IV. Other U.S. Initiatives and Programs

U.S. Government Assistance to Eastern Europe under the Support for East European Democracy (SEED) Act
Bureau of European and Eurasian Affairs
January 2003


Faculty Exchange Program, Federal Republic of Yugoslavia

The Faculty Exchange Program (FEP) provides five months of practical training to university educators from progressive agricultural institutions to increase their capacity to develop academic and adult education programs and curricula in agricultural economics and marketing, agribusiness, and agrarian law. The FEP is designed and managed by the Professional Development Program of the Food Industries Division, International Cooperation and Development, Foreign Agricultural Service. In FY 02, the first three participants to take part in the FEP from the Federal Republic of Yugoslavia (FRY) completed the U.S.-based portion of the program in December 2001 (along with 17 other participants from Kazakhstan, Russia, and Ukraine). Three more participants from the FRY began in July 2002, and will complete the U.S.-based portion of their program in December 2002. (These 3 participants joined 23 others from Kazakhstan, Russia, Ukraine, and Uzbekistan.)

The FEP's objectives are to: 1) increase the number of adults in the FRY who understand market economics by improving the quantity and quality of academic and adult education programs in agricultural economics and marketing, agribusiness, and agrarian law; 2) develop the ability and confidence of participating faculty to evaluate and revise curricula and courses through the application of basic principles of learning and curriculum development; and 3) establish enduring U.S.-FRY institutional relationships that will catalyze and support curriculum development, course revision, faculty development, and joint research in the areas of agricultural economics and marketing, agribusiness, and agrarian law. The FEP plays a critical role in building the human and institutional capacity necessary for the FRY's transition to a market-based economy. Increasing the number FRY adults who understand the workings of a market economy, can teach and create educational materials on market economics, and possess the mind-set to adapt to a market economy is essential to the formulation and implementation of sound agricultural policies and the promotion of agricultural development.

An individualized program is designed for each participant. U.S. university staff work one-on-one or in small groups with participants at each host university. Participants observe classes in their subject areas and learn new methods of teaching. In addition, they learn how to revise existing curricula, develop new ones, choose and develop class materials, and assess student progress. Through visits to and internships with agribusinesses and extension and adult education programs, FEP participants gain practical, firsthand experience in the day-to-day functioning of the U.S. agricultural research and education systems, as well as U.S. agribusinesses. During their programs, participants develop at least three new or revised course outlines and materials for introduction at their universities when they return home. All participants received in-depth training in how to develop Internet-based courses for use in distance education programs.

The program also provides follow-up support visits by U.S. faculty to each participant's home institution, four to eight months after the program ends. Activities conducted during these visits include reviewing newly developed course outlines and materials; meeting and discussing curricula revision with Heads of Department and Deans; giving lectures and seminars to faculty and students on market economics and agribusiness-related topics; visiting and meeting with farmers; reviewing and suggesting improvements in extension and adult education programs; and discussing future joint research and exchange programs.

Program Developments

A participant from the University of Novi Sad was promoted from Department Head to Vice Dean.

Participants have given seminars and written articles on topics such as cooperatives, agricultural extension service, marketing, GMOs, biotechnology, agricultural policy in developed countries, and
the organization of the education system in the U.S. and the possibility of implementing similar concepts in Yugoslavia.

As a result of networking started or enhanced during their U.S. stay, participants worked on projects with other agencies or organizations related to Yugoslavia's development. They are involved, for example, with the Policy Advisory Unit for Agriculture of the European Agency for Reconstruction, the FAO, and ACDI/VOCA programs.

As a result of the FEP follow-up visits by two U.S. professors from Pennsylvania State University (PSU), five Yugoslavs (professors, department heads, and a dean) were invited to visit PSU on a two-week Agricultural Education and Extension study tour. PSU and private-sector donors partially funded this.

Two participants, along with three invited colleagues, attended a one-week seminar on the management of rural organizations and the agricultural extension service in Poland. The extension service seminar is an annual event sponsored by PSU and the Polish Agricultural Extension Service and is partially funded by PSU and Pennsylvania agribusinesses. As a direct result of Yugoslav participation in the FEP, the PSU/Polish Extension Service agricultural extension seminar will be held in Yugoslavia in 2004.

FY 2003

The FEP will select six participants from the FRY agricultural universities or research institutes to build a core of U.S.-trained staff within the country. Three will continue in the agricultural economics focus, and three will be chosen to begin USDA's Agricultural Science FEP.



In FY 02, the U.S. Forest Service (USFS) continued activities under the USAID-funded Albania Watershed Assessment Project (AWAP). The USFS increased Geographic Information Systems (GIS) capacity/capability through the expansion of GIS lab use and services and contributed to national watershed management strategic planning efforts. In addition, the USFS implemented and monitored a number of mitigation projects in the Shkumbini and Vjosa watersheds, including technical training for managers, and sponsored the attendance of an Albanian expert at the Forest Service International Seminar on Watershed Management.

Through the USAID-funded Albania Herbs and Spices Project, the USFS is working with the International Fertilizer Development Center (IFDC) and its subcontractor, FFF Associates, Inc. The partners have made significant progress in ensuring that the environmental aspects of harvesting native herbs and alleviation of species degradation are given a high priority to maintain the sustainability of the sector and biodiversity in forest areas. The project incorporates sustainability into the Assistance to Albanian Trade Associations Project in Albania (AAATA), a complementary USAID project. FFF worked closely with Albaflor, a trade association of collectors and smaller dealers with a significant interest in this area, to implement the project's environmental protection aspects. Activities included an update of the status of the endangered/degraded species list of herbs and spices in Albania; a review of existing laws and regulations on the use of the forests regarding herbs and spices; the design and initial implementation of a training program for the environmental sustainability of herbs and spices; the conduct and assessment of initial trials of cultivation of herbs and spices; and the design of the second set of cultivation trials to be conducted in the following year. In addition, FFF and AAATA coordinated the founding of the Albanian Spice and Herbal Trade Association (ASHTA). As part of ASHTA's activities, FFF conducted training and education seminars in several locations around Albania; the seminars included specific components on environmental protection. FFF also worked with Albaflor to produce two educational materials for widespread distribution -- a poster on the proper collection and handling of sage leaves, the most significant single spice or herb collected in Albania (either wild or cultivated), and a booklet on the proper use and protection of Gentiana Lutea, an endangered species found in Albania.


In FY 02, the USFS began implementing a two-year, USAID-funded wildfire capacity-building program in Bulgaria. Three USFS technical specialists worked closely with the Bulgarian Government to develop a specific work plan for the project and implemented USFS agreements under it. USFS improved wildfire preparedness by providing fire-fighting equipment, including handheld radios, radio repeaters, protective clothing, and chainsaws to the Bulgarian Civil Protection for distribution to other relevant Agencies and Ministries. In addition, USFS hosted a study tour in the western United States for three Bulgarian wildfire specialists, providing an introduction to the Incident Command System and inter-agency co-ordination in wildfire management in the U.S.


Established in 1990 by Congress under the SEED Act, CEEBIC offers a wide array of services, business counseling, and information products designed to help primarily small and medium-sized U.S. companies export to Central and Eastern European (CEE) markets.

In FY 02, CEEBIC trade specialists answered over 2,000 inquiries from U.S. companies. CEEBIC staff were able to tailor the information and counseling to suit each client's individual needs. In FY 02, CEEBIC generated over $85 million in commercial activity.

CEEBIC's 15 overseas employees (host-country nationals on personal services contracts) stationed throughout CEE identified trade and joint-venture opportunities for U.S. companies; assisted U.S. companies active in the region; and worked closely with CEEBIC's Washington-based international trade specialists to disseminate commercial information to U.S. companies. Over two-thirds of them are devoted to Southeast Europe, with one CEEBIC specialist each in Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Yugoslavia/Montenegro, Yugoslavia/Serbia, Macedonia, Kosovo, and Cluj and Bucharest, Romania. In nine of 15 U.S. embassies, CEEBIC provides the only full-time commercial specialist.

The highly popular CEEBICnet Internet site was accessed over 5,000 times per week in FY 02, providing U.S. companies with the most up-to-date information available and giving a comprehensive view of the business climate and opportunities in the region. CEEBICnet also includes trade and partnerships opportunities submitted by CEEBIC's overseas staff for 16 of the leading sectors in CEE for U.S. companies. CEEBIC enables small CEE companies seeking U.S. products and investment to reach potential U.S. partners. CEEBIC's web site contains a special section devoted to its Southeast Europe Initiative. In 2002, CEEBICnet was recognized by Forbes Magazine as one of the "Best on the Web" worldwide for commercial information for CEE.

In FY 02, CEEBIC continued to produce its core publications, Central and Eastern Europe Commercial Update and Southeastern Europe Business Brief. Every issue provided information on new trade and joint venture opportunities throughout the CEE region. CEEBIC distributed to U.S. companies over 80,000 copies of the Central and Eastern Europe Commercial Update, which features an "Eye on Southeast Europe" section in every edition. CEEBIC produced 45 editions of the Southeastern Europe Business Brief and distributed over 40,000 copies to U.S. companies.

In FY02, CEEBIC organized seven business briefings, which were attended by 562 U.S. companies. Briefings featured such topics as information technology, energy, updates on the Bulgarian business climate, and European Union Accession. The briefings included presentations by visiting foreign officials and business delegations, and offered U.S. companies opportunities to meet with one-on-one with foreign delegations. CEEBIC supported 18 conferences and provided outreach to 1,230 U.S. companies. In 2002, CEEBIC was a featured panel member and provided an overview of the Southeast European business climate at conferences in Washington, New York, Minneapolis, Tucson, Chicago, and San Francisco.

CEEBIC's highlights for Southeast Europe in FY 2002 include: 1) recruited U.S. companies for the first- ever American Catalog Shows in Macedonia; 2) co-sponsored the "Croatia's Energy Industry: Strategic Opportunities for U.S. Companies" conference in Washington, D.C., (February), attended by 75 U.S. companies; 3) sponsored two reverse trade missions from Kosovo; and 4) hosted two business briefings for Bulgarian companies and government officials.


Commercial Law Development Program

The Commercial Law Development Program (CLDP) manages a program of technical assistance to seven signatories of the Stability Pact for Southeastern Europe: Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Macedonia, Romania, and the Federal Republic of Yugoslavia (certified in March 2002). Focused on trade liberalization and integration, CLDP helps the Southeastern European (SEE) countries to work together to reduce barriers to trade and investment, while at the same time building the mechanisms necessary for increased international and regional trade and investment.

CLDP's activities are unique in that all seven countries are equally represented at all CLDP-organized events (problem-solving workshops, training seminars, and conferences). These events are geared toward the main objectives of: 1) facilitating the negotiation of bilateral free trade agreements between the seven countries; 2) improving the regional enforcement of intellectual property rights (IPR), in particular through training for judges and other officials entrusted with enforcing the laws protecting IPR; 3) assisting in the creation and the development of American Chambers of Commerce SEE, as they are effective proponents of trade liberalization and integration; and 4) contributing to the development of the regulatory framework required for businesses to take advantage of trade liberalization in the region.

Highlights of FY 02 Activities

Free Trade Agreements/Trade capacity building: CLDP organized a Trade Policy workshop in Washington, D.C., for 35 trade negotiators from all seven countries. CLDP also made it possible for these trade officials to meet in London and Sarajevo. In coordination with NIST, CLDP organized a workshop in Washington on standards for 35 key officials from the seven countries

IPR enforcement: In coordination with the Federal Judicial Center, CLDP organized a workshop to train 35 judges from all seven countries in adjudicating intellectual property disputes. Previously, CLDP had organized an IPR conference in the region to make officials better aware of the issues. Also, at CLDP's invitation, 42 experts from the seven countries attended two USPTO programs in Washington, D.C.

American Chambers of Commerce (AmChams): By making it possible for all the stakeholders to meet, CLDP provided the momentum for American Chambers of Commerce to be created in Yugoslavia and in Bosnia. Then, through two regional workshops, CLDP brought together the region's AmChams to focus on regional advocacy and best organizational practices. All seven countries now have AmChams, which have started exchanging information and best practices among themselves and are becoming effective conduits for promoting the reforms required for much-needed trade development in SEE.

Regulatory Infrastructure: Special emphasis was placed on the insurance sector and e-commerce in FY 02. Four main events were organized for SEE insurance experts (primarily regulators). To promote e-commerce, two conferences were held (in Sarajevo and Zagreb) for a total of 150 participants.

Overview of FY 02 Results

Thanks to CLDP's activities in Trade Capacity Building, more than 16 bilateral FTAs were signed by the seven SEE countries (several of which had been at war with each other only a few years ago). This achievement was highlighted during the June 2002 Sofia ministerial. In addition, key trade officials in all seven countries now know each other. This not only explains why so many FTAs were signed, but also bodes well for the future, as the countries will soon have to deal with the complex issues of trade compliance and trade dispute resolution.

As a result of CLDP's IPR enforcement initiatives, there is now in SEE a network of well-trained key officials in charge of IPR enforcement who have learned to work together. This will eventually help prevent infringers from exploiting regional loopholes.


Authorized by Congress under the SEED Act, the Enterprise Funds were established as unique "public-private partnerships" to invest U.S. Government (USG) funds to support private sector development and the nascent market economies of Poland and Hungary. The Funds have concentrated on making equity investments in and long-term loans to small and medium-sized businesses. Subsequent Foreign Appropriations Acts and the FREEDOM Support Act extended the authorization to set up Funds in other Central and Eastern European countries, and in the New Independent States. SEED-area Enterprise Funds are active in Albania, the Baltic States, Bulgaria, Hungary, Poland, Romania, and Slovakia.

Each Enterprise Fund operates as an independent, autonomous organization, guided by a Board of Directors with the appropriate legal structure and authority to manage its resources. The SEED Act provides considerable autonomy to the Funds, with the USG retaining oversight responsibility for operations. This model was designed so that the Funds could deliver assistance as rapidly as possible, with enough flexibility to develop programs and use a variety of investment approaches to address each country's specific conditions.

USAID's Bureau for Europe and Eurasia manages all Enterprise Fund activities, with oversight from the State Department's Office of the Coordinator of U.S. Assistance for Europe and Eurasia. Since its formation in 1990, the Enterprise Fund program has been an important U.S. foreign policy success, creating thousands of jobs, transforming industry sectors, and increasing the levels of business experience and corporate governance. Most of the Enterprise Funds in Europe have now privatized their management companies to attract new private investment and provide future incentives for their employees. Other successes include the establishment of banks, leasing companies, mortgage lending institutions, pension funds, and investment banking activities. Moreover, Funds have become resources to which other investors turn for information on the business climate in these countries. A brief summary of the activities of each Fund follows.

Albanian-American Enterprise Fund

Established in 1995, the Albanian-American Enterprise Fund (AAEF) was capitalized with a $30 million USAID grant. The Fund's investments have stimulated the Albanian economy by providing growing and export-oriented small and medium-sized enterprises (SMEs) with access to equity, loans, and leases.

During the second half of FY 02, the AAEF continued to consolidate its portfolio, identify exit strategies for appropriate investments, and source new clients. AAEF has profitably liquidated a portion of its real estate holdings and strengthened several deteriorating loans. Shortly after the fiscal year ended, the Fund completed negotiations to sell the ground floor of the Noli Center for about $1.5 million, and converted one equity holding (NPV Korca) into an intermediate-term loan with a 33 percent profit. The pipeline of new investment opportunities has strengthened, and there have been a number of positive developments for existing AAEF portfolio investments. The Albania Fiberoptic Backbone is on track and progressing toward installation of cable. Teqja, a pipe manufacturer, has recently won several contracts to supply plastic pipe. And, in an interesting judicial system-related development, when the AAEF has initiated legal action to foreclose on loans, the Albanian courts have always ruled in the Fund's favor.

The AAEF has made steady progress in enhancing reporting procedures and the staff's professional skills. More focused, detailed financial reports are now standard, and they include a debt risk rating and review system that is designed to identify early signs of credit deterioration and to address solutions. Each of the Fund's investment officers will now undergo outside training as part of his or her overall training program.

The American Bank of Albania (ABA) contnues to be the Fund's largest, most successful investment. The ABA has become one of the country's most important financial institutions and is consulted regularly on legislative and regulatory issues affecting the banking industry. Unaudited pre-tax profit for the first nine months of 2002 reached $3.1 million, as compared to $2.1 million during the same period in 2001. The ABA now has assets exceeding $188 million, 146 skilled employees, and operates branches in Tirana, Durres, Vlore, Rinas Airport, and the U.S. Embassy. The bank has pioneered many traditional and innovative products, including the first home mortgage loans, the "Deposit with Life Insurance" program for lek time deposit accounts, WEBCAS Internet banking services, an electronic customs house clearing service, and FUTURA savings accounts for children.

As of September 30, 2002, USAID had obligated $30 million to the Fund. From inception to then, the Board had approved 53 investments worth over $30 million, disbursed 51 investments worth over $26 million, and had four investments worth $4 million under review. AAEF has divested two equity investments worth $10,000 and received 19 loan repayments of closed investments worth nearly $5 million.

Bulgarian-American Enterprise Fund

The Bulgarian-American Enterprise Fund (BAEF), with a funding base of $58.25 million, has actively invested in Bulgaria since 1992. As at June 30, 2002, the Fund had drawn down $57.5 million from USAID and made a total of 903 investments. The Fund's investments, including equity and loans, now exceed $70 million, with re-flows of more than $34.4 million and a current carrying value of $45.7 million. The BAEF's current net worth is around $42 million.

The Fund has made an important contribution to Bulgaria's development by building a model for equity investments and long-term lending to small and medium-sized businesses (SMEs). The Fund is effectively demonstrating improved investment methods and financial structures, and the formalization of business operations.

BAEF invests in private businesses that have strong, capable management. The prospect for long-term growth and access to export markets are also considerations. The Fund has developed extensive knowledge and experience in agriculture and food processing, construction and housing, tourism, consumer goods, distribution, and light industry.

BAEF has begun to give thought to options for graduation. The Board of Directors considers the most promising legacy to be the Bulgarian-American Credit Bank (BACB), wholly owned by the Fund. The Fund has been actively reducing its exposure in equity investments and transferring many loans to the BACB. Bulgaria's largest long-term lender, the BACB has been rated by "Finance Central Europe" magazine as the best bank in Bulgaria and in Southeast Europe, based on its return on assets. BACB was also ranked third by return on equity by the same publication. As of June 30, 2002, BACB's total assets exceeded $60 million, and its loan portfolio was over $64 million. Other developments include:

  • To develop full-service banking, the BACB is implementing a five-year plan to launch additional branches and provide clients with basic banking products and services. The bank plans to increase customer deposits by aggressive marketing, offering new deposit products and electronic banking. BACB recently opened a new branch on Stara Zagora.

  • To promote growth in mortgage bonds, BACB sold a second bond issue of 5.5 million euros, which was purchased entirely by HypoVereinsbank. Its first issue of mortgage bonds, which closed at the end of July 2001, was oversubscribed by 12 investors for a total of 3.242 million euros, with a 3-year term and fixed rate of 7.75 percent. The BACB is registering the bonds with the Securities Commission for registration on the Bulgarian Stock Exchange.

  • The number of home mortgages originated by BACB topped 1,000 borrowers and $20 million in financing. BACB's mortgage program is expanding and providing services in Sofia, Varna, Bourgas, Plovdiv, and at the new branch in Stara Zagora.

  • BACB has secured a $5 million mortgage finance facility from the International Finance Corporation to expand the mortgage finance market.

Baltic-American Enterprise Fund

Since 1995, the $50 million Baltic-American Enterprise Fund (BalAEF) has become a reliable financial partner for growth-oriented private companies, entrepreneurs, and new homeowners throughout Estonia, Latvia, and Lithuania. The BalAEF contributes to the development of the Baltic financial services sector and the creation of value for SMEs and households.

As of March 31, 2002, the BalAEF had drawn down $50 million from USAID. Net investment outlays were around $79 million, with a current carrying value of around $41 million. The Fund's net worth stands at about $38 million.

The Fund continues to build a platform well suited to attracting additional capital from commercial sources, thereby leveraging the positive impact it has made. BalAEF is searching for capital for each of its three business lines: mortgage lending, small enterprise financing, and real estate investment. In response to the ongoing tightness in venture capital markets, the Fund seeks to expand SME lending with a new mezzanine finance and investment program. Discussions are under way with local banks and the International Finance Corporation (IFC) on mezzanine finance, which provides loans with a convertible equity feature and possibly a success fee and is considered to be an ideal approach for the Baltics. The BalAEF is actively building a pipeline of new mezzanine financing transactions.

As of March 31, 2002, the BalAEF had disbursed $80 million of $88 million in approved investments. Investments are in 14 equities, 127 business loans, and over 2,400 mortgages. The current portfolio has thus far returned about $47 million in interest and principal payments, which have been reinvested.

The Fund intends to help develop a secondary mortgage market in the Baltic States to promote greater access to capital from the housing sector. BalAEF has developed a wholesale lending activity, the first of its kind in Latvia, with Latvijas Unibanka, under which the Fund has drawn down $14 million of a $20 million credit line for Latvian mortgage production.

To expand home mortgage lending, the IFC has agreed to extend a $50 million line of credit for the BalAEF's mortgage program. In addition, the Fund is finalizing a credit line with Nord LB for a $15 million facility to fund mortgage activities in Lithuania. It also is working to complete the first securitization of Baltic mortgages with the U.S. Wachovia Bank. In Estonia, the Fund is now approving loans guaranteed by Kred-Ex, an Estonian mortgage insurance program for high loan-to-value lending to first-time borrowers. This year, mortgage production has averaged over $4 million each month.

In real estate development, BalAEF continues to invest in selective projects from investment reflows. The Fund exited its investment in the historic Elizabetes 10 property in Riga. The sale of this landmark Jugendstiehl property to the Fund's partners resulted in a gain of $435,000. In May 2002, the Fund-financed Vilnius Holiday Inn opened, with high occupancy rates. In Tallinn, Estonia, the Fund is finalizing an investment in a built-to-suit warehouse project.

The Czech and Slovak-American Enterprise Fund

The Czech and Slovak-American Enterprise Fund (CSAEF) was established in 1991 and capitalized with a $65 million USAID grant. CSAEF was set up to offer financing and management assistance to private enterprises in the Czech and Slovak Federal Republic (CSFR). It helped privatize former state-owned enterprises, assisted with joint venture projects, and advised Western firms interested in investing in the CSFR. The forms of investment included loans, leases, equity, and guarantees. Following the CSFR's dissolution on January 1, 1993, the Board of Directors of the CSAEF created two separate subsidiary Funds: the Czech-American Enterprise Fund (CAEF) and the Slovak-American Enterprise Fund (SAEF). In 1996, the Board of Directors decided to discontinue the Fund's undertakings in the Czech Republic. The office in Prague was closed and the investment portfolio was sold to a third-party investment company. Today the Fund is active solely in Slovakia.

In the current investment climate, Slovakia has experienced an increase in both the numbers of transactions and capital invested. But there has been no significant increase in the quantity of new venture capital and private equity participants, in part because the private sector continues to offer only a limited number of attractive investment opportunities, and even the most interesting deals represent a high-risk profile for the investor.

The Fund still has about $15 million to invest that the Board of Directors believes will be fully invested within two years. Priority objectives in the Fund's 2002 business plan include:

  • Privatize the Fund's Management Company: In October 2002, privatization was approved by Congress.

  • Complete Phase Two of the Wood Strategy: The sawmill has been acquired, and the three wood processing companies are being integrated. The objective now is to find new, profitable products to make in the existing facilities.

  • Begin efforts to launch Phase Three of the Wood Strategy: Preliminary talks have been held with the EBRD. The Fund will produce a prospectus document to attract other investors.

  • Identify a second core industry with the same characteristics and opportunities that exist in wood processing. The Fund has targeted $5 million for investment.

  • Add seven new investments to the Small Loan Progam: The Fund has a budget of $800,000 and so far has approved three new investments, totaling $390,000.

  • Complete the investment in the Distressed Asset Fund. The target date for the initial closing will be 2002. CSAEF believes that participation in the Fund will help attract 10-25 million euros of new venture capital investment to Slovakia.

  • Continue to support Transparency International, SLOVCA, EVCA, and the Business Plan Contest among other non-financial activities.

Hungarian-American Enterprise Fund

The Hungarian-American Enterprise Fund (HAEF) is a $72.5 million investment fund financed by its fully obligated USAID grant. The purpose of the HAEF, organized in 1990, is to accelerate the development of Hungary's private commercial sector by providing equity and loan capital and technical assistance to small and medium-sized enterprises. As of March 31, 2002, HAEF had drawn $69.5 million from USAID and expected proceeds from investments were $46.5 million. The Fund has investments in food processing, automated banking, fast food, and light manufacturing.

HAEF is now considering wind-down and return of capital to the U.S. Treasury, in accordance with the Grant Agreement. HAEF expects to do so on a basis similar to that of the Polish-American Enterprise Fund, which ensures that its heritage will be of continuing value to Hungary. In the meantime, HAEF will continue working toward its targets for capital appreciation and proceed deliberately with investment decisions to maximize the value of its portfolio. HAEF is now fully invested and is not likely to participate in new investments. However, it will continue to meet existing portfolio investment commitments of about $8.8 million and be prepared to provide any necessary follow-on capital to companies in the current portfolio. As a pure venture capital fund, HAEF's final returns will depend on how much is realized from the sale of its investments. A notable example was the sale of Euronet Worldwide, Inc. To date, HAEF's $2.9 million Euronet investment has returned $21.6 million, and the Fund hopes to realize an additional $1.9 million from selling further shares.

In 1997, HAEF established a parallel venture capital fund called Hungarian Equity Partners (HEP), LP. With $9.5 million of HAEF capital invested, the Fund has a 19 percent interest in HEP, while EBRD and private investors have the remaining 81 percent interest. So far, the HEP has made nine investments totaling $24 million of the approximately $40 million invested.

In 1998, HAEF established the Hungarian Innovative Technology Fund (HITF) as a subsidiary specializing in financing smaller, high-tech start-up companies with global market potential. Initially capitalized by HAEF at $5 million, HITF capital was further increased to $10 million in February 2001. To date, HITF has made six investments in computer software and biotechnology, with current anticipated return of $15.2 million. HITF expects to complete two to three investments in FY 02, for a total of about $1.5 million invested.

As both HAEF and the HEP, LP approach wind-down, Management Company (MAVA) is looking to form an alliance, strategic partnership, or merger with another private equity fund. It also is researching the feasibility of raising a small, domestic fund for local Hungarian investors.

Polish-American Enterprise Fund

The Polish-American Enterprise Fund (PAEF) is still the most successful of all the Funds. The PAEF originally received $262 million from the U.S. Government and expects to give back between $315 and $330 million that will be split between the USG and the new Polish-American Freedom Foundation (PAFF) in Poland. In September 2001, the PAEF made the final payment to the U.S. Treasury and fulfilled its pledge to return $120 million to the USG. In October 2002, it made an additional payment of $17 million to the endowment of PAFF, bringing the total of payments to the endowment to $137 million. Over the next two or three years, the Fund expects to add another $60 to $80 million to the endowment, as it completes the sale of its equity portfolio.

During its first seven years, the Fund invested in factories, computer stores, banks, housing, and mortgage and lending programs. As it sells its interests in these businesses, it will leave behind a number of important business-related institutions. First, there are 30 or so businesses in which the Fund made large direct investments. Most will continue to operate and to grow under their new owners. Second, the investment manager Enterprise Investors (EI) has raised over $450 million in non-USG capital. EI is comprised of the former staff of the Enterprise Fund. EI will continue to raise additional capital and invest it in Polish businesses through venture capital funds. Third, the Fund's small business loan program has extended loans totaling $275 million to some 7,000 businesses. To carry out this program, the Fund bought and reorganized a small Polish bank that it subsequently sold to Fortis Bank. The Fund also created the First Polish-American Mortgage Bank, later sold to GE Capital, and the micro-enterprise fund, Fundusz Mikro, that has extended $71 million in 41,000 loans. The Enterprise Fund will eventually turn Fundusz Mikro over to the PAFF.

The PAFF, in contrast to the business-related institutions, is not a profit-oriented entity. It provides grants to the Polish not-for-profit sector. During FY 02, its second full year of operation, the PAFF had 18 active grants and disbursed about $4.3 million. In two years the foundation has approved a total of $10.4 million in funding for 25 activities. Grants are concentrated in the following areas:

  • Initiatives in Education (eight grants) promote computer literacy, Internet educational resources, adult education, better schools, and after-school activities for students in poor, rural areas.
  • Support for Local Communities (six grants) strengthens Polish NGOs through Internet links and networks and improved financial management techniques. It also tries to reduce unemployment and encourage self-help programs in Poland's poor, rural communities.
  • Sharing Polish Experiences in Transformation (three grants) brings young business and government people from former Soviet bloc countries to Poland to study how Poland managed its transition to a democratic, free-market society. It also promotes cooperative relationships between NGOs in these countries and Polish NGOs with similar goals.
  • Democracy and Law (one grant) promotes computer literacy for judges through training centers and web sites that specialize in legal applications.
  • The rich legacy of sustainable business and philanthropic institutions in Poland that the PAEF has established will continue to benefit Poland and its neighbors for many years to come.

Romanian-American Enterprise Fund

The Romanian-American Enterprise Fund (RAEF) was established in September 1994. USAID initially capitalized the RAEF with a $50 million grant and later added $11 million, bringing total obligations to $61 million. The RAEF's goal was to promote the development of Romania's private sector, create employment, spur joint ventures, demonstrate the efficacy of strategic private equity investment in new private enterprise, and promote policies and practices conducive to sound, robust private market development and expansion. As of September 30, 2002, after investing $41.7 million, the Fund's net worth stood at $35.7 million.

In overall performance for the year ending September 30, 2002, the Fund lost $3.1 million, higher than the budgeted amount of $1.4 million, primarily due to lower revenues, investment losses, and additional reserves for losses needed on investments and loans.

RAEF's investments in the Major Transaction Portfolio (MTP) of 18 companies are for the most part in bad shape, with several problem investments and further losses expected. However, there are success stories, such as the Banca Romaneasca and Titan Mar/Marosin investments and the opportunistic purchase of Motoractive shares not owned by the Fund.

Management sold the Small Loan Program (RO-AM) to Banca Romaneasca. Any remaining RO-AM loans not sold to Banca Romaneasca will be maintained by the RAEF. The money received from the investments sold is being used by other RAEF programs. The Small Loan Program disbursed 239 loans for a total of $13.2 million between 1997 and 2001.

The Micro-Loan Program (MLP) lends to small businesses, initially with a $1.5 million grant from USAID. The program has attracted the support of other lenders and now has total funding of $6.05 million. As of September 30, 2002, the MLP became self-sustaining, with revenues covering program expenses and a net income of $105,000. During FY 02, the MLP disbursed 991 loans for a total of $5.09 million. Since inception, the program has disbursed 3,101 loans and $15.8 million.

Since early 2002, the Fund has actively pursued involvement in the energy efficiency sector. It has established a debt and equity energy efficiency fund with EBRD to work with municipalities, and received a firm offer from the World Bank to be the Fund Manager of a Romanian Energy Efficiency Fund.

The Fund has been discussing the sale of its successful banking investment, Banca Romaneasca, which had record profits of over $1 million for the first six months of this year. Two foreign banks, Venetto Banca (Italy) and Erste Bank (Austria), are discussing the possible acquisition.

The RAEF is pioneering investment banking in Romania and teamed with Credit Suisse First Boston (CSFB) consultants for the privatization of the Romanian gas distribution companies. The proposal the consortium submitted to the Ministry of Industry was one of six finalists approved by the Romanian Government. The Fund has also formed a consortium with J.P. Morgan to act as consultants for the privatization of Petrom, the Romanian oil company. The Fund's consortium is one of six finalists that submitted bids at the end of August. The Fund is also exploring opportunities with Bank of America for the privatization of Electrica Oltenia and is considering other banking and corporate finance projects.
Incorporation of the new Mortgage Company (RO-FIN) is proceeding more slowly than anticipated, primarily due to bureaucratic demands, but is expected to be completed by early 2003. RO-FIN will focus on the primary mortgage market. Expressions of interest in RO-FIN have been received from international financial institutions such as the EBRD, FMO, and IFC. The new mortgage company also plans to attract $7 million in private funding from Raiffeisen Bank Vienna through a 50 percent loan guarantee arrangement provided by USAID. In total, the Fund expects to meet its goal of attracting $15-20 million in investments by the end of 2002. As of September 30, 2002, the mortgage loan portfolio stood at 46 disbursed loans totaling $448,000. A further 24 loans worth $477,000 have been approved, and disbursement is pending. By the end of 2002, total loans will exceed $1 million.

Slovene Enterprise Funds

The Horizonte Slovene Enterprise Fund (HSEF) is a closed-end venture capital fund with over $7 million in capital. It is supported principally by the EBRD and other international investors, and operated for the EBRD by Horizonte Venture Management. USAID has contributed $1 million to the HSEF through the EBRD.

The purpose of the fund is to provide equity and debt financing to growth-oriented private enterprises in Slovenia. The fund has built an active portfolio and is now approaching wind-down. It will begin divesting its portfolio of investments in bio-technology, electronics, tourism, farm machinery manufacturing, book printing and binding, industrial cleaning services, and commercial laundry franchising.

A second fund, the Slovenian Development Capital Fund (SDCF), is a closed-end venture capital fund co-sponsored by the EBRD and the IFC, with almost $20 million in committed funds. USAID has contributed $1 million to the SDCF through the EBRD. Management is provided for the EBRD by the Slovenian Fund Management Company.

The Fund makes equity and debt financing available to small private enterprises in Slovenia. In addition, the SDCF has brought a broad base of international and Slovenian investors to the Fund. The SDCF is now entering its wind-down phase and will begin divesting its portfolio of investments in tourism, wood processing, agro-industry, light engineering, and leather products.


The U.S. Nuclear Regulatory Commission's (NRC) efforts to strengthen the nuclear regulatory authorities of Central and Eastern Europe (CEE), specifically Bulgaria, Czech Republic, Hungary, Lithuania, and Slovakia, started in 1991. The objectives of the regulatory assistance program have included providing assistance in the development of an effective regulatory organization; advancing safety culture awareness and practices; strengthening the legal framework and regulatory capability governing nuclear safety; and strengthening inspectorates through intensive training in NRC regulatory inspection philosophy. Since FY 91, NRC has received about $8 million in SEED Act funds to support the provision of this assistance.

In FY 01, the NRC concluded that the nuclear safety regulatory authorities in the Czech Republic, Hungary, and Slovakia had effectively utilized the nuclear safety and regulatory assistance they had received and, as a result, further assistance was not warranted. Therefore, during FY 02 NRC engaged and encouraged the Czech, Hungarian, and Slovak regulators to provide assistance to other regulatory authorities in the region.

NRC's assistance efforts for the Lithuanian nuclear safety inspectorate, VASTESI, continued apace in FY 02. NCR's work with VATESI focused on providing assistance in conducting a regulatory review of a Safety Evaluation Report and performing regulatory review and approval of safety upgrades at Ignalina Unit #2 (specifically the Diverse Shutdown System). NRC did not conduct any nuclear safety assistance activities with the Bulgarian regulatory during FY 02, due to the lack of funds.


The principal objectives of the SEC's technical assistance program for Central and Eastern European (CEE) countries under the SEED Act are to assist securities regulatory authorities and self-regulatory organizations in those countries to develop transparent, well-regulated securities markets in which both domestic and foreign investors will have confidence. There are many rule-of-law and other infrastructure issues, as well as macroeconomic conditions, beyond the control of the SEC and its CEE counterparts, which affect the realization of these objectives. The SEC nevertheless believes that its program objectives are being substantially achieved, specifically by providing U.S. and overseas training for senior personnel of the CEE regulatory and self-regulatory organizations, and, on request, extending specific technical assistance regarding laws and regulations.

During FY 02, the SEC provided funding for training to 101 participants from 15 CEE countries, bringing the cumulative totals of participants trained since the inception of the CEE program in 1992 to about 450 from the 15 countries.

USAID provided $300,000 in additional SEED funding to the SEC for FY 02. The SEC's NIS/CEE Interagency Agreement (IAA) ended at the close of FY 02. The SEC intends to continue to pursue the objectives outlined above through the types of programs described below. Currently, the SEC is finalizing a new five-year Global IAA with USAID that will carry over unused funds from the previous IAA and provide a mechanism through which individual USAID Missions may contribute funds to support SEC technical assistance programs in their respective countries and/or regions. The new IAA will not provide new funding beyond funds contributed by individual USAID missions. About $800,000 in carryover funding remains for SEC technical assistance activities in CEE countries. In addition, the SEC has $120,000 and $50,000 in carryover funding specifically designated for technical assistance activities in Croatia and Bulgaria respectively. In FY 03, the SEC intends to continue to cooperate with other funded assistance providers and utilize any available carryover funding to continue its pursuit of the aforementioned objectives through the types of programs listed below.

Training Programs

SEC International Institute on Enforcement and Market Oversight: The SEC offers this one-week program annually for securities regulators from countries with developed and the more advanced developing markets. The FY 02 program was held October 15-19, 2001, at the SEC's Washington headquarters, and three participants from three CEE countries were funded under the IAA.

International Institute for Securities Market Development: During the April 22-May 2, 2002 period, the SEC presented its International Institute for Securities Market Development (Institute) at its Washington headquarters, with 118 securities regulators from 58 different countries attending. Following the main program, delegates could choose to participate in an optional, three-day internship program with U.S. private sector participants. Delegates selected from programs offered in New York, Chicago, or Washington, D.C., and 14 participants from 10 CEE countries received funding under the IAA.

NIS/CEE Issuer Disclosure and Corporate Governance Training Program: Due to scheduling requirements, this annual program took place twice in FY 02. During the October 8-12, 2001 period, the SEC held its annual NIS/CEE Issuer Disclosure and Corporate Governance Training Program (NIS/CEE Disclosure Program) in Budapest, Hungary, under the co-sponsorship of the Hungarian Financial Supervisory Authority and the East-West Management Institute. Twenty-nine participants from 11 CEE countries were funded under the IAA.

From September 9 to 13, 2002, the SEC held its annual NIS/CEE Disclosure Program in Vilnius, Lithuania, with the Lithuanian Securities Commission and the East-West Management Institute co-sponsoring. Thirty-three participants from 14 CEE countries were funded under the IAA.

NIS/CEE Enforcement and Market Oversight Training Program. June 3-7, 2002, the SEC offered its annual NIS/CEE Enforcement and Market Oversight Training Program in Sofia, Bulgaria, under the co-sponsorship of the Bulgarian Securities Commission and the Financial Services Volunteer Corps (FSVC). Twenty-one participants from 11 CEE countries were funded under the IAA.

Commodity Futures Trading Commission (CFTC) Symposium: The SEC used its funding under the IAA to cover a portion of the travel expenses of Romanian National Securities Commission Commissioner Paul-Gabriel Miclaus to attend the CFTC's annual training program, held October 19-26, 2001, in Washington, D.C., and Chicago.

CEE Regional Assistance

February 26-27, 2002, at the request of USAID, Robert Strahota, Assistant Director in the SEC's Office of International Affairs, participated in USAID's Southeastern Europe Financial Sector Conference in Zagreb, at which he spoke on Legal Requirements for a Diversified Financial Sector. He also chaired a panel and made a presentation regarding "Company Financial Information and Its Dissemination."

May 29-31, 2002, Robert Strahota attended the Second OECD Corporate Governance Roundtable for South-Eastern Europe in Istanbul, Turkey. Mr. Strahota made a presentation on the International Organization of Securities Commission's Non-Financial Disclosure Standards and participated in discussion and commentary on a corporate governance white paper that the Roundtable was preparing.


In February 2002, Mr. Strahota consulted briefly with the Financial Services Volunteer Corps (FSVC) resident adviser responsible for Albania regarding a proposed approach to developing the Albanian securities market.


In January 2002, at the request of FSVC and ABA-CEELI, Mr. Strahota made written comments on a draft Macedonian company law prepared by ABA-CEELI's resident adviser and Macedonian experts. This project arose, in part, from comments he had prepared a year earlier on the inadequacies of the current company law. The new draft law reflects a substantial improvement over the current law.

In March 2002, the SEC responded to a questionnaire from the Macedonian Securities Commission regarding a number of regulatory issues.


Regional Summary

The U.S. Trade and Development Agency (USTDA) advances economic development and U.S. commercial interests in developing and middle-income countries. The agency funds various forms of technical assistance, feasibility studies, training, orientation visits, and business workshops that support the development of a modern infrastructure and a fair, open trading environment.

USTDA's strategic use of foreign assistance funds to support sound investment policy and decision-making in host countries creates an enabling environment for trade, investment, and sustainable economic development. Operating at the nexus of foreign policy and commerce, USTDA is uniquely positioned to work with U.S. firms and host countries to achieve the agency's trade and development goals. In carrying out its mission, USTDA emphasizes economic sectors that may benefit from exports of U.S. goods and services.

FY 02 was a productive year for USTDA's operations in Southeastern Europe (SEE). The agency has maintained a diverse portfolio of projects and been responsive to Administration priorities, such as the special focus on Serbia. Most importantly, however, the impact of USTDA's FY 02 investments on the region's development objectives and on U.S. companies' commercial interests there is already evident.


USTDA is making a major investment in Albania's power sector through a $720,000 grant to examine a series of transmission and generation issues. Most important perhaps is support for three international financial institutions -- the World Bank, European Bank for Reconstruction and Development, and European Investment Bank -- as they prepare a $100 million loan package for a new thermal power plant.

USTDA investments in Albania (SEED funds during FY 01, and the agency's own funds in 2002) yielded a $33 million contract for Lockheed Martin this year. The project will result in the modernization of the country's air traffic management system and is the first major foreign investment in the country by a U.S. firm. This successful effort was led by Ambassadors Limprecht and Jeffery, with significant support from USTDA's colleagues at CEEBIC, the State Department, and the U.S. Export-Import Bank.


USTDA worked during FY 02 to ensure that its previous investments in Bosnia-Herzegovina realized their full impact. Foremost among these are the Elektroprivreda Telecommunications project and two on-going projects with the World Bank and the EBRD in the power and rail sectors, respectively.


Telecommunications/Information Technology (IT) and mining were the foci of USTDA's Bulgaria program during FY 02.

In Bulgaria and across the region, USTDA's telecommunications strategy is to encourage the development of potential providers of voice, data, and video communications services. These may be Internet Service Providers (ISP), infrastructure companies in the power or transport sectors, cable TV operators, and others. Most countries in the region are still dominated by monopoly fixed-line service providers, which are often owned by Western European companies otherwise disinclined to buy U.S. products. The emergence of a new, fixed-line competitor is good for consumers, because it adds competition to the marketplace. It is good for U.S. suppliers because it decouples long-term relationships between monopoly providers and their traditional (mostly Western European) equipment suppliers. USTDA's Telecommunications/IT activities this year included feasibility study support for two Bulgarian cable TV providers, as well as grants to the Council of Ministers and the United Revenue Agency. The highlight of the agency's IT activities this year was a visit by officials from all of these organizations to meet potential partners in the U.S.

USTDA is also working with mining companies to improve the environmental aspects of their operations. Grants in this area include support for the Kardjali Lead & Zinc Complex and the Union Miniere copper mine. USTDA also funded a feasibility study of operations at the Neochim Mixed Fertilizer Plant.


The energy sector was a highlight of USTDA's activities in Croatia during FY 02. The agency featured a high-level delegation of public officials and representatives of the large Croatian utilities at a business briefing in early 2002 on opportunities in the Croatian energy sector. This briefing was developed in cooperation with CEEBIC. USTDA also made a $410,000 grant to develop a feasibility study on modernizing the refineries at Rijeka and Sisak. As a result, and thanks to significant support from Ambassador Montgomery, the Commercial Team in Zagreb, and the Advocacy Center, ABB Lummus Global was awarded a $10 million contract to implement the recommendations of the study.

Consistent with the agency's strategy to support the development of new competitors in the telecommunications sector, USTDA also made a grant to fund preparation of a business plan for the Croatian ISP Iskon Internet. USTDA is also supporting the EBRD's effort to develop a loan for commercial development at the Port of Dubrovnik.


Continuing with USTDA's focus on telecommunications and IT, feasibility study grants were provided this year to the cable TV firm Romanian Cable Systems and to the Ministry of Labor and Social Solidarity. The latter grant is designed to help implement the IT elements of a World Bank loan. As the city of Bucharest plans an IT modernization, USTDA is helping it with technical and tender procedural challenges through a technical assistance grant. Finally, USTDA is also working closely with the Ministry of Waters and Environmental Protection to improve its disaster management technology. The Romanian Government recently approved a $45 million deal with Lockheed Martin to implement the project. The Commercial Team and the USAID Mission at the Embassy, together with the USAID EcoLinks program, also contributed significantly to this successful project.

The energy sector was also an important area of activity for USTDA in Romania this year. The agency continued to pursue refinery modernization projects, with two investments in refineries operated by the state-owned firm Petrom, and another investment in support of a modernization project operated by the private firm Rompetrol. USTDA also supported two electricity generation feasibility studies -- one at the city-owned heating plant in Buzau, and the other examining control system technology for the thermal plants belonging to the state-owned utility Termoelectrica.

FRY (Serbia, Montenegro, Kosovo)

USTDA was honored to have the opportunity to resume activities in the FRY during FY 02 with a program of investments targeting a variety of industrial and infrastructure sectors. USTDA believes there are significant opportunities for U.S. firms in the chemicals and petrochemicals sectors in the FRY, as there are elsewhere in the region. That is why the agency supported grants to look at modernization of the three refining and petrochemicals companies in Pancevo. Of the three, a $250,000 grant to examine modernizing Nafta Industrija Srbije relied upon SEED funds; the other two were developed using USTDA's own funds. In addition, a $300,000 grant was provided to the EBRD to help prepare chemicals and petrochemicals projects for the Bank's working capital fund.

USTDA is also focused on the rail and aviation sectors. Teams of Serb officials from both sectors visited the U.S. as USTDA's guests this year, and the agency is currently discussing additional feasibility study and technical assistance activities in these sectors. In telecommunications and IT, USTDA is working with Microsoft to help the Yugoslav Customs Administration improve its IT infrastructure. The agency also is providing $585,000 to assist the EBRD in improving the telecommunications regulatory framework. Finally, USTDA is working with the U.S. firm MediaTel to develop a commercial water bottling facility in Southern Serbia.

Regional Projects

USTDA has long supported cross-border and regional projects in SEE. One area of consistent USTDA activity has been support of oil pipelines designed to move Caspian oil from the Black Sea to Western markets without transiting the Bosporus. During FY 02, USTDA, together with the U.S. firm Parsons Corporation, supported expansion of a previously funded feasibility study that looks at transporting oil from Constanta across Serbia, and through Croatia to the port of Omisalj.

USTDA also maintains a business development office in Zagreb, which is SEED funded.


The U.S. Customs Service (USCS) has been active in Central and Eastern Europe (CEE) for a number of years. USCS activities in the region use SEED funds and tie together several initiatives, including the Southern European Cooperative Initiative (SECI), the World Bank-funded (and USG co-financed) Trade and Transportation in Southeast Europe (TTFSE) activity, the SECI Anti-Crime Center in Bucharest, the Department of State Export Control and Border Security (EXBS) program, and the International Law Enforcement Academy (ILEA) in Budapest. These activities represent a broad program of border-related assistance in areas including cargo facilitation, revenue collection, personnel reform, and the interdiction of weapons of mass destruction and related materials. USCS has also been involved in modernizing the region's Customs services.


USCS has a single advisor tasked with helping Albanian Customs to collect required performance data, and create Local Project Teams to develop bottom-up solutions to processing delays at several pilot sites. The Advisory mission is co-located with the EU Customs Assistance Mission-Albania (CAM-A).


Three USCS teams are co-located in Bulgaria. The first is a country-specific advisory team assisting Bulgaria in meeting the requirements of the TTFSE World Bank loan program. This two-person team helps Bulgaria to develop data collection procedures, as well as working out and implementing bottom-up operational reforms at three pilot sites. The Team also assists the Calafat/Vidin project, which is a USG-funded, World Bank-administered grant program to improve the ferry crossing operations. A notable achievement is an advanced declaration system at Plovdiv that has reduced clearance time for compliant traffic from 280 to 80 minutes.

The second team is a two-person Regional Management Office (RMO). This unit provides oversight and planned integration of the various teams' activities. Until the countries develop the cross-border links envisioned under TTFSE, the RMO and advisory team can assist in coordination. The team is also the counterpart of the TTFSE Regional Steering Committee, the SECI Center, SECI PRO, and the U.S.-funded trade facilitation effort operated by the American College of Thessaloniki.

The third team is a NADR-funded Export Control and Border Security team, an extension of the EXBS office in Romania.


The three-person Croatia Advisory team addresses World Bank TTFSE Loan requirements in both Bosnia-Herzegovina and Croatia. In Bosnia, the team has assisted the Port Director at Grude to develop new procedures that have reduced clearance times from 153 minutes to about 60 minutes. The team also is responsible for assisting the Federation (and, in FY 01, the Republika Srpska entity) in data collection efforts. In Croatia, it helps with data collection, local project teams, and ground-up operational reforms. The Team is also undertaking several agency-wide reviews of Croatian Customs, including personnel policy, staffing levels, workload distribution, and legislative/policy needs. The European Union, Customs and Fiscal Affairs Union (CAFAU), provides organizational and procedural reform advice. Notable achievements include a 50 percent reduction in clearance time for entries at the Jankomir, Croatia inland clearance site. This is due to improvements in traffic management, introduction of a post-entry review team, and an entry review/control team.


The three-person Macedonia Advisory team assists with the requirements of the World Bank TTFSE loan program. The team works in the following areas: data collections, Local Project Teams, development of mobile enforcement teams, implementation of an investigative/enforcement unit, and development of an intelligence unit within the Macedonian Customs Authority (MCA).

Notable achievements in FY 02 include the establishment of a national customs intelligence/cargo selectively unit. This unit set national cargo criteria for the examination of trucks. In addition, the team has helped MCA begin the use of selective examinations, based on criteria in its automated system at the Kumanovo inland clearance terminal. The Team has worked with the MCA to train, equip, and implement a mobile enforcement team that has been working for the past four months. Also, the team was asked to assist the MCA with its EU pre-accession strategy and review.


The three-person team in Romania supports the World Bank TTFSE loan program, by assisting Romania's border agencies with data collection methodology, as well as facilitation advice to local project teams tasked with developing bottom-up solutions to border delays. The team also carries on work started by previous SEED-funded operations, including a cargo manifest targeting team at Constanta seaport and a trade outreach program by Romania Customs.

FRY (Yugoslavia)

U.S. Customs opened a three-person advisory office in Belgrade, in August 2002. This office will fulfill the technical assistance requirements of the World Bank TTFSE loan. The team's terms of reference with the Yugoslavia Customs Service place the USCS Chief of Party as chief Advisor to the Director General for integration of external assistance.

Agency Overview/Regional Programs

USCS SEED-funded regional activities revolve around U.S. assistance to the Southern European Cooperative Initiative (SECI) and participation at the International Law Enforcement Academy (ILEA) Budapest.

In SECI, the primary operations are advisory teams assisting those SECI countries that have borrowed funds from the World Bank under the TTFSE program. There are teams in Albania, Bulgaria, Croatia, Macedonia, Romania, and Yugoslavia, whose role is to provide technical assistance to the countries so that they can modernize their border procedures to take full advantage of World Bank-funded infrastructure improvements. A Regional Management Office located in Bulgaria supervises this effort.

Other SEED programs under SECI include support to the Customs Fraud Task Force of the SECI Anti-Crime Center in Bucharest. This task force targets fraud in the region and uses the Center as a focal point for specific information sharing. USCS provides an intermittent advisor to Croatian Customs (which is the lead country on this task force) and assistance to other task force members. The task force recently completed operation "Bulldog," an effort aimed at tracking cigarette shipments in the region and identifying possible diversions of legitimate shipments to the black market.

U.S. Customs also participates in the International Law Enforcement Academy (ILEA) in Budapest. ILEA's goal is to enhance the knowledge and skills of local law enforcement officials and to help them coordinate better by bringing related agencies and countries to training together.


The Peace Corps is currently using SEED funds to support its Small Projects Assistance (SPA) Program in Bulgaria and Romania. The SPA Program makes resources available for local capacity-building workshops, seminars, and other training events, as well as providing small grants to communities to carry out locally identified and facilitated infrastructure and capacity-building activities.

During FY 02, Peace Corps Volunteers (PCV) and their communities in Bulgaria were approved for 25 community-based activities, including the establishment of computer learning centers, community resource centers, environmental education and ecotourism sites, youth leadership camps, maternal and child health seminars, as well as a series of training activities to prepare local municipal management staff in how better to fulfill their responsibilities.

In Romania, the Peace Corps Community Economic Development project began to focus more in FY 02 on capacity building at the local level, with particular attention to generating sustainable development initiatives, recognizing Romania's strong interest in being invited to join NATO and ultimately the European Union. PCVs and their communities initiated 52 community-based grant activities, including the establishment of community resource centers, Internet learning sites, schools and school facilities improvements, youth leadership training activities, small and medium-size enterprise support networks, support for local NGO capacity building and strengthening, health awareness campaigns, and an educational campaign focusing on "Violence Against Women."

Peace Corps Volunteers are most effective at the grassroots level, regardless of their primary work assignment area. One PCV in Bulgaria, while assigned to work in municipal administration, was able to garner the support and partnership of many local institutions and organizations to promote successful small project activities in environmental education, energy saving and awareness, tourism development, and municipal organization. This was accomplished by using small infusions of grant funds to leverage additional funding support from local NGOs, national and local government institutions, and other international organizations. Likewise, another PCV was instrumental in securing funding (both from SPA and other sources) for a three-day workshop for local government officials and other interested parties to explore tourism opportunities in the Rhodope Mountains area and the impact such development would have on the local village economies and culture.

In Romania, PCVs and their counterparts in the environment sector were instrumental in gathering information on the EU, developing informational materials, brochures, and electronic presentations for use in community training activities. For example, a PCV drafted a proposal with a local environmental group on a public awareness campaign to clean up a toxic waste dump that is a major source of groundwater pollution. Another PCV worked closely with a national NGO dedicated to community development in order to get a better understanding of how to address the needs of poor communities. Other PCVs worked closely with the citizens of Braila on raising awareness of EU accession and what it would mean for Romania.

Also in Romania, a PCV accessed SEED funding through SPA to assist a CARA Regional Training Workshop for Institutional Capacity Building. CARA is a network of over 20 NGOs. Information coming out of the workshop was collected for further dissemination as best practices, success stories, and frequently asked questions. An electronic newsletter will be a follow-up for NGO participants within the CARA Network. One aim of the workshop was to strengthen CARA and its partner NGOs to ensure their future sustainability.

Another SEED-supported activity began addressing the issue of violence against women through education and prevention, with the goals of increasing public awareness of the problem, decreasing tolerance for violence, and engaging the community in activities that address ways to protect all its citizens. It is further hoped that ARAPAMESU's well respected reputation as a legitimate NGO with professional staffing will be further enhanced, and that it will become an example on which other NGOs and community groups can model themselves.

As a result of these activities and other community-initiated, grassroots projects that have been made possible with the SEED support for the SPA Program, the Peace Corps is able more effectively to fulfill its mission of providing Bulgaria and Romania with the services of skilled American men and women and building local capacity.


FY 02 was a very active year for the Export-Import Bank (Ex-Im Bank) in Southeast Europe (SEE). First and foremost, Ex-Im Bank officially opened a regional office in Zagreb, Croatia, in August 2002. The office is shared with OPIC, is located at the U.S. Embassy, and is the only overseas Ex-Im Bank office at this time. Countries and other entities the office covers include Albania, Bosnia-Herzegovina, Croatia, Bulgaria, Kosovo, Macedonia, Romania, and the FRY (Serbia and Montenegro). In addition to the office, Ex-Im Bank increased staffing for the region by hiring one contract employee located in Washington, D.C., to maintain liaison with the regional office and work with other USG agencies, U.S. exporters, and commercial lenders on activity in SEE.

Ex-Im Bank also expanded its program availability to more markets in the region during FY 02. The Bank officially opened in Bosnia-Herzegovina, Macedonia, and the FRY for private sector, medium-term transactions. (The official announcement on Bosnia-Herzegovina was made in October 2002). Currently, Ex-Im Bank is open for business in all of countries in the region, albeit support is limited to the private sector in the countries listed above.

During FY 02, Ex-Im Bank continued to seek financial partners in the region. On December 16, 2002, the Bank signed a Memorandum of Understanding (MOU) with the Croatian Bank for Reconstruction and Development (HBOR). The MOU provides for joint financing of projects in both Croatia and other countries in the region. On January 25, 2002, Ex-Im Bank and the Black Sea Trade and Development Bank signed an MOU to promote U.S. goods and services in the Black Sea region. Under the agreement, Ex-Im Bank's short, medium, and long-term financing products can be used to support exports of U.S. goods and services to any country located in the Black Sea region, including Albania, Bulgaria, and Romania.

In Albania, Ex-Im Bank signed a Master Guarantee Agreement with the American Bank of Albania that involves an innovative risk-sharing arrangement. This is the first arrangement of its kind that Ex-Im Bank has ever entered into, and is key to success in providing Ex-Im Bank-guaranteed loans to Albanian small businesses and other purchasers of U.S. goods and services. If it is successful, Ex-Im Bank hopes to negotiate similar arrangements with other commercial banks in the region.

The signing of the Master Guarantee Agreement with the American Bank of Albania was made possible by Ex-Im Bank's success in negotiations with the Central Bank. As a result of discussions initiated by Ex-Im Bank, the Albanian Central Bank authorities have agreed to treat Ex-Im Bank as having a zero risk rating, which is how they treat multilateral risk.

One final, important point on Albania is the role Ex-Im Bank has played in structuring the financial package for Albania's Air Traffic Control System. While significant obstacles still remain, if ultimately successful, this will be the first structured deal with the Albanian Government. In such cases, Ex-Im Bank is key not only for the financial support provided, but also for the expertise it brings to the table in structuring transactions. After more than two years of negotiation, Lockheed Martin was awarded the contract in December 2002.

Ex-Im Bank has also played an important role in opening Kosovo up to ECA financing. One of the most significant factors preventing creditors from being able to provide significant financing to Kosovar parties is Kosovo's undetermined eventual political status. One way partially to address this is to get the SRSG (Special Representative of the Secretary General) and UNMIK authorities to provide appropriate assurances that their actions, and any actions of PISG (Provisional Institutions of Self-Government), will be fully valid at least so long as UNMIK is in existence. After initial resistance, UNMIK has now agreed to provide Ex-Im Bank such assurances. Another area that Ex-Im Bank has been examining is a substitute for sovereign financings into Kosovo. One recent step in this regard is the expected inclusion (at Ex-Im Bank's initiative) of ECAs and bilateral agencies in a new law being prepared by UNMIK and the PISG to permit PISG "governmental" borrowings.

Romania was Ex-Im Bank's most active market in the region during FY 02. Ex-Im Bank's Board approved an $84 million transaction with the National Radio Communications Agency of Romania as the obligor and the Ministry of Finance as the guarantor. The loan guarantee will be used to purchase transmitter and other equipment to upgrade the country's broadcasting capabilities, including the expansion of radio and microwave systems and the integration of these two networks. Also noteworthy is Ex-Im Bank's activity in the private sector in the region, particularly in Bulgaria and Romania, where several transactions of $1 million or less involving SMEs were authorized.

Ex-Im Bank held two conferences in the region during FY 02 -- The First Regional Conference in Dubrovnik, Croatia, and an Environmental Exports Conference in Budapest, Hungary. Ex-Im Bank also teamed up with the U.S. Embassy in Skopje, Macedonia, to host the Renaissance Conference, in June 2002. In April 2002, Ex-Im Bank co-sponsored a municipal lending conference in Zagreb, Croatia, with the U.S. Foreign Commercial Service and EcoLinks. Ex-Im Bank views these conferences as an excellent opportunity to not only market Ex-Im programs, but also to showcase the programs of its sister agencies -- OPIC, TDA, AID, and the Department of Agriculture. Ex-Im Bank also co-sponsored a conference in Chicago with the Illinois State Department of Agriculture, on October 1, 2002, that focused exclusively on SEE. During December 2002, Ex-Im Bank held training seminars in three Romanian cities -- Bucharest, Cluj, and Timisoara -- and in Belgrade, Serbia. More are planned during FY 03.


In the early 1980s, the Executive Branch, Congress, and the academic community pooled their efforts to create the Soviet-Eastern European Research and Training Act of 1983 (Title VIII). Its aim was to redress the diminishing supply of experts on this region by providing stable, long-term financing on a national level for advanced research; graduate and language training (domestic and on-site); public dissemination of research data, methods, and findings; and contact and collaboration among U.S. Government and private specialists. Title VIII now is referred to as the Program for the Study of Eastern Europe and the Independent States of the Former Soviet Union.

Title VIII is guided by an advisory committee, chaired by the State Department and consisting of representatives of the Secretaries of Defense and Education, the Librarian of Congress, and Presidents of the American Association for the Advancement of Slavic Studies and the Association of American Universities. The Assistant Secretary of State for Intelligence and Research chairs the advisory committee for the Secretary of State. The committee meets at least annually to recommend grant policies and recipients.

From 1985 to 1990, Congress appropriated about $4.6 million annually to the Title VIII program in support of the activities listed above. In light of the dramatic changes in the region, Congress appropriated about $10 million a year for FY 1991 through 1994. Since then funding has generally been in the $4-5 million range. For FY 2002, funding was $5 million, of which $1.6 million was for East European activities. In recent years, the funds for Eastern Europe have come from the Support for East European Democracy (SEED) Act budget.

Title VIII operates on the basis of a two-stage award process. First, the Department of State conducts an open competition each year among U.S. national organizations with an interest and expertise in administering research and training programs in the Eurasian and Central and East European fields. These organizations are to be national in scope and have in place broad selection and peer review mechanisms. A call for applications is published in the Federal Register. The Title VIII advisory committee reviews the applications and recommends grant recipients to the Secretary of State. Those approved by the Secretary then serve as intermediaries for the funds by conducting their own open, national competitions to make awards to end-users, either individual scholars or other institutions.

A list of the FY 2002 grantees, including the amounts and purposes of their awards covering Central and Eastern Europe, follows:

American Council of Learned Societies ($480,000): To support dissertation and post-doctoral research fellowships; institutional language training grants in the U.S. covering the basic Central and East European languages; individual language training fellowships; and the Junior Scholars' Training Seminar at the Woodrow Wilson Center.

American Councils for International Education ($70,000): To support on-site individual language training fellowships in the Central European languages; the Research Scholars and Junior Faculty fellowships; and the Combined Language Training and Research fellowships.

The William Davidson Institute of the University of Michigan Business School ($90,000): To support grants for pre- and post-doctoral research projects on economic and business development and public policy to develop free markets in the Balkans.

University of Illinois at Urbana-Champaign ($30,000): To support the Summer Research Laboratory, which provides dormitory housing and access to the University's library for advanced research, and the Slavic Reference Service, which locates materials unavailable through regular interlibrary loan.

International Research and Exchanges Board ($265,000): To support Individual Advanced Research Opportunities at the pre- and post-doctoral levels for on-site research; Short-term Travel Grants for senior scholars; dissemination activities; and Policy Forums.

National Council for Eurasian and East European Research ($275,000): To support the post-doctoral National Research Program of research contracts for collaborative projects and fellowship grants for individuals; Policy Research Fellowships in Central and East Europe for junior post-doctoral scholars; Short-term research grants to focus on the Balkans; and the Ed. A. Hewett Fellowship Program to allow a scholar to work on a research project for up to a year while serving in a USG agency.

Social Science Research Council ($30,000): To support pre-doctoral fellowships, including advanced graduate and dissertation; post-doctoral fellowships; a dissertation workshop on understudied regions; and the institutional language programs for the Baltic languages.

The Woodrow Wilson Center for International Scholars ($280,000): To support the residential programs for post-doctoral Research Scholars, Short-term Scholars and Interns; and the Meetings, Outreach, and Publications Programs of the East European Studies of the European Program, including the East European Program's Junior Scholars' Training Seminar with the American Council of Learned Societies.