 for inclusive business development of the Roma population in Bulgaria.

USG assistance in the agricultural sector resulted in the establishment of the U.S.-Bulgarian training center at Trakia University for agricultural academics. Under USG-sponsored exchange programs, seven young Bulgarian scientists and four Bulgarian professors were trained at U.S. land-grant universities. Six food safety workshops were conducted for 600 meat industry personnel and official inspectors. An Avian Influenza awareness and preparedness workshop addressed the needs of Bulgarian official veterinarians.

PROGRAM PERFORMANCE/IMPACT

The new business registration process prepared to enter into force in 2007 is expected to be three times faster than the old process (estimated by the World Bank in 2005 to require 32 days). Creditors have already chosen to file 20,000 cases with the new private enforcement agents (PEAs), as compared to 609 new cases opened with the still functioning state enforcement agents (SEAs) for the same period. Although slow to take hold, commercial mediation holds great promise as a cost-effective and efficient method for resolving disputes and reducing court case loads.

The adoption of a unified system of accounts for energy licensees will aid in the battle against corruption within the sector and will enhance consumer protection by providing consistency, fairness and transparency in monitoring and auditing energy companies. The USG energy regulatory program supported the first privatization of a large generating utility in the country in 2006. This effort proved successful when a large power plant was privatized without a long-term power purchase agreement (such agreements place restrictions on power sources and dictates human resource requirements), thus ensuring that the competitive power market will continue to function without restrictions.

Private sector competitiveness was strengthened by services of business support organizations; these include business development training programs, investment forums, quality certifications, and other related assistance. Through USG funding, these organizations became better equipped to serve the needs of their constituents. A network of USG-supported career development centers ensured that businesses have influence over university operations to make them more market-oriented, as well as have direct access to the best university graduates. This directly contributed to the improved competitiveness in the private sector and increased job opportunities for young Bulgarians.

USG support in strengthening bank and non-bank financial sector regulatory institutions helped maintain the soundness and stability of the financial system in Bulgaria. USG programs ensured that risks in the system are addressed with an integrated and risk-based approach and in a timely manner. Thus, the financial system continued to further strengthen its ability to effectively channel financial resources to meet business needs. In addition, the USG helped private businesses in the country by improving access to credit and enhancing business opportunities. The micro-lending facility resulted in 898 new jobs.

USG assistance in the agricultural sector resulted in improved regulatory practices in food safety, inspection for meat, dairy, and fruit and vegetable processing. Bulgarian universities now educate students through an improved program and curriculum. Farmers' access to credit increased, reaching $2.9 million in new loans and a 30% increase of new clients with commercial banks. The knowledge of organic marketing in Bulgaria substantially improved as a result of USG assistance.

MEASURES OF PROGRAM EFFECTIVENESS

In order to determine how U.S. Government assistance affects a country, U.S. embassies set targets for improvement called "performance indicators." Data for these indicators are collected by research institutes, embassies and international organizations. By examining data over time, U.S. policymakers can better understand whether or not assistance programs are having the intended impact.

Please find below two important indicators in the area of Economic Growth. In the charts, the "Baseline" refers to a starting point from which to measure progress or regression over time. The embassy and its partner organizations then agree on a "Target" figure that they hope to achieve as a result of U.S. assistance programs. The "Rank" figure is the resulting measurement. "FY" stands for "fiscal year," the period of the U.S. budget that runs from October 1 - September 30 of the following year. "CY" stands for "calendar year," or January 1 - December 31.

Performance Indicator: Purchasing Power Parity (PPP) as Percentage of EU Average. Purchasing-power-parity is a method of measuring the relative purchasing power of different countries' currencies over the same types of goods and services. Because goods and services may cost more in one country than in another, PPP affords more accurate comparisons of standards of living across countries. Source: EUROSTAT.

CY 2003 Baseline

CY 2005 Rank

CY 2006 Rank

CY 2007 Target

28.3%

32%

33%

35%


Impact of U.S. Assistance on the Above Indicator: USG assistance fostered private sector growth by enhancing the ability of Bulgarian SMEs to cope with competitive pressures of EU accession, focusing on streamlining the enabling environment for business development to reduce barriers to market entry and attract investments to the country. While this performance indicator shows only slight improvement from last year, USG assistance is laying the groundwork for future economic growth and investment.

Performance Indicator: Private Sector Share of GDP. The underlying concept of private sector value added includes income generated by the activity of private registered companies, as well as by private entities engaged in informal activity in those cases where reliable information on informal activity is available. This indicator is analyzed in the "Monitoring Country Progress in Eastern Europe and Eurasia" USAID/E&E/PO, #10 August 2006, drawing from EBRD, Transition Report. Ratings are based on a 1 to 5 scale, with 5 being most advanced. Found on line at http://inside.usaid.gov/EE/po/mcp.html.

FY 2003 Baseline

FY 2004 Rank

FY 2005 Rank

FY 2006 Target

4.5 (75%)

4.5 (75%)

4.5 (75%)

76%


Impact of U.S. Assistance on the Above Indicator: While the private sector has not increased as a share of GDP, economic reforms in Bulgaria have resulted in strong economic growth. The stalled privatization program regained momentum in 2006, which should positively impact this indicator in the future.

Investing in People

While Bulgaria's broad achievements have been impressive, much of the population has yet to benefit from the positive change. Per capita income is still about 30% of the EU average and Bulgaria will enter the EU as its poorest member. Although the unemployment rate declined to a record low of 8.74% in August 2006, its level is double the EU average and remains among the highest in the region. Bulgaria continues to maintain the lowest compensation levels in the region. With an aging population, inadequate delivery systems, and excessive infrastructure, the modernization of health and education services poses a major challenge for the country. Health care reform continues at an uneven pace and is often cited as a major reason for public discontent. The population's health status is well below the EU average. The educational system is also failing to meet the needs of the country's job market. Substantial reforms followed by appropriate investment in health and education will be required to reverse the deterioration of social indicators and to improve Bulgaria's competitiveness.

U.S. ASSISTANCE PRIORITIES

Social challenges were not a primary focus of USG assistance in Bulgaria in FY 2006. Nevertheless, USG activities in the sector significantly contributed to Bulgaria's efforts to reform. An ethnic integration program created jobs for minorities and addressed key health and educational issues that the Roma and Muslim minorities face. USG efforts targeting the labor market responded to the needs of the employers, directly contributing to a reduction in the unemployment rate by creating new opportunities, particularly for young people. In addition, participant training programs and support to the American University in Bulgaria directly promoted the development of a qualified workforce in Bulgaria capable of dealing with the competitive challenges of EU accession and a growing market economy.

DESCRIPTION OF PROGRAMS AND ACTIVITIES

A USG-supported participant training program invested in building the human capacity and staff experience of indigeneous institutions and organizations, particularly ones which actively participated in the implementation of USG assistance. The program equipped a broad base of Bulgarian leaders and professionals with skills and practical knowledge to develop and support democratic processes, free enterprise, market economics and an improved quality of life. This support was provided through visits to other countries, in-country trainings, and the provision of small grants. In order better to prepare Bulgaria for EU accession, the predominance of USG study tours taken by Bulgarian decision makers and professionals were to EU countries in order to examine the most appropriate EU models for reforms. The USG also brought EU experts to Bulgaria in order to share their experiences with wide audiences of local partners.

The USG continued a decade and a half of support to the American University in Bulgaria (AUBG), a joint undertaking of the GOB and USG, by establishing a $20 million endowment fund. In FY 2006, the USG worked to support the AUBG's achievement of academic excellence, the promotion of diversity and tolerance, and the reaching of financially sustainable. A financial feasibility assessment was conducted to determine AUBG's current level of sustainability and the effectiveness of the AUBG financial management systems.

A USG-funded international visitor program exposed Bulgarians to well functioning systems in the U.S., providing them with the opportunity to directly benefit from the American experience.

OUTPUTS

In 2006, the USG providing short-term trainings in the U. ., Bulgaria, or other countries to build the capacity of individuals to implement needed reforms. Three hundred fifty fiveparticipants from indigenous institutions and organizations benefited from 18 tailored participant training events, bringing the total number of Bulgarians trainees to over 3,000. Participants included ministers and other high-level governmental officials, members of parliament from the entire political spectrum, energy commissioners, mayors, Supreme Court judges, and key business association leaders.

With the support of USG assistance, AUBG made great strides towards achieving financial sustainability. AUBG showed the first operating income surplus in its 15-year history. In the 2005/2006 academic year, enrollment reached 950 students and the institution is targeting an enrollment range of 1,000 to 1,400 in the next five years. The university developed a master capital expenditure plan focusing on a proposed $26 million construction program to complete the campus. An independent assessment concluded that AUBG has excellent prospects for achieving financial sustainability due to its competent management, effective leadership, sound budgeting processes, and well-designed and effective financial systems.

USG programs supported the decentralization of social service delivery. The USG assisted 17 municipalities to develop and implement model procedures for social contracting, which promoted work with social service NGOs supporting marginalized groups such as the disabled, street children and other vulnerable populations. In FY 2006, 28 social enterprises were registered and became operational. Of these, half already earn enough income to support their mission. As a result of USG efforts, the number of operational community funds increased from seven to ten.

PROGRAM PERFORMANCE/IMPACT

As a result of participant training programs, a local government caucus was established in parliament; new judgment enforcement legislation was enacted; numerous state employees and private sector leaders were educated in EU structural funds procedures, thus enhancing the capacity of Bulgaria to absorb EU funds; and case delays were reduced and customer service strategies were implemented in targeted courts.

USG-provided small grants supported innovative initiatives and produced tangible results for a large group of beneficiaries. Grant funds were used to support meetings between a visiting Iraqi business delegation and local businesses, develop a regional economic development plan, enhance professionalism and ethnic tolerance through multi-ethnic training of journalists, and conduct a series of seminars to educate local leaders on the requirements of the EU accession.

MEASURES OF PROGRAM EFFECTIVENESS

In order to determine how U.S. Government assistance affects a country, U.S. embassies set targets for improvement called "performance indicators." Data for these indicators are collected by research institutes, embassies and international organizations. By examining data over time, U.S. policymakers better understand whether specific assistance programs are making their intended impact and, if necessary, how to adjust these programs to improve the impact.

Please find below an important indicator in the area of Investing in People. In the charts, the "Baseline" refers to a starting point from which to measure progress or regression over time. The embassy and its partner organizations then agree on a "Target" figure that they hope to achieve as a result of U.S. assistance programs. The "Rank" figure is the resulting measurement. "FY" stands for "fiscal year," the period of the U.S. budget that runs from October 1 - September 30 of the following year. "CY" stands for "calendar year," or January 1 - December 31.

Performance Indicator: Human Capital Index. Six primary indicators are used to track human capital: per capita income; secondary school enrollment; under five mortality rates; life expectancy; public expenditure in health; and public expenditure in education. These six indicators are used to create an overall human capital index (analyzed in the "Monitoring Country Progress in Eastern Europe and Eurasia" USAID/E&E/PO, #10 August 2005, 1 is lowest, 5 is highest). Source: World Bank, World Bank Development Indicators 2005 and UNICEF, Social Monitor 2005. Found on line at Http://inside.usaid.gov/EE/po/mcp.html.

FY 2003 Baseline

FY 2004 Rank

FY 2005 Rank

FY 2006 Target

3.2

3.2

3.3

3.3



Impact of U.S. Assistance on the Above Indicator: USG programs indirectly influence human capital indicators, which have gradually increased over the past several years. USG assistance fostered private sector growth by enhancing the ability of Bulgarian SMEs to cope with competitive pressures during EU pre-accession and beyond. This activity and the micro-lending facility enabled SMEs to gain access to credit, thus increasing jobs and opportunities for income growth and improved standards of living.

The USG-supported ethnic integration program worked to enhance the inclusion of Roma and Turkish/Muslim populations by increasing access to quality education, business opportunities, and social services, thereby raising living conditions. The community fund and social enterprise program led to improved delivery of social services, also contributing to improved standards of living.

Peace and Security

In FY 2006, Bulgaria again demonstrated willingness to support common peace and security around the world. Although politically difficult, Bulgaria maintained a humanitarian mission in Iraq. In Afghanistan, the Bulgarian Armed Forces assumed command and control of the Kabul International Airport. Bulgaria also maintained peacekeepers in Bosnia, Kosovo, and Afghanistan. In April, the U.S. and Bulgaria finalized negotiations for shared use of two military bases in the country. Bulgaria's contribution with troops on the ground played an important role in promoting security and stability throughout the region.

Within Bulgaria, organized crime and public corruption constitute a serious threat. The inadequate responses of law enforcement and judicial institutions complicate reform, lessen public confidence in democratic government, and undermine regional security. To address these challenges, parliament passed constitutional amendments clarifying the structure of the judiciary; unfortunately, many ambiguities remained. In FY 2006 a reform-minded Chief Prosecutor took office and focused on improving the Prosecution Service's record in combating organized crime, public corruption, and money laundering. While convictions remained limited, there was visible evidence of increased prosecutorial activity. Moving aggressively against malfeasant prosecutors under his command, the Chief Prosecutor, together with the Financial Intelligence Agency and the Ministry of Interior, formally committed to cooperate on money laundering matters.

U.S. ASSISTANCE PRIORITIES

USG priorities for assistance in the sector were to enhance stability and security, improve law enforcement and judicial systems, and combat transnational crime. Security-related assistance worked to modernize the Bulgarian Armed Forces, increase interoperability with other NATO/coalition forces, and expand Bulgaria's ability to combat terrorism.

To address the inefficiency of Bulgaria's judiciary the USG worked at the national and local levels with courts, lawyers, governmental organizations, and NGOs. At the national level, the USG focused on strengthening the Supreme Judicial Council (SJC), the National Institute of Justice (NIJ), and the Supreme Bar Council. Locally, efforts focused on improving the work of courts and local bars. Additionally, specific programs strengthened the GOB's institutional capacity to fight corruption. Civil-society activities promoted anti-corruption awareness, monitored public administration work, and investigated corruption allegations.

Bulgarian organized crime groups already operate in the U.S. and USG assistance is focused on making Bulgaria a strong and credible partner in the fight against transnational organized crime. Working with regional and national level law enforcement and judicial entities is designed to increase the number of successful investigations and prosecutions of transnational criminal cases, particularly in the areas of financial crime and money laundering, human trafficking and migrant smuggling, cyber crime, and intellectual property enforcement.

DESCRIPTION OF PROGRAMS AND ACTIVITIES

In order to improve the Bulgarian justice system, USG assistance worked with judges and attorneys as well as with parliament regarding legislative initiatives in the justice sector. A USG-supported program provided institution-building assistance to the SJC, trained judges and court clerks and helped individual courts improve their operations through strategic planning. This program also served as an advocate for a strong judiciary and was active in policy discussions on this issue. Another initiative enhanced the legitimacy of the legal profession by instituting a rigorous bar exam, implementing standards for discipline, providing continuing legal education, promoting alternative dispute resolution, and increasing the amount of practical training required in legal education. USG efforts to support open government strengthened the GOB's institutional capacity to prevent corruption in government audit, internal controls, and public procurement.

USG law enforcement assistance focused on developing and implementing criminal justice reform legislation, combating human trafficking and other forms of organized/transnational crime, developing training modules on investigation and prosecution of intellectual property cases, and providing technical assistance to the new Prosecutor General. A USG initiative continued to upgrade the capabilities of the central and local laboratories to analyze potential evidence. Another USG-funded program sought to institutionalize police training through incorporation into the curriculum of the Police Academy. Other assistance efforts worked to improve criminal tax enforcement, prevent financial crimes, support the implementation of Bulgaria's new asset forfeiture law, and facilitate the establishment of effective controls over non-bank financial institutions. In addition, USG assistance helped Bulgaria fight trafficking in persons by building the capacity of Bulgaria's National and Local Anti-trafficking Commissions, as well as by providing training on investigation and prosecution of human trafficking cases.

USG assistance helped modernize the Bulgarian military by providing a personnel management system, an integrated logistics system, a modeling and simulation center, navigational aids, and tactical vehicles. Using USG funds, Bulgarian personnel received professional military education, graduate-level education, and technical training in the U.S.

OUTPUTS

In FY 2006, the USG worked extensively to institutionally strengthen the SJC. A study tour for seven of the Council's 25 members helped them understand key court administration concepts. The USG supported public discussion of key legislative acts, such as the recent constitutional amendments, the pending judicial system act, and the Civil Procedure Code, in order to improve the legislative framework of the judiciary. To help individual courts improve their operations, the USG introduced a court improvement plan comprised of 26 factors and corresponding detailed templates for concrete, low-cost reforms towards court efficiency, transparency, and independence. In early FY 2006, the U.S. signed memoranda of understanding with 22 courts in partnership to implement the plan, bringing the number of supported courts to 32 out of 157. USG efforts to increase media visibility of the judiciary resulted in 339 newspaper publications, 28 publications in electronic media, over 1,500 TV and radio broadcasts, and 12 films.

USG-supported institutions provided over 13,800 days of training to magistrates, attorneys, and court clerks helping the NIJ develop the second phase of a judge mentoring program. Additionally, USG-supported district courts prepared local training plans and conducted trainings for magistrates. The USG continued to work with EU donor programs to institutionalize this practice. The USG helped establish 13 court information centers to improve public outreach. More than 80% of court management at the district level was trained in media relations.

In FY 2006, a USG-funded open government initiative launched a public procurement register compliant with EU standards to be used by all contracting authorities and businesses. The project trained over 700 experts from GOB ministries, municipalities, and the National Audit Office on fraud detection and prevention. Additionally, the program helped establish institutions in support of good governance, including the Bulgarian Chapter of the Institute of Internal Auditors and the government's Internal Control Directorate.

The USG sponsored four workshops for 91 law enforcement officials on combating organized crime through application of money laundering and asset forfeiture statutes. Three bi- or tri-lateral workshops for 50 Bulgarian Border Police and their counterparts from Romania, Macedonia, Albania and Greece focused on improving cross-border cooperation in anti-trafficking techniques. Prosecutors, investigators, and personnel from the Agencies of Financial Intelligence, National Revenue, and Asset Forfeiture benefited from training in criminal analysis and financial profiling. A regional criminal justice initiative delivered two five-week criminal investigation courses for 70 high level police investigators and an advanced instructor development course for a core group of 14 trainers for replication to over 2,000 police investigators. The USG also supported a workshop on enforcement of intellectual property rights which resulted in a set of recommendations for the Prosecutor General. Thirty police officers from all regions of Bulgaria attended a similar workshop and exchanged best practices and lessons learned.

Eight key partners, who provide technical assistance in drafting legislation regarding human trafficking, traveled to the U.S. under a visitor program. Upon return, the group developed a human trafficking practice manual giving Bulgarian prosecutors, investigators, and the Prosecutor General a practical reference guide for future use.

In FY 2006, 51 Bulgarian military personnel received training in the U.S. USG assistance automated the personnel management system making career development, promotions, training, and assignments to NATO and elsewhere easier and more transparent. The integrated logistics system increased efficiency in military planning while the modeling and simulation center created a more cost effective way to train military personnel. A USG-supported air sovereignty operations center enabled Bulgaria to more effectively secure its territory while providing NATO a more complete common operating picture. An English language training detachment increased interoperability and assisted Bulgaria in fulfilling its NATO responsibilities. The USG purchased navigational aids giving NATO aircraft access to Bulgarian military airfields and modernizing critical military infrastructure. At the end of FY 2006, the Land Forces was in the process of purchasing 52 tactical vehicles to use in deployments like Afghanistan.

PROGRAM PERFORMANCE/IMPACT

USG-funded rule of law activities achieved considerable successes in FY 2006. USG-funded training, for example, directly supported the judicial structural reforms underway at various levels within the Bulgarian judicial system. The increasingly assertive judiciary used USG-sponsored forums to effectively oppose constitutional amendments that would have impaired its independence. USG supported SJC members and helped draft the legislative proposal for a new judicial system act. A courts partnership program trained judges and improved court staff court administration procedures. An independent survey of public perception of the courts revealed that court users ranked USG-assisted courts 17% higher in subpoenaing of witnesses and 15% higher in the overall quality of service than non-USG-assisted courts. Most importantly, the SJC adopted the USG-sponsored court improvement plan on a nationwide basis.

The NIJ continued to increase its capacity to train the nation's magistrates as a fully sustainable U.S. legacy organization. The fact that the draft judicial system act devotes a separate chapter to the Institute confirmed its increasing recognition and influence. In FY 2006, NIJ's second class of newly-appointed judges graduated and joined the court system. Thanks to extensive USG assistance, continuous education for attorneys was institutionalized through the establishment of an attorneys training center under the Supreme Bar Council.

USG anti-corruption efforts led to improved procedures used to perform government and audit operations. Such operations were carried out more efficiently and with greater transparency, resulting in a higher degree of accountability among government officials when performing these duties.

Extensive USG work in drafting and amending penal legislation resulted in a better functioning law enforcement system. New laws addressing asset forfeiture, money laundering, and electronic payments were put in place. Action was taken against some officials who abused the public trust. Bulgarian police disrupted a human trafficking ring involving 17 Moldovans and eight trafficking groups in Pazarjik over the course of three months. Prosecutors brought money laundering charges against five organized crime figures. The USG's work on financial crime contributed to more money laundering cases coming to trial and, in early FY 2007, to Bulgaria's first money laundering convictions under its current statute. USG work with Bulgarian prosecutors and police on human trafficking contributed to a steady increase in the number of human trafficking related cases coming to trial and resulting in convictions.

Through its partnership with the U.S. and its membership in NATO, Bulgaria contributed to peace and security in the region and around the world. The USG gave Bulgaria the tools and the training it needed to provide this contribution. USG programs exposed military personnel to U.S. training and military philosophy and provided an opportunity to establish professional career-long bonds.

MEASURES OF PROGRAM EFFECTIVENESS

In order to determine how U.S. Government assistance affects a country, U.S. embassies set targets for improvement called "performance indicators." Data for these indicators are collected by research institutes, embassies and international organizations. By examining data over time, U.S. policymakers can better understand whether or not assistance programs are having the intended impact.

Please find below two important indicators in the area of Peace and Security. In the chart, the "Baseline" refers to a starting point from which to measure progress or regression over time. The Embassy and its partner organizations then agree on a "Target" figure that they hope to achieve as a result of U.S. assistance programs. The "Rank" figure is the resulting measurement. "FY" stands for "fiscal year," the period of the U.S. budget that runs from October 1 - September 30 of the following year. "CY" stands for "calendar year," covering events from January 1 - December 31 of the subject year or last calendar year.

Performance Indicator: Judicial Framework and Independence Rating (formerly Constitutional, Legislative, and Judicial Framework Rating). This indicator highlights constitutional reform, human rights protections, criminal code reform, judicial independence, the status of ethnic minority rights, guarantees of equality before the law, treatment of suspects and prisoners, and compliance with judicial decisions. (7-point scale: 1 is the highest, 7 is the lowest). Source: Freedom House, Nations in Transit 2006. (This volume covers events from January 1 through December 31, 2005). Found on line at http://www.freedomhouse.org/research/nattransit.htm.

CY 2003 Baseline

CY 2005 Rank

CY 2006 Rank

CY 2007 Target

3.50

3.25

3.0

3.0



Impact of U.S. Assistance on the Above Indicator: As of the end of FY 2006, new constitutional amendments were pending, in a second attempt towards a more accountable judiciary. If the amendments are passed by the parliament, positive change can be expected in FY 2007. However, no change is expected in the indicator until 2008, which will be based on 2006 data.

Performance Indicator: Corruption Perceptions Index (CPI) 2005. This indicator addresses the status of public sector corruption. The CPI ranks countries in terms of the degree to which corruption is perceived to exist among public officials and politicians. It is a composite index, drawing on corruption related data in expert surveys carried out by a variety of reputable institutions. It reflects the views of business people and analysts from around the world, including experts who are locals in the countries evaluated. The CPI ranges between 10 (highly clean) and 0 (highly corrupt). Source: Transparency International Corruption Perceptions Index 2005. Found on line at www.transparency.org.

CY 2003 Baseline

CY 2004 Rank

CY 2005 Rank

CY 2006 Rank

3.90

4.10

4.00

4.0*


* This is CY 2006 Rank as TI has already published the data.

Impact of U.S. Assistance on the Above Indicator: The GOB worked to implement legislation that will help remedy existing problems with corruption, but it will take time for this legislation to produce tangible results that will have a real effect on the indicator targets. Deficiencies in the legal system, rather than a lack of political will, help explain the zero variance in the 2005 and 2006 CPI ranks.



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