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U.S. Department of State

Diplomacy in Action

II. Country Assessment--Croatia


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 CroatiaArea: 21,831 sq mi (56,542 sq km), slightly smaller than West Virginia 
  • Population: 4,494,749 (July 2006 est.) 
  • Population Growth Rate: -0.03% (2006 est.)
  • Life Expectancy: Male 71.03 yrs., Female 78.53 yrs. 
  • Infant Mortality: 6.72 deaths/1,000 live births 
  • Gross Domestic Product (GDP): $55.76 billion (2005 est.; purchasing power parity) 
  • GDP Per Capita Income: $11,600 (2005 est.; purchasing power parity) 
  • Real GDP Growth: 4% (2005 est.)

Overview of U.S. Government Assistance

In FY 2006, the USG allocated an estimated $19.12 million in assistance to Croatia:

  • $6.80 million in democratic reform programs; 
  • $7.04 million in economic reform programs; 
  • $0.01 million in humanitarian programs; 
  • $3.66 million in security, regional stability, and law enforcement programs; and
  • $1.61 million in cross-sector and other programs.

FY 2006 Assistance Overview

U.S. STRATEGIC INTERESTS & FOREIGN POLICY PRIORITIES

U.S. strategic interests in Croatia, and more broadly in South Central Europe, remain to promote lasting peace, stable democratic systems, and economic prosperity. It is a goal of the US to promote closer ties between Croatia and its friends and allies; a vibrant market-oriented economy; and transparent and accountable democratic systems so that Croatia becomes a force for regional stability and a strong partner in Euro-Atlantic institutions.

Toward these ends, the USG assists Croatia's implementation of the requirements for membership in the North Atlantic Treaty Organization (NATO) and the European Union (EU). These efforts simultaneously advance Croatia's market-orientation, build more effective democratic institutions and processes, strengthen Croatia's relationships with its neighbors, and enhance the country's capacity to promote regional security and combat international terrorism. U.S. engagement is generating good results. In the last twelve months Croatia became a EU candidate country and its request for NATO membership was significantly bolstered by the U.S. Administration when President Bush stated "I also believe it's in the world's interest that Croatia join the North Atlantic Treaty Organization" by 2008.

FOREIGN ASSISTANCE PRIORITIES

The most important aim of U.S. foreign assistance is securing the last mile in Croatia's journey into NATO and the EU. To do this, USG priorities are to: promote private sector led economic growth leading to higher per-capita incomes for Croatians and a more attractive market for U.S. exports and investments; strengthen broad-based democratic institutions, including local government and civil society, leading to improved governance, less corruption and greater citizen participation and trust; encourage Croatia to expand its bilateral relations and economic integration with other southeastern European countries, thereby securing the benefits of peace and stability for other countries in the region; support Croatia's NATO ambitions, enabling it to fulfill its potential to contribute to regional and global security; and, strengthen Croatia's engagement in battling transnational threats of terrorism, trafficking, organized crime, and corruption.

OPERATING ENVIRONMENT

Croatia's steady progress towards Euro-Atlantic integration, while promising, largely reflects its success in completing first tier reforms. The remaining journey will be more difficult as special interests are challenged and the requirements of adopting both EU and NATO pre-conditions consume Croatia's limited implementation capacity. With an election year on the horizon, government's commitment to maintain its reform stance is a concern. For example, while Croatia's general macro-economic health is good (with 4.5% real Gross Domestic Product [GDP] growth, a stable exchange rate and strong employment growth), the government is increasingly focusing on second tier micro-economic reforms such as reducing the regulatory burden on investors, improving the effectiveness of commercial courts, and eliminating corruption.

On the democracy front, decentralization to local and regional governments has gained momentum but financing for local authorities must come out of other parts of the budget. Likewise, Croatia will continue to struggle with judiciary reform, with caseload backlogs hampering the courts. Corruption remains a problem, although government has recently formed a national-level anti-corruption commission.

NATO recognized Croatia's readiness for membership, citing its troop deployment in support of the Global War on Terror. However, Croatian leaders will need to solidify public support for membership - a critical element in ensuring that the elected leaders have the will in the future not only to join the Alliance but to meet NATO's ever challenging obligations.

COUNTRY PERFORMANCE MEASURES

Croatian Democratic Reform

The "radar" or "spider web" graphs below illustrate Croatia'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 Croatian Democratic Reform:  Average of Romania and Bulgaria-2002, corruption, 2.5; electoral process, 3.7; civil society, 3.7; independent media, 3.2; governance/public admin, 3.3; rule of law, 2.7

The graph above shows Croatia'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 Croatian Democratic Reform: 1999, corruption, 2.5; electoral process, 3.7; civil society, 3.7; independent media, 3.2; governance/public admin, 3.3; rule of law, 2.7
The graph above shows Croatia's democratic reform scores in 2005* (the gray shaded area) as compared to its democratic reform scores in 1999.

*Actual 2006 scores not yet available.

Croatian Economic Reform

The "radar" or "spider web" graphs below illustrate Croatia'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 Croatian Economic Reform: Average of Romania and Bulgaria-2002, external debt percent GDP, 1.5; private sector share, 3.0; share of employment in SMEs, 5.0; export share of GDP, 2.5; FDI pc cumulative, 5.0; GDP as percent 1989 GDP, 3.0; 3yr avg inflation, 5.0

The graph above shows Croatia'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 Croatian Economic Reform: 1999, external debt percent GDP, 1.5; private sector share, 3.0; export share of GDP, 2.5; FDI pc cumulative, 5.0; GDP as percent 1989 GDP, 3.0; 3yr avg inflation, 5.0

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

*Actual 2006 scores not yet available.

FY 2006 Country Program Performance

Governing Justly and Democratically

Corruption and the lack of transparent and accountable public administration remain impediments to developing broad-based democracy and governance in Croatia. Against this backdrop, the EU accession negotiations have prompted major Croatian reforms in the democracy and governance sector. New legislation will provide a stronger framework for improving the judiciary, strengthening anti-corruption efforts, protecting ethnic minority rights, and opening the political process. For example, the parliament adopted the law establishing the State Election Commission as a permanent body, adopted a National Anti-Corruption Program, drafted the Law on the Financing of Political Parties, and enacted a National Strategy and Plan for Civil Society Development. Moreover, a law for the direct election of mayors and county prefects, which is expected to be approved in 2007, will significantly improve local political accountability. Finally, the Government of Croatia (GOC) drafted a Law on Voters Lists improving the transparency for voting procedures. Professional training institutions are also training large numbers of local government workers to implement these new laws. Even with training programs in place the implementation of the Constitutional Law on National Minorities (CLNM) continued, albeit at a slow pace, as evidenced by the minorities' under-representation in the state administration, judiciary, and police. Freedom House Nations in Transit (NIT) scores show Croatia's civil society moving towards consolidation (on best policies and practices of liberal democracy). However, Croatia's legal framework for NGOs remained weak in the areas of foundations, taxation, and volunteers' legal status.

U.S. ASSISTANCE PRIORITIES

While the EU declared Croatia a fully functioning democracy in 2005, the USG continued to promote and monitor two priorities. First, USG assistance supports 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. Second, the USG strives to expand citizen participation and trust in local government.

To achieve both priorities, in FY 2006 USG assistance supported the creation of strong and credible voices in local government and civil society organizations. In the area of local government, institutions supported by technical assistance worked to ensure that Croatia will have enduring advocates for decentralized, transparent, and participatory local government. In strengthening local governments, the USG focused on policy and legislation for fiscal and administrative decentralization. USG support to non-governmental organizations (NGOs) provided checks and balances for a democratically functioning government and created opportunities for citizens to participate in government and society in general.

DESCRIPTION OF PROGRAMS AND ACTIVITIES

A USG-funded local government reform project provided local governments with public administration skills and management models and enabled them to better handle local affairs through advocacy, legislative reform, outsourcing, and public administration training. USG assistance guided local governments through an asset inventory and management model, allowing them to manage and derive public asset income from property leasing or sales. Through e-government, local governments improved internal efficiency and made operations more transparent and accessible to citizens. The USG introduced an EU accession-compatible procurement manual, providing local governments with guidance and training required to carry out competitive, transparent, and cost-effective procurement.

A USG program improved NGOs' infrastructure, advocacy skills, organizational management, financial viability, and capacity to draft new laws and promote public discussion. Assistance supported NGO advocacy activities in anti-corruption, legislative oversight and political process, corporate social responsibility, ethnic minority rights, and entrepreneurship. The USG assisted NGO support organizations and networks as they helped other NGOs develop. Finally, the USG supported the GOC's national strategy for civil society development, which provided an institutional, financial, and legal framework for NGOs and defined roles and relations among government, NGOs, and other key institutions.

Additionally, the USG managed a number of targeted activities that improved outcomes in the sector, including small grants, public speakers, and support for media. NGOs received grants in the areas of human rights, academic ethics, Roma assistance, refugee return and reintegration, voter education, women's rights, minority rights and tolerance, and rule of law. U.S. academic experts led a seminar for university educators on ethics. Croatian journalism students attended U.S. universities, while U.S. journalists/educators taught at the University of Zagreb.

OUTPUTS

In FY 2006, USG assistance provided to build local government capacity supported the reviewing and drafting of the law on direct election of mayors, the law on local and regional self-government, and the law on financing of local governments. Assistance improvedassetmanagement, including compiling and leveraging $500 million in local government assets, which generated over $30 million in revenue for those governments. E-government activities provided over 60 local governments installed e-government systems with over 93,000 citizen hits on their websites. USG-providedtraining included six universities and institutions, which offered public administration courses to over 250 participants from local and regional governments. Local government outsourcing assistance enabled local government to outsource a total of 152 contracts and over 800 grants to the private sector or NGOs. Efforts targeting improved procurement procedures led to the streamlining and codifying of an EU-compliant public procurement manual, providing all governments and vendors with a source of information for conducting transparent and open procurement.

Assistance targeting civil society development contributed to the drafting of the law on volunteerism, public discussions on the new draft of the law on foundations, and NGOs drafting a Code of Good Practices in Public Financing of NGOs. Advocacy NGOssupported by USG assistance carried out three national level campaigns on anti-corruption, political process reform, and entrepreneurship, resulting in a draft law submission to the GOC. Institutional strengthening enabled 40 NGOs to improve institutional and organizational standards, thereby strengthening their ability to meet their stated mandates. Financing assistance enabled 30 NGOs to diversify their funding sources and increase domestic financing by 10%. Partnerships grew between NGOs and communities as 294 small projects were completed and 70,000 citizens were mobilized in over 200 communities across Croatia.

The USG provided small grants for 20 projects focused mainly on teaching the younger generation about tolerance, rule of law, minority rights, and voter education, such as a grant to a student organization to present academic ethics issues to university students, take polls, conduct interviews, and promote ethics in student behavior. Under the auspices of a speakers program, U.S. academic experts led a seminar for Croatian university educators and recommended an ethics codes to the committee drafting the University of Zagreb's first ever code of ethics. Through media programs, U.S. journalists/educators assisted in the development of a new journalism department at the new University of Dubrovnik. Croatian students who studied with U.S. journalists/educators broadcast and printed stories that adhered to U.S. standards of professionalism and balance. One Croatian participant assisted in producing a special report on USG programs in the Vukovar region.

PROGRAM PERFORMANCE/IMPACT

Two of the most impressive impacts of local government assistance were: the role that the Croatian Association of Cities (AOC) played in advocacy and legislative reform; and, the impact of the public procurement manual and accompanying training and support on transparency and accountability of public funding and funds. First, in FY 2006, AOC grew significantly (now representing 77 of the largest towns and cities in the country), becoming a strong advocate for the local government sector and for reform legislation that promotes fiscal and administrative decentralization. Through the AOC's efforts, a new law on the direct election of mayors entered parliament along with a new law on financing local government. The Association is also preparing new laws related to roads, schools, land use, and permitting - areas that local governments deem important for bringing citizens into decision-making processes. Second, USG assistance in preparing an EU-compliant procurement manual ensured that the national and local governments will adhere to accepted practices in public procurement, thus reducing corrupt practices and building trust and respect for Croatia's procurement system.

In civil society, USG assistance helped NGOs become credible voices strengthening Croatia's democratic procedures and institutions. Public debate and discussion on the perception of NGOs and their contribution to society led to improved public trust of NGOs while media training improved NGOs' public relations skills and advocacy effectiveness. A recent study showed that over 70% of citizens have trust in NGOs' work - an increase by over 10% in the past four years. Improved public trust helped NGOs' advocacy yield significant results. For example, one NGO, which received USG assistance, worked with the Ministry of Justice in drafting the GOC's National Program for the Prevention of Corruption 2006-2008, which parliament adopted in March 2006. In the area of legislative oversight, NGOs, which had received USG assistance, successfully advocated for anti-corruption measures, resulting in the law on financing political parties and campaigns, and for an improved legal framework for elections supporting the new state election commission law. The GOC accepted the recommendations of a NGO, which had received USG assistance to support and improve the country's entrepreneurial climate. NGOs, through advocacy and community programs, developed in partnership with the government, businesses, and other stakeholders. For example, at least seven new Croatian firms signed memoranda of understanding on developing corporate social responsibility models.

A group of journalists and political party members who were sent to the U.S. to observe midterm elections learned about how political parties reach voters, how the media covers elections, and the key issues of political party fundraising, campaign finance, and transparency. A second group of local government leaders were sent to the U.S. to observe how state legislatures, lobbyists, and NGO advocates work. Through articles published in Croatia on these trips, public debate and discussion for campaign finance and lobbying began. The Croatian general public broadened its understanding of the proper role and place of such practices in society.

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.

Performance Indicator: NGO Sustainability Index 2005. Seven different dimensions of the NGO sector are analyzed each year in the NGO Sustainability Index: legal environment, organizational capacity, financial viability, advocacy, service provision, NGO infrastructure and public image. The NGO Sustainability Index uses a seven-point scale, to facilitate comparisons to the Freedom House indices, with 7 indicating a low or poor level of development and 1 indicating a very advanced NGO sector. Source: USAID, The 2005 NGO Sustainability Index for Central and Eastern Europe and Eurasia. Found on line at http://www.usaid.gov/locations/europe_eurasia/dem_gov/ngoindex/2005/.

CY 2003 Baseline

CY 2004 Rank

CY 2005 Rank

CY 2006 Rank

3.5

3.5

3.4

3.2



Impact of U.S. Assistance on the Above Indicator: USG assistance played a supportive role in improving Croatia's score on NGO Index this year in three areas: institutional infrastructure, legislation, and public image. First, through a combination of policy dialogue and training, the U.S. supported the GOC's adoption of the National Strategy for Civil Society Development which provided a clear institutional framework for civil society. Second, USG support for the new law on volunteerism provided NGOs a legal umbrella enabling them to promote volunteerism. Third, NGOs developed partnerships, networks, forums, and coalitions with USG support enabling them to promote broad NGO interests. Intermediary support organizations improved and expanded activities to new areas and regions.

Performance Indicator: Local Democratic Governance. This indicator considers the decentralization of power; the responsibilities, election, and capacity of local governmental bodies; and the transparency and accountability of local authorities. Ratings are measured 1 to 7, with 1 representing greatest development of local democratic 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 2005 Baseline*

CY 2006 Rank

CY 2007 Target

3.75

3.75

3.25


*Freedom House Rating began in 2005, as noted above.

Impact of U.S. Assistance on the Above Indicator: The CY 2006 indicator remained unchanged because it is measuring 2005 progress, and therefore lags by one year. The CY 2007 target ambitiously reflects CY 2006 progress, as noted in above sections. The major contributors to that expected outcome were the new law on the direct election of mayors and the Association of Cities draft legislation on distribution of personal income and corporate profit taxes. The project also provided language to modify the existing law on local government and the decentralization of permitting, schools, roads and land-use, to be discussed by the GOC in 2007.

Economic Growth

The Croatian economy grew by an estimated 4.5% in FY 2006 due to an increase in business investment and consumer spending. Increased tax revenue enabled the government to lower its deficit targets for the first time since independence in 1991. The draft budget lowered the deficit projection for 2006 to 3.0% of GDP, below the 3.3% agreed to with the International Monetary Fund (IMF) last year. Inflation remained under control while job growth accelerated slightly, although unemployment remained high. The country's commitment to economic reform was manifest in recent initiatives to streamline government regulation, facilitate property sales, and make the legal system more efficient. However, significant problems still remain. Most notably, privatization of remaining state assets was stymied by political and legal challenges, leaving the state with a relatively large and unchanged role in the economy (approximately 40% of GDP). State subsidies to loss-making parastatals accounted for 3% of GDP and in combination with excessive social spending, crowded out government investments in productive infrastructure. Increased levels of foreign debt (83% of GDP) limited the capacity of government to address its over-valued currency. Other concerns were excessive bureaucracy and lingering problems with property registration that, collectively, impeded foreign direct investment.

U.S. ASSISTANCE PRIORITIES

USG assistance targeted building economic institutions, laws, and policies that foster private-sector economic growth, sustainable development, and poverty reduction. Spurring private sector growth requires an innovative and dynamic small and medium sized business (SME) sector producing goods and services competitive on world markets. To achieve this, USG-funded projects: supported the GOC's transformation from being an owner and manager of economic assets to serving as a facilitator of private economic initiative, and encouraged and supported policy reforms that create the environment for employment-generating private sector growth; and, enhanced the performance of Croatian private SMEs, especially in the agriculture sector.

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 impacting businesses, thereby eliminating the discretion of functionaries to exact extra-legal payments. The USG supported new financial products to make credit more accessible to SMEs as part of a larger initiative to generate employment, particularly in war-affected areas where unemployment rates are higher than the average. USG assistance worked to strengthen quality standards and product marketing to improve the competitiveness of Croatian industries, an important consideration with EU accession on the horizon. Finally, USG assistance supported the building of the institutional capacity of business associations and worked with private sector counterparts to advocate for business environment reforms. USG development programs targeting economic growth will be phasing out due to Croatia's success at implementing market reforms. As a result, economic growth programs were structured to achieve short-term impacts through regulatory and policy reforms while improving the capacity of private sector counterparts and "legacy" institutions to continue efforts to improve business productivity and competitiveness.

DESCRIPTION OF PROGRAMS AND ACTIVITIES

Two key projects provided most of the technical assistance, training, and other inputs associated with USG economic growth activities. An initiative to enhance SME performance focused on four key aspects of private sector development: marketing assistance for Croatian businesses; improved access to finance through innovative financial products and services; business development services, including training, quality standards, and business organization institutional development; and, investment facilitation. In addition, the SME performance initiative implemented a policy component that directly addressed deficiencies in the microeconomic and general business climate. Specific initiatives carried out through USG assistance aimed to improve the regulatory burden on investors, streamline and rationalize tax administration, support the development of a centralized quality standards institution, and identify and address skills shortages in the information and communications technology sector.

The USG funded two complementary activities; an agribusiness competitiveness enhancement program and another one to raise the incomes in economically distressed areas by supporting farmers, livestock producers, and organizations in dairy production, swine production, and horticulture. The projects worked at all levels in the food chain to improve production quality, processing capacity, distribution, and marketing of agricultural products. The projects helped to organize and support producer and buyer cooperatives and improve access to finance for farmers and cooperatives through commercial bank loan guarantees. Implementers trained farmers in production techniques and helped them comply with international sanitary, phytosanitary, and other production standards. The projects also provided small grants to farmers and cooperatives, particularly those in war-affected areas of the country. Other USG initiatives in FY 2006 included financial sector restructuring, energy restructuring, and support for the privatization of state-owned enterprises.

OUTPUTS

To date, the small enterprise performance initiative has assisted over 1,650 enterprises with training, technical assistance, quality standards compliance, and marketing support. As of June 2006, activities undertaken had contributed to over 3,000 newly created jobs. Through export promotion and marketing assistance, the project helped Croatia generate over $35.2 million in additional export revenue. Assisted firms increased total revenue by over $69 million. Foreign direct investment grew by $54.1 million as the initiative facilitated investment promotion and business expansion plans. Through work with the banking sector to increase knowledge about various financing options, over 1,200 enterprises employed new credit lines. The project trained over 2,600 people, 48% of whom are women.

In the agricultural sector, the cumulative annual buy-off of selected agricultural products increased by over $90 million through increased domestic consumption and reduced imports. In economically distressed areas, project activities resulted in 1,290 new jobs.

PROGRAM PERFORMANCE/IMPACT

Three key impacts stand out from FY 2006. First, USG assistance led directly to a GOC decision to implement a broad-based program of regulatory reform. Through USG efforts, the GOC approved two regulatory bodies. USG assistance facilitated the creation of a single regulatory body covering pension, insurance and securities market regulation, and an energy regulatory body that overseas tariffs and other related affairs. USG programs improved the regulatory oversight capacity of the Croatian Central Bank. Second, USG funding improved competitiveness in key economic sectors including dairy, swine production, and horticulture. Assistance activities led to the adoption of quality management systems for agriculture, in conformance with EU standards. These activities enabled farmers and cooperatives to gain access to EU pre-accession funds. Third, USG-funded activity increased support for new investment. Support for the GOC privatization program led to the tendering of 201 government-owned enterprises and the sale of 49, an increase of 21 privatized enterprises in the past year. U.S. loan guarantee programs prompted commercial banks to ease their collateral requirements and improve credit terms in rural areas.

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 an important indicator 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: Private Sector Share of Employment. The percent of total GDP accounted for by private sector enterprises. These data are available annually from the European Bank for Reconstruction and Development (EBRD) in its November Transition report. The value represents data collected from September 2005 through September 2006. Source: Annual Transition Report 2005: Business in Transition. More information can be found online: www.ebrd.org.

FY 2002 Baseline

FY 2004 Actual

FY 2005 Actual

FY 2006 Actual

56%

61%

63%

70%



Impact of U.S. Assistance on the Above Indicator: USG assistance for the GOC privatization program facilitated the sale of state-owned assets, thereby increasing the private sector share of employment in the economy. Specifically, successful privatization of agrocombinants transferred thousands of jobs from the public to the private sector. Assistance initiatives supported the promotion of foreign direct investment and improved the capacity of the Croatian investment promotion agency to market Croatia as an investment destination. USG-sponsored business development activities (including 3,000 new jobs) led to a gradual increase in private investment and a proportionate decrease in the public sector share of GDP.

Investing in People

Overall, Croatia's socio-economic indicators are quite strong. According to the United Nations Development Program's Human Development Index, Croatians have 98% adult literacy, an estimated life expectancy of 75 years and an average income of over US $12,000. As Croatia nears integration into Euro-Atlantic institutions, and specifically the EU, it is obligated to improve its population's productivity and well-being in the areas of education, environment, and public health. The EU Commission's 2006 Progress Report highlights a number of areas where improvements have already been made. For instance, in FY 2006, in the public health sector, the government adopted a National Strategy and Action Plan for Combating Drug Abuse. Additionally, the EU reported progress in the area of education, training, and youth, as the GOC continued the education reform process under its Education System Development Plan. Croatian universities are adapting to the Bologna Process, in line with other EU universities and a requirement of EU accession. In the environment, progress was made in the areas of air quality, waste management, nature protection, genetically modified organisms, and water quality although, due to the complexity of the sector, much work remains.

U.S. ASSISTANCE PRIORITIES

This sector is not a high priority for USG assistance, given Croatia's relatively high socio-economic indicators. The USG completed its key program in this area, a trafficking in persons (TIP) prevention activity, in 2006.

DESCRIPTION OF PROGRAMS AND ACTIVITIES

In 2006, the USG completed its two-year trafficking in persons (TIP) prevention activity. The program raised awareness among the public, media, law enforcement officials, and policy-makers about the problems related to TIP, provided them with knowledge to identify and combat the problems related to trafficking and how to best provide assistance to victims. The activity maximized collaboration between local NGOs and the GOC, highlighting the fact that issues and problems related to trafficking are part of many social spheres and must be dealt with holistically. Support to Croatia on anti-trafficking was bolstered by a USG speakers program in which U.S. experts spoke on TIP-related issues. Additionally, the USG awarded four grants to organizations working on TIP issues and financed a speaker to participate in a GOC-organized conference focusing on TIP issues.

OUTPUTS

In FY 2006, the USG provided seven sub-grants to local NGOs, which benefited 1,400 Croatian high school students from targeted border communities. These students participated in workshops on recognizing trafficking ploys and the dangers of falling victim to trafficking. Media campaigns, designed to raise awareness of the trafficking risks, reached an estimated 200,000 people in targeted border communities over the life of project. These campaigns included local television and radio shows with professionals such border control police, emergency doctors, investigation judges, NGO leaders, and others who deal with trafficking issues in their work. Educational brochures and leaflets were distributed in border communities and posters were placed at border crossings with Bosnia and Herzegovina and Serbia. Over 100 professionals, including social workers, local government officials (primarily in border communities), doctors and other medical staff from emergency rooms, were trained to recognize and assist trafficking victims.

PROGRAM PERFORMANCE/IMPACT

As a direct result of the program, the GOC's Office for Human Rights (OHR) increased its capacity to monitor the trafficking situation in Croatia and to train professionals, such as journalists, local government officials, and others, on the spectrum of TIP issues. OHR also designated county liaison officers to interact with border police, doctors, and social workers in recognizing and assisting trafficking victims. As a result of both the professionals' training and the media campaign, trainees recognized and assisted the victims of trafficking in two different border communities. To protect high school students from falling victim to traffickers, 51 students became peer educators, resulting in awareness building that will continue beyond the end of the project.

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: Trafficking in Persons Country Ranking. The annual Trafficking in Persons (TIP) Report includes those countries determined to be countries of origin, transit, or destination for a significant number of victims of severe forms of trafficking. The Report rates countries as Tier 1, Tier 2, Tier 2 Watch List, or Tier 3. Tier 1 reflects countries whose governments fully comply with the Trafficking Victims Protection Act 2000 minimum standards; Tier 2 reflects countries whose governments do not fully comply with the Act's minimum standards but are making significant efforts to achieve compliance with those standards; Tier 2 Special Watch List is the same as Tier 2 but also denotes a deteriorating trafficking environment (i.e. the absolute number of victims of severe forms of trafficking is very significant or is significantly increasing); and Tier 3: Countries whose governments do not fully comply with the minimum standards and are not making significant efforts to do so. Source: State Department TIP Report 2005. Found on line at http://www.state.gov/j/tip/rls/tiprpt/2005/.

CY 2003 Baseline

CY 2004

CY 2005

CY 2006 Actual

Tier 2

Tier 2 Watch List

Tier 2

Tier 2


Impact of U.S. Assistance on the Above Indicator: The USG's moderately-sized activity in anti-trafficking yielded excellent results. The Croatian government used USG assistance to help complete a National Action Plan, Operational Plan, legal framework and enforcement infrastructure, demonstrating a genuine political commitment and operational efforts in the areas of prevention, education and victim's assistance. The USG continued to reiterate with GOC officials the importance of investigation, prosecution and conviction of traffickers as a deterrent to trafficking in the region. This work, along with support to the GOC Office for Human Rights created impressive momentum in the GOC which enabled Croatia to avoid the State Department Tier 2 Watch List.

Peace and Security

Croatia worked towards meeting NATO membership criteria as the government completed, and Parliament approved, a Long Term Development Plan for the Croatian Armed Forces to transform into a more efficient and responsive military. This revised doctrine reduced perceived threats from Croatia's neighbors, allowing Croatia to prepare to join the international community in responding to global security challenges. Entering FY 2006, Croatia participated in 11 UN peace support operations. This year, Croatia tripled its support of international efforts in Afghanistan. To build public support for NATO membership, Croatia planned a communications strategy.

In FY 2006, Croatia continued to build cooperative relationships with its neighbors, a critical component for regional peace and stability. Under bilateral agreements with Serbia and Montenegro as well as with Bosnia and Herzegovina, prosecutors and judicial authorities collaborated in prosecuting war crimes cases and providing witness security. New agreements with Montenegro and Serbia allowed prosecutors to transfer case evidence where defendants could not be extradited, permitting trials where the defendants were located. Police and customs authorities strengthened capabilities in combating organized crime and smuggling. Croatian law enforcement agencies continued to need improvements in interagency coordination. Croatia supported international efforts to build BiH state institutions. Normalizing relations with Serbia remained a top government priority, and both countries' leadership met throughout the year. Progress continued toward reintegrating the displaced ethnic Serb minority.

U.S. ASSISTANCE PRIORITIES

During FY 2006, programs focused on developing joint police and prosecutor capacities to combat organized crime and corruption, developing management skills and professionalism in police administration, strengthening border police and customs capacities to detect and deter movement of illicit goods and trafficked persons across Croatia's borders, and improving police, prosecutor, defense attorney, and judicial capacity to fairly prosecute remaining war crimes cases, including those transferred from the International Criminal Tribunal of Yugoslavia (ICTY).

Additionally, humanitarian de-mining activities were targeted to promote the return of refugees and economic development of war-affected communities. U.S. military cooperation and assistance was directed toward developing Croatia's potential to become a strong regional leader on military and security issues. In FY 2006 Croatia was ineligible for USG military assistance, per the provisions of the American Service members Protection Act (ASPA).

DESCRIPTION OF PROGRAMS AND ACTIVITIES

In FY 2006, USG rule of law programs established an executive advisor position to the General Director of Croatian Police. As a member of the director's "Collegium," the advisor attended senior staff meetings, counseled on long-range development and helped implement policies and procedures that provide accountability. Delegation and accountability were emphasized during the reorganization. An organized crime advisor worked with the police and the special prosecutor's Office for Combating Organized Crime and Corruption (USKOK) in efforts against human trafficking, corruption, and organized crime.

The USG-funded export control and border security assistance program worked with the GOC to implement and enforce export controls. USG assistance to the border police filled urgent gaps not covered by EU assistance.

The USG provided de-mining funds to war-affected regions, giving priority to projects in communities that promoted refugee returnand stimulated economic development. A USG-supported war crimes project increased the capacity of the Croatian justice system to investigate, prosecute, defend, and adjudicate war crimes cases domestically. The project trained judges, prosecutors, police, and defense attorneys; reinforced the growing political will to prosecute war crimes without regard to the ethnicity of the defendants or victims; took responsibility for the cases returned from the ICTY to Croatia; alleviated concerns over unjust trials that have impeded returns by displaced ethnic groups; and provided an important longer-term legacy of enhanced criminal justice capacity. Additionally, grants to raise awareness of war crimes issues included a radio program on war crimes cases and trials, journalist training, and other public outreach activities.

The speaker program contributed to outreach efforts critical to building public support for NATO membership.

OUTPUTS

The USG trained 870 professionals in several specialized activities ranging from anti-trafficking to racketeer influenced and corrupt organizations (RICO) laws and completed its ongoing field training of 127 police officers. International instructors, who taught twelve weeks of advanced train-the-trainer programs, certified 315 Croatian police trainers in advanced undercover operations, evidence collection, courtroom presentation, computer forensic recovery, advanced firearms, mid-level management, advanced homicide, family violence, and modern techniques for terrorism investigations and prevention. Joint police-prosecutor training was provided on witness protection.

The USG held courses for customs and border police on border security, licensing, port security, tracker training, and funded a maritime security assessment carried out by the U.S. Coast Guard.

Through the war crimes project, USG assistance funded two study trips to the International Criminal Tribunal for the former Yugoslavia (ICTY) for 14 judges and 15 state prosecutors. In addition, the project provided ten workshops on the following topics: witness protection; fugitive tracking; train-the-trainers; prosecution of international crimes in domestic courts; the role of defense; right to a fair trial; media relations; video link use; massacre case study; and sexual assault. About 100 county court judges, 16 defense attorneys, 141 state attorneys, and 82 police officers participated in these workshops.

The USG donated digital video conference systems for use in protected witness testimony to five courts in Vukovar, Split, Rijeka, Osijek, and Zagreb, as well as to the Judicial Academy. Assistance provided an audio/video feed system for the Zagreb County Court that allows journalists direct audio and video feed during trials to increase judicial transparency.

USG assistance also supported activities to raise awareness of war crimes. Projects included a radio program to educate the public about war crimes cases, special training for journalists who cover war crimes trials, public outreach through roundtables, community meetings, and publications, a website and publication of a training manual for trial monitoring, and a first-ever conducted poll to gauge public attitudes on war crimes cases and trials.

De-mining projects were initiated to de-mine approximately 1,169,820 square meters of mined territory in Croatia. An estimated 1,147 square kilometers in Croatia remain mine-suspected. The USG's humanitarian de-mining program provided recreational and rehabilitation programs for young mine victims in the region and funded mine risk awareness workbooks, performances, films, and other materials for school-aged children around the country. Thirty-two performances were seen by more than 6,000 children.

PROGRAM PERFORMANCE/IMPACT

The USG helped strengthen the rule of law in Croatia through the development of a professional, modern, unbiased law enforcement community capable of cooperating effectively with counterparts regionally and internationally. Under U.S. mentoring, and in coordination with a complementary EU Community Assistance for Reconstruction, Development, and Stabilization (CARDS) program, the Criminal Police and USKOK created the first joint police-prosecutor task force to target a specific criminal organization. At the request of the Ministry of Interior, the USG began assisting in a major reorganization that will create a 300-person national criminal police investigative department.

Croatia took steps to improve its export control regime, using USG assistance to implement and enforce export controls through the ongoing revision of existing legislation to include dual-use and munitions controls, customs code, and criminal code. Croatia continued to improve cooperation with the U.S. and other states in the region to interdict trade in narcotics and protect against the proliferation of weapons of mass destruction.

In FY 2006 Croatian Customs officers, who had received training in detecting concealed compartments in vehicles and shipping containers, seized drug precursors through a container port. Also, 1,857 cartons of contraband cigarettes were confiscated by Customs authorities through a land port, demonstrating comprehensive capacity for detection and deterrence at the borders. Considerable training and equipping of border police remained to be implemented, but Croatia developed a comprehensive strategic plan in partnership with German and Slovenian experts under the EU CARDS Border Police twinning program.

De-mining continued to be a high priority for the Croatian Government, which prioritized categories of types of land to be de-mined. The GOC estimated that Croatia will be mine-impact-free by 2010. In 2006, the number of casualties due to land mines decreased. The GOC increased efforts to educate at-risk populations about the dangers of mines.

In FY 2006, Croatia demonstrated significant political will and professional commitment to prosecuting war crimes, even when defendants were ethnic Croats, including a case involving an active member of parliament. The quality of witness protection and war crimes prosecutions improved, according to international observers. The Ministry of Justice established a witness/victims support unit. Following USG assistance, the Ministry of Interior's witness protection unit became fully operational. The Judicial Academy made plans to continue training based on modules developed during USG-funded education programs on witness protection, prosecuting international crimes in domestic courts, right to a fair trial, media relations, massacre cases, and sexual assault in armed conflict. Reporting on war crimes was, by and large, objective and balanced. Journalists who went through U.S. training provided more comprehensive information in articles.

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. 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. The report also monitors Croatia's cooperation with the ICTY. Progress towards each category is rated on a seven-category scale, 1 representing the most advanced and 7 the least advanced. Source: Freedom House, Nations in Transit 2006. (This volume covers events from January 1 through December 31, 2005). Found on line on http://www.freedomhouse.org/research/nattransit.htm.

 

CY 2003 Baseline

CY 2004 Rank

CY 2006 Actual

4.25

4.50

4.25


Impact of U.S. Assistance on the Above Indicator: USG assistance was designed to promote ethnically blind, transparent police, prosecutor, and judicial performance in protection of individual rights. Police assistance was specifically used to build capacity in Croatian institutions charged with fighting organized crime and corruption. In 2006, the first class of 127 field training officers completed training in the USG-funded overhaul and revitalization of the basic police school. This assistance enhanced human rights protections, equality before the law and humane treatment of suspects and prisoners. The government adopted a Judicial Reform Strategy in February. The police Witness Protection Unit became operational. Additionally, USG-trained state prosecutors led a successful search for ICTY indictee Ante Gotovina.

Performance Indicator: Corruption Perceptions Index (Transparency International). The CPI measures how experts view the state of corruption in a country. Because Transparency International uses a country ranking chart, we have used their raw score to better evaluate change. The CPI score relates to perceptions of the degree of corruption as seen by business people and country analysts and ranges between 10 (highly clean) and 0 (highly corrupt). Found online at http://www.globalcorruptionreport.org/index.html.

FY 2003 Rank

FY 2004 Rank

FY 2005 Rank

FY 2006 Actual

3.7

3.5

3.4

3.4


Impact of U.S. Assistance on the Above Indicator: The Croatian Parliament's Conflict of Interest Commission took modest steps forward. In February, the general assembly confirmed Commission conclusions on two Members of Parliament (MPs), noting in one case that the MP concerned acted in conflict of interest during his ministerial mandate. In March, the Parliament adopted the Anti-Corruption Program (2006- 2008) specifically focusing on the justice sector, health services, state agencies and political parties. Additionally, the USG-funded speakers and international visitor programs highlighted conflict of interest issues, in which participants learned about the importance of legislative modifications and enforcement.



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