Country Overview
Country Facts
Overview of U.S. Government Assistance
In FY 2005, the USG allocated an estimated $24.73 million in assistance to Croatia, including:
In FY 2005, a total of 293 Croatians traveled to the United States on USG-funded exchange programs.
FY 2005 Assistance Overview
U.S. STRATEGIC INTERESTS
Lasting peace, stable democratic systems and economic prosperity are the major U.S. strategic interests in South Central Europe. U.S. strategic goals, from which SEED program assistance priorities flow, are designed to promote economic, political, and cultural transition in Croatia so that it becomes a force for regional stability. Promoting integration into Euro-Atlantic institutions is key to achieving that objective. Croatia's integration into the European Union (EU), beginning with the opening of negotiations in October 2005, is underway but far from complete as it strives to implement some of the most difficult economic and democratic reforms. Croatia still faces budgetary, historical, and administrative obstacles in its path to NATO membership as well. USG assistance, entering its final year of appropriation in FY 2006, can play an important role in consolidating achievements thus far and facilitating further critical reforms.
KEY ISSUES
On October 3, 2005, the European Commission determined that Croatia had met all conditions to begin formal EU accession negotiations, thereby acknowledging Croatia's progress toward strong democratic institutions, and macroeconomic stability and growth, but simultaneously presenting the Government of Croatia (GoC) with its most significant internal political and economic challenges to date. Other key issues include Croatia's relationships with its neighbors and its efforts to join NATO, which will require significant, and costly, defense reform.
EU membership requires stable institutions that guarantee democracy, the rule of law, human rights, and respect for and protection of minorities. Croatia made great strides in each of these areas in FY 2005, including holding free and fair presidential and local elections; nonetheless, much remains to be done. Parliament must increase its transparency and accountability to Croatian citizens. The role and structure of the Croatian judicial system remains a concern, from an overall backlog of about 1.6 million cases, to the excessive length of court proceedings, to persistent ethnic bias in local courts. Corruption remains a serious problem, with surveys highlighting the perception that corruption has actually gotten worse in the past year. Croatia's cooperation with the International Criminal Tribunal for the former Yugoslavia has been generally good, culminating in the capture in December 2005 of war crimes indictee General Ante Gotovina.
USG assistance in democracy and governance focused on local governance and the non-governmental organization (NGO) sector. The Local Government Reform Program (LGRP) addresses the most urgent needs of cities, towns and municipalities as they assume greater responsibilities, through fiscal and administrative decentralization. To date, approximately 400 local governments have been introduced to modern public administration practices to improve their efficiency and provide for citizen participation. The LGRP closely coordinates its program with the EU's regional economic development program. An NGO Capacity Program (CroNGO) provides training and technical support to local NGOs, develops NGOs' service capacity through small grants, and creates networks among grassroots organizations and with local governments. In FY 2005, CroNGO directed its program to strengthen public advocacy organizations working in the areas of anti-corruption, judicial reform, corporate governance, anti-trafficking, and legislative oversight. The USG and the EU jointly chair the steering committee of all civil society donors and both coordinate with OSCE and other donors. Through U.S. Department of Justice ICITAP programs, which train and advise police and prosecutors, the USG is assisting Croatia in its efforts to combat corruption and organized crime.
EU membership will also require a functioning market economy and the capacity to cope with competitive forces. Croatia is well on its way to meeting these criteria, provided it continues implementing its reform program. These reforms will also help to improve the business climate and attract higher levels of domestic and foreign investment. In FY 2005, the Croatian economy experienced moderate but decelerating growth rates, low inflation, and exchange rate stability. Privatization of state-held entities under the Privatization Fund stalled, and it seems unlikely that the Fund will be able reach its goal of privatizing 45 entities by April 2006. Business registration procedures have slightly improved, with the opening of a one-stop shop in Zagreb in May 2005, but deficiencies in public administration and the judiciary still hamper private sector growth and investment. Unemployment is troubling (between 14 and15 percent and as high as 40 percent among youth), and may be the most critical threat to Croatia's progress toward long-term political and economic stability.
To address these challenges, the USG assistance program focused on improving the business/investment climate and job creation. The USG coordinates with the World Bank Multilateral Investment Guarantee Authority investment promotion programs and U.S. assistance in the economic sector has been a catalyst for the International Financial Institutions' and the European Commission's programs that continue to work on structural and policy reforms with the GOC. A small and medium enterprise (SME) development program is building a cadre of over 200 professional and financially sustainable business service managers and firms, and providing technical assistance to over 4,000 Croatian enterprises country-wide.
Croatia has made significant strides in its relations with its neighbors, including the first exchange of prime-ministerial level visits with Serbia and Montenegro since diplomatic relations were re-established after the end of hostilities. Visa-free travel between Croatia and Serbia has been indefinitely extended; nagging maritime boundary and land-border disputes with Slovenia occasionally flare up in the press, but are on track to be resolved diplomatically.
Finally, Croatia continued to work on implementing the goals specified in its Annual National Plan in preparation for eventual NATO membership. This is proceeding with only minimal USG assistance due to restrictions imposed on Croatia by the American Serviceman's Protection Act and the lack of an Article 98 agreement.
COUNTRY PERFORMANCE MEASURES
Croatian Democratic Reform
The "radar" or "spider web" graphs below illustrate Croatia's democratic performance during 2004. 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 2004 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. 9 (April 2005). Found online: www.usaid.gov/locations/europe_eurasia/country_progress/.
The graph shows
*Actual 2005 not yet available.
The graph shows
*Actual 2005 scores not yet available.
Croatian Economic Reform
The "radar" or "spider web" graphs below illustrate Croatia's economic performance during 2004. 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 2004 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. 9 (April 2005). Found online: www.usaid.gov/locations/europe_eurasia/country_progress/.
The graph shows
*Actual 2005 scores not yet available.
The graph shows *Actual 2005 scores not yet available.
FY 2005 Country Program Performance
Democratic Reform
FY 2005 was a productive year for democratic reforms and processes. That momentum will likely continue in 2006 as accession negotiations with the European Union (EU) get underway. National and local elections were successfully held, once again ably monitored by NGOs. On the legislative front, the Government of Croatia (GoC) adopted a national corruption prevention program and a new law decentralizing more functions to local governments. In March 2005, Parliament adopted amendments on the law for local elections, extending voting rights to all Croatian citizens, regardless of residency. With USG assistance, amendments to the law on local government were drafted. Also, a draft law for the direct election of mayors and county prefects entered into parliamentary procedures and will likely be passed in FY 2006.
Civil society organizations have shifted from a primarily human rights focus to a much broader set of issues, such as corruption, electoral process, rule of law, minority rights, and environmental protection. These organizations are also building a stronger domestic base. NGOs are also expanding their relationships with local governments. Several signed charters on NGO-government cooperation allow NGOs to deliver social services. The business sector is also becoming more active in implementing corporate social responsibility programs and in supporting NGOs active in social services, culture, sports, and youth education. The National Foundation for Civil Society Development, a national support organization for NGOs, improved its grant-making capacity, providing funds to many NGOs.
The key challenges to building broad-based democracy in Croatia remain decentralization legislation and policies to support local governments, and improving the environment for NGOs. Another challenge is improving the efficiency of two institutions critical for NGO-government cooperation: the National Council for Civil Society Development (an advisory body to the government); and the Government Office for Cooperation with NGOs. Effective functioning of these two leading bodies and their closer partnerships with NGOs should improve NGO-government cooperation and allow NGO participation in the accession process. Finally, as in many transition countries, NGOs must address financial sustainability problems associated with decreased foreign funding and insufficient local funding bases.
Since the beginning of the EU accession process in October, the Croatian government demonstrated its openness and interest in accelerating reforms in the areas of the judiciary, corruption, ethnic minority rights, and political process. The country's commitment to local government reform has also improved. However, the GoC has been less effective in supporting reforms needed to improve the environment for NGO development. The Croatian legal framework for NGOs is weak in the areas of foundations, taxation, and volunteers' legal status. In addition, the current legal framework poses several obstacles to volunteering in Croatia. Finally, enactment of a draft code of good practices for government grant-making at all levels of government is needed to provide transparency and ensure consistency in the procedures of awarding government funds to private organizations and NGOs. As Croatia moves toward integration into the Euro-Atlantic organizations, it becomes less vulnerable to conflict and crisis.
U.S. ASSISTANCE PRIORITIES
The USG's democracy assistance emphasizes raising democratic standards for local governance and participatory civil society. Through the U.S. speaker and book translation public diplomacy programs, the USG supports journalist training, academic reform, and civil society growth. In strengthening local governments, USG programs are most focused on assisting Croatian reform policy and legislation for fiscal and administrative decentralization. These programs support institutions to ensure Croatia will have enduring advocates for decentralized, transparent, and participatory local government. To increase local government capacity to manage resources, U.S. programs help those governments through an asset inventory and management model, which allows them to track and manage their public assets and derive income from property leasing or sales. By promoting e-government, the Local Government Reform Program (LGRP) improves a local government's overall internal efficiency and makes its operations more transparent and accessible to citizens. The USG will also introduce an EU accession-compatible local government procurement model to provide local governments with guidance, best practices, and training required to carry out competitive, transparent and cost-effective procurement. To support civil society development, activities teach advocacy skills to NGOs, helping them partner with government to promote policy reforms in areas such as corruption, legislative oversight, ethnic minority rights, corporate governance and entrepreneurship. Another key priority is improving the legal framework that will support NGO development.
PROGRAM PERFORMANCE
Support Democratic Local Government and Decentralization: The USG recognized that legislative change was lagging in local government, particularly in support of administrative and fiscal decentralization and also in the direct election of mayors. As a result, in FY 2005, the local government project was redesigned with a focus on improving advocacy for legislative and policy change, and areas that expand local responsibility and strengthen local capacity.
Through the LGRP, the USG enabled local governments to improve capacity to manage local affairs. In FY 2005, local governments identified and registered over $1 billion in government assets. These assets generated $2.5 million in much-needed local government revenue. Revenue will continue to rise as local governments better identify and manage assets and determine their future disposition. In FY 2005, increased revenues enabled local governments to provide broader and better social services for citizens, an important step in increasing their financial independence from the central government. Further, approximately 30 local governments adopted e-government systems developed by the USG, enabling them to improve their efficiency and to allow citizens to participate in local affairs and track officials' performance and resource management.
The USG increased the capacity of the Association of Cities and Municipalities to become a more active and capable organization. As a result, the Association helped draft legislation on the direct election of mayors and the new law on local government. In addition, a broad-based, nation-wide campaign advocating decentralization began to foster legislation to devolve administrative responsibilities and fiscal decentralization to local governments.
The USG collaborated extensively with the EU on fiscal decentralization work in the Ministry of Finance and administrative decentralization in the National Office for Administration. The USG also worked closely with the EU to define a national procurement policy that conforms to EU standards. The USG cooperated with the EU and the central government to help local governments prepare infrastructure projects.
Strengthen Civil Society: As the phase-out of assistance programs approaches, strengthening civil society is increasingly important for easing Croatia's entry into Euro-Atlantic institutions. In FY 2005, the USG focused on supporting NGO advocacy activities in areas including anti-corruption, legislative oversight, corporate governance/corporate social responsibility, ethnic minority rights, and entrepreneurship. This approach is beginning to show results. The advocacy program supported Transparency International Croatia (TIC) in producing a report on a national integrity system, with policy recommendations to prevent corruption. The report was presented publicly and submitted to relevant government offices and ministries. This resulted in the GoC developing a corruption prevention program. Another USG-funded activity with the NGO "GONG" has resulted in growing support for a draft law to establish a permanent election commission and a draft law to establish the direct election of mayors and county prefects.
The USG-funded NGO program has also built strong partnerships between NGOs, local governments, and businesses to resolve local problems. In FY 2005, the program made 22 sub-grants. An additional 73 community-building projects were awarded grants for economic development, tourism promotion, and public parks. These grants have supported project development in smaller communities where foreign donors have not been active. Success with these small grants results from a close affiliation among three regional NGO partners. Administering the sub-grants program also helped the regional NGOs develop their grant-making capacity. Through the USG's efforts to support local -level NGO-government partnerships, charters for NGO-government cooperation were signed in several towns and counties, including Rijeka, Osijek, Slatina, Beli Manastir, Osijek-Baranja County and Vukovar-Sirmium County.
The USG funded additional efforts to improve the organizational and financial capacity of NGOs, strengthen the non-profit sector infrastructure, and advance the legal and operational environment for civil society in Croatia. Through a training program, NGO managers created a quality assurance system known as "Q," a valuable self-assessment tool that helps NGOs identify strengths and weaknesses. For the first time, Croatian NGOs can measure their capacity and make concrete plans to improve their organizations in any of 12 key organizational and functional areas. This tool improves leadership, management, and other functions of NGOs. To promote broader use of this self-assessment tool, four Croatian mentors were certified in the UK. A Trainers Forum was established and is now a key organization for improving professionalism and good practices of NGO trainers. This Forum's modest membership of 20 doubled in six months, indicating that NGO trainers and consultants recognize that improving NGO infrastructure and professionalism of trainers is important for sustainability.
In FY 2005, the USG coordinated all civil society organization activities through the Donor's Forum, organized quarterly, and with the European Commission Delegation and the Organization for Security and Cooperation in Europe (OSCE). The USG will continue to work closely with the EU and OSCE and jointly encourage the GoC to proceed with needed reforms.
To meet phase-out goals, the legal environment for NGOs must become more supportive, NGOs' advocacy skills must improve, and NGOs must strengthen their financial viability through improved fundraising, service provision, and administrative and organizational skills. In FY 2006, USG assistance will focus mainly on these three areas. The USG's programs will help NGOs more effectively advocate for policy changes in the areas of corruption, legislative process, ethnic minority rights, entrepreneurship, and corporate governance. The USG will continue to support development of the legal framework for Civil Society Organizations (CSOs) and enactment of laws on foundations and volunteerism, a code of good practices for government grant-making and development of criteria on the public benefit status of NGOs. The USG will work with partners to provide training for fund raising, service delivery, and other activities that promote financial viability.
Public Diplomacy: Public diplomacy programs that contribute to democratic reform in Croatia include Democracy Commission Small Grants (DCSG), a U.S. speakers' program, a media assistance program, and educational programs, such as support for university administration reform and U.S.-educated alumni tracking. In FY 2005, DCSG were notable for two new trends: in an effort to reach out to new NGOs, the commission awarded 13 grants to NGOs that had never applied before; grants were awarded in new areas, such as HIV/AIDS education and anti-corruption. Under the speakers' program, the USG brought 12 U.S. speakers to Croatia in such fields as investigative journalism, journalism tradecraft, scientific collaboration, American culture and society, public relations, and NATO.In education reform, the USG organized a working group of university educators who are engaged in university administration reform efforts, including looking at issues of academic ethics in the university system. Support for alumni groups consisted of a grant to a local educational NGO to create and maintain a data base and form alumni groups.
To enhance Croatians' appreciation of diversity in societies, the USG brought a Croatian TV crew to the U.S. to do a documentary on Native Americans. Croatia TV has already used some of the material in nationally-broadcast programs. To support journalism training, the USG brought two Croatian journalism students to U.S. universities for a Professional Development Year program, and sent three U.S. journalists/educators to work with Croatian journalism students at the University of Zagreb. Students worked with U.S. journalists/educators in in-country trainings, resulting in broadcast and print stories for various student publications that adhered to U.S. standards of professionalism and balance. FY 2006 is the final year of bilateral USG assistance for this sector.
MEASURES OF PROGRAM EFFECTIVENESS
In order to determine how USG 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 Democratic Reform. 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 USG 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 2004. 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: 2004 NGO Sustainability Index for Central and Eastern Europe and Eurasia. The CY 2005 rank is based on data collected in 2004. Found online: www.usaid.gov/locations/europe_eurasia/dem_gov/ngoindex/2004/.
|
CY 2003 Baseline |
CY 2004 Rank |
CY 2005 Target |
CY 2005 Rank |
|
3.5 |
3.5 |
3.3 |
3.5 |
Croatia's NGO Sustainability Index remained at 3.5 due to a number of factors: the legal environment in Croatia was not favorable for civil society organizations; financial viability of NGOs worsened slightly due to decreased foreign donations and inability to attract domestic funds; and NGO advocacy skills remained weak. Additionally, two new institutions, the National Council for Civil Society Development, an advisory body to the government, and the Government Office for Cooperation with NGOs, did not function effectively and efficiently. Early in FY 2005, the USG CroNGO program was reconfigured to address the key weaknesses identified in the NGO Sustainability Index. This should improve NGOs' ability to advocate for a stronger legal and fiscal framework, strengthen the legislative and policy framework governing the sector, and increase the financial and organizational sustainability of NGOs.
Economic Reform
The opening of accession negotiations with the EU presents both challenges and opportunities for economic reform in Croatia. EU membership will: 1) expose Croatian enterprises to heightened levels of competition; 2) force Croatian enterprises to meet EU quality and safety standards for export products; and 3) stimulate interest in Croatia as a potential investment destination. The GOC has committed itself to enacting and implementing reforms that will streamline burdensome regulations and enhance Croatian businesses' competitiveness in the long term. The prospect of EU accession has provided an opportunity for new political alliances to improve the business climate and improve Croatia's competitiveness in open markets through legal and institutional reform. The USG is well-positioned to support these new coalitions and promote constructive policy and regulatory reforms.
U.S. ASSISTANCE PRIORITIES
USG assistance priorities include support for an innovative and dynamic small and medium enterprise (SME) sector that is producing goods and services competitive in open markets, job creation, and dynamic private sector growth. The implications of EU membership affect the USG's economic growth initiatives in a number of ways. The demand for enterprise development training and technical assistance has increased as firms attempt to improve their competitiveness in global markets. A similar surge in demand for quality standard certification for export products has already been experienced and should intensify in 2006. The USG will increase assistance in both areas to accommodate heightened demand.
PROGRAM PERFORMANCE
The USG economic development program consists of several components: increased private sector growth; increased agricultural productivity; strengthened financial sector; and expanded access to economic and social infrastructure. Each program is focused on establishing the conditions to generate investment and private sector employment. In FY 2005, the USG directly assisted farmers, producer organizations, processors, and other market actors to raise the competitiveness of the Croatian agricultural sector in order to compete in national and open markets. Croatian businesses, especially SMEs, received assistance to acquire skills, financing, and services to improve their product quality and broaden their markets. The USG provided technical assistance and training to the GoC to strengthen its independent energy regulatory authorities and assist the national electrical utility with its restructuring and modernization efforts. USG provided expert assistance to the Central Bank of Croatia and other regulatory institutions that enabled them to meet stringent EU accession requirements.
The economic development program produced many positive results in FY 2005. The private sector's share of employment increased to 63 percent, a 2 percent increase over 2004. The annual total buyoff (total value of sales of domestic agricultural products) achieved 97 percent of target. The number of jobs created among assisted-SMEs far surpassed the target, with 2,869 jobs created. Finally, investment promotion initiatives yielded exceptional results, with $51.6 million in new FDI and a draft national investment promotion strategy.
Increase Private Sector Growth: A new SME development program had a significant positive impact in the first year of operation, accelerating job creation and increasing revenue by improving the performance of Croatian enterprises. Technical assistance to firms and business associations improved enterprise efficiency, reduced costs, and improved market access. The USG helped lending institutions create new financing products and simplify the loan application process, increasing SME access to finance. As a result, 2,869 new jobs were created in FY 2005, far exceeding expectations for the first year of program activity. Another component of the program promotes FDI. As a result of the USG's FDI promotion activities, two firms invested $51.6 million in Croatia, creating over 100 jobs in FY 2005 and over 400 more in FY 2006 when factory construction is complete. Finally, in FY 2005, the USG began work with the GoC on drafting a new national investment promotion strategy, which will be completed and implemented in FY 2006.
The USG also worked closely with local business service providers to raise the consulting industry's quality standards and to ensure the sustainability of enterprise development efforts after the phase-out of SEED assistance. This resulted in improved and standardized entrepreneurship training materials. The USG also supported materials development and provided training for the Association of Management Consultants (AMC) and other similar organizations. For example, a firm in northern Croatia purchased the services of a consultant who had received USG-financed training through the AMC. The consultant's comprehensive analysis of company activities, including sales, logistics, marketing, communication flows, strategic and operational management, resulted in certification that business operations were in compliance with ISO 9001 and 14001 standards. The company owner attributes his decision to proceed with a 6 million Euro expansion to the consultant's technical expertise acquired through project-funded training.
Assistance for the privatization of large state-owned enterprises experienced a series of setbacks when vested interests successfully blocked the sale of a hotel chain and an aluminum processing plant. This contributed to 12 fewer enterprises tendered by the Croatian Privatization Fund than the program's target of 40. Further assistance in this area (scheduled to end in March 2006) is subject to suspension if the GoC does not exhibit the political will to meet its privatization commitments.
To respond to positive changes in the GoC's commitment to reform, new initiatives to support microeconomic policy reform are being developed. The USG is providing expert analysis of Croatian tax laws and regulations to enable a key strategic counterpart, the National Employers' Association, to lobby more effectively for tax simplification. Similarly, the USG is providing expert assistance on regulatory reform that, if adopted and successfully implemented, will reduce the regulatory burden on domestic and foreign investors.
Increase Agricultural Productivity: In FY 2005, agribusiness programs improved the productivity and profitability of dairy, meat and horticulture producers. Partnerships were formed with some of the largest food processors in the country to enhance linkages between producers and processors and improve production practices in order to meet the requirements of the domestic and export markets. Performance indicators for agriculture productivity include a national agriculture buyoff target (the total value of sales of domestic agricultural products) and a target for employment in economically distressed areas. In FY 2005, the employment target of 350 new employees in assisted-organizations was met and the buyoff target, a composite of buyoff in dairy, swine and horticulture, fell just 3 percent short of the $25 million target.
Project-sponsored partnerships with established food processors led to the development of farm "production models" that were subsequently replicated by many farmers. For example, USAID and Podravka (a large food processor) jointly implemented a pilot project to test new methods of tomato irrigation for small farmers. Based on excellent results, the tomato production area under irrigation in Istria expanded 220 percent. Replication of this model generated approximately $185,000 in additional revenue for 40 farmers.
The USG, in cooperation with the largest Croatian dairies, continued to work with pilot groups of dairy farmers to increase the quantity and quality of milk that producers deliver to dairies. As a result, Croatia's dairies have decreased their imports of raw milk by 30 percent. Such interventions with pilot groups supplying these dairies (3,676 dairy farmers in total) increased 2005 production by 16,013 metric tons and increased their EU-quality milk by 15 percent. The improved quality and increased quantity resulted in increased revenue of over $6.5 million for the farmers. In order to strengthen the Croatian pork sector, the USG is undertaking similar initiatives with a leading Croatian food processor, Agrokor. Agrokor recently bought two major meat processing plants and will, with USG assistance, expand pork buyoff from 2,000 local farmers to a level of 300,000 fattened pigs per year.
The USG provided market-linkage assistance in economically distressed areas through local processors such as Tomaic Commerce. This SME now buys milk from 233 farmers who preserve their milk for pick-up with lacto freezers provided through a USAID grant. In FY 2005 alone, farmers sold an additional 125,000 liters of higher quality milk, valued at $12.3 million.
In economically distressed areas, USG assistance will create 2,000 sustainable jobs in Croatia's war-affected regions. In FY 2005, 350 sustainable jobs were created and overall on-farm incomes were increased for many others. Agribusiness projects will continue working with hundreds of producers in these areas, increasing employment through more than 18 cooperatives and associations in dairy, meat and honey.
Strengthen the Financial Sector's Contribution to Economic Growth: In FY 2005, the USG provided technical assistance to the Croatian financial sector to help Croatia adopt EU standards and achieve Basel Core Principles for effective financial supervision. The USG responded to specific requests from the Croatian National Bank (CNB) to enable bank examiners to adopt risk-based supervision techniques in the areas of credit risk, liquidity risk, market risk, operational risk, and consolidated supervision. Experts from the Swiss Competition Authority and the U.S. Department of Justice trained CNB staff in its Protection of Financial Sector Competition unit, which has already resolved over 40 cases of suspected abuse in the last two years. In the field of insurance, consultants from new EU member states provided comments on Croatia's draft insurance law, which is expected to be compliant with EU directives. Insurance supervisors from the United States and Austria conducted a thorough assessment of insurance supervision in order to identify weaknesses in the current system and develop a detailed strategy to address them. Finally, the USG is working with the Securities Commission and local stock exchanges to develop a Corporate Governance Code for listed companies.
Expand and Improve Access to Economic and Social Infrastructure: Physical reconnection of the South East European (SEE) electricity grid helped catalyze the formation of a SEE Energy Community, also known as the Athens Process. In October 2005, countries in the region signed a binding treaty requiring them to undertake the difficult task of restructuring their country's energy industry to conform to EU requirements. The USG has supported this process from its inception. Assistance to Croatia in FY 2005 included direct technical assistance to the Ministry of Economy, the national utility, and the national regulator. USG advisors helped shape national energy legislation and provided an organizational framework for the newly established regulator. Through USG assistance, the USG promoted knowledge exchange in the areas of tariffs, licenses, and EU accession issues. Expert consultants also facilitated meetings with the leadership of the national power utility to discuss market design, business plans, corporate governance, and related restructuring issues. A USG-supported partnership between the Croatian power utility and the American Electric Power of Ohio was formalized in a Memorandum of Understanding that laid out the terms for continuing cooperation. FY 2006 is the final year of bilateral SEED assistance for this sector.
MEASURES OF PROGRAM EFFECTIVENESS
In order to determine how USG 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 the most relevant indicator for Croatia in the area of Economic Reform. 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 USG 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 EBRD in its November Transition report. The value represents data collected from September 2004 through September 2005. 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 Target |
FY 2005 Actual |
|
56 percent |
61 percent |
63 percent |
63 percent |
The indicator above demonstrates that the private sector share of employment increased by 2 percent over 2004. USG assistance programs have focused on facilitating privatization of state-owned assets and attracting foreign direct investment, both of which serve to reduce the public sector share of employment. Thousands of workers will be transferred from public to private sector payrolls as the privatization process moves forward; however, a lack of political will on the part of the GoC has impeded speedy forward movement.
Social Reform and Humanitarian Assistance
While the USG is no longer providing direct assistance in the social and humanitarian sector to Croatia, USG support of the NGO sector has helped strengthen public advocacy organizations working in the areas of anti-corruption, judicial reform, corporate governance, legislative oversight, and anti-trafficking.
Trafficking in women is a problem, according to the US State Department Country Report on Human Rights Practices in Croatia, published in February 2004. What little statistical information exists suggests that the country is primarily a transit country for women trafficked to other parts of Europe for prostitution. Women from Hungary, Ukraine, Romania, Bulgaria, Slovakia, and other countries are reported to be trafficked through Bosnia and Herzegovina and Montenegro to Croatia, with some remaining to work as sex workers and others being trafficked to other destinations. In 2002 the Croatian government appointed a National Committee for Combating Trafficking in Persons. The National Committee created a National Action Plan but the implementation has been slow due to a combination of limited resources, a weak organizational structure ands a lack of authority to enforce decisions.
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. The CY 2005 determination is based on data collected in 2004. Found online: www.state.gov/j/tip/rls/tiprpt/2005/.
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CY 2003 Baseline |
CY 2004 Determination |
CY 2005 Determination |
|
Tier 2 |
Tier 2 Watch List |
Tier 2 |
As demonstrated in the indicator above, the USG removed Croatia from the Tier 2 Watch List because the GoC developed a comprehensive approach to anti-TIP activities. Croatia adopted a new national action plan that incorporates the recommendations of a draft plan, supported by USG funding and developed by government, civil society, and international representatives. Further, the GoC outlined an Operational Plan for 2005 with specific benchmarks and dedicated funding. The USG also facilitated an information exchange among government officials and NGOs dealing with TIP with neighboring Serbia-Montenegro and Bosnia-Herzegovina. As this is a new indicator for Post, there was no CY 2005 target.
Security, Regional Stability and Law Enforcement
Croatia took a major step forward with the October 3, 2005 opening of formal negotiations on membership in the EU. This progress toward integration into regional and Euro-Atlantic security institutions and developing positive relations with other states in Southeast Europe is essential to achieving the USG goal of improving regional security in the Balkans. Croatia made further progress in FY 2005 toward meeting criteria for NATO membership, with continued improvement in developing its Annual National Plan for achieving NATO Membership Action Plan goals. The Government completed a Strategic Defense Review that will give focus to a Long Term Development Plan for the security sector. Under this revised doctrine, Croatia no longer sees a strategic threat from any of its neighbors. Croatia participates in a number of international peace support operations and is committed to tripling its contribution to support international efforts in Afghanistan beyond the current platoon of professional military police.
Croatia continued to build cooperative relationships with its neighbors in the region. Under bilateral agreements with Serbia and Montenegro and Bosnia and Herzegovina, Croatian prosecutors and judicial authorities collaborated in prosecuting war crimes cases and providing security for witnesses from all three countries. Croatian law enforcement entities continue to show improving performance in respecting the rights of ethnic minorities. Police and customs authorities are beginning to show improved capabilities in combating organized crime and smuggling in contraband, arms, and persons, but some basic skills, particularly in customs, are unevenly developed. Concerted efforts are needed to improve interagency coordination and ensure best practices are uniformly implemented throughout all law enforcement agencies. The Croatian government continued to support international community efforts to build state institutions in Bosnia and Herzegovina. Relations with Slovenia are generally good, but unresolved border disputes - likely to be remedied through arbitration - continue to be minor irritants. Progress continued toward reintegrating the ethnic Serb minority displaced by the war, with Croatia, Serbia and Montenegro, and Bosnia and Herzegovina developing a "road map" in partnership with international organizations.
U.S. ASSISTANCE PRIORITIES
USG assistance to Croatia in the security area promotes the rule of law through the development of a professional, modern, unbiased justice sector community capable of cooperating effectively with counterparts regionally and internationally. During FY 2005, programs focused on developing joint police and prosecutor capacities to combat organized crime and corruption; 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 for the Former Yugoslavia (ICTY). Additionally, humanitarian demining activities are targeted to promote the return of families and economic rebirth of war-affected communities. U.S. military cooperation and assistance is directed toward developing Croatia's potential to become a strong regional leader on military and security issues. However, Croatia's ability to train its armed forces to meet NATO standards remained limited due to budget constraints and the loss of U.S. International Military Education and Training (IMET) and Foreign Military Financing (FMF) funding in accordance with the American Service members Protection Act (ASPA).
PROGRAM PERFORMANCE
Croatia continued to improve the professional capabilities and performance of its law enforcement organizations in FY 2005. Under ICITAP program mentoring, and in coordination with a complementary EU CARDS program, the Criminal Police and the special prosecutors' Office for Combating Organized Crime and Corruption (USKOK) created the first joint police-prosecutor task force to target a specific criminal organization. In addition, 127 field-training police officers were deployed to provide first-ever six-month field training to new police officers. The Ministry of Interior has requested the ICITAP program to assist in a major reorganization that will create a 300-person national criminal police investigative department. Although initiated in FY 2005, important elements of this assistance will be provided in FY 2006. The OSCE completed its program to train 700 police as contact officers under the Community Policing initiative.
Croatia took steps to improve its export control regime, using U.S. Export Control/Border Security (EXBS) assistance to implement and enforce a new export control law on dual use goods. Croatia continues to improve cooperation with the United States and other states in the region to interdict trade in narcotics and protect against the proliferation of Weapons of Mass Destruction. In FY 2005 Croatian customs officers who received EXBS-funded training in detecting concealed compartments in vehicles and shipping containers seized 700kg of marijuana hidden in a truck. Additional training and equipping of border police remain to be implemented, but Croatia has developed a comprehensive strategic plan in partnership with German and Slovenian experts under the EU CARDS Border Police twinning program. USG assistance to the border police under EXBS, Defense Threat Reduction Agency (DTRA), and Department of Energy (DoE) programs are designed in harmony with this strategic plan and fill urgent gaps not covered by EU assistance.
Additional USG support to Croatia's war-affected regions in FY 2005 included the disbursement of approximately $1.237 million in demining funds. Projects presently underway will demine approximately 823,000 square meters of mined territory in Croatia. In selecting suitable sites for humanitarian demining, the program gives priority to projects in communities that have a proven track record in making good use of other USG assistance projects. An estimated 1,142 square kilometers in Croatia remain mine-suspect.
In FY 2005, Croatia took serious steps to improve domestic prosecution of war crimes cases. The USG initiated a comprehensive program to further develop investigative, prosecutorial, and judicial capacity to manage war crimes cases. USG assistance also funded procurement of video conferencing equipment to facilitate regional cooperation and allow witness testimony to be taken outside of Croatia during trial proceedings.
Public Diplomacy War Crimes funds provided grants to Croatian NGOs and one independent radio station to organize media workshops and education for journalists, public opinion research (qualitative and quantitative) on public attitudes towards war crimes issues, and round-tables and film projections in communities mainly in war-affected areas. Other activities included educational sessions with representatives from the ICTY on legal process of war crimes cases, publications of thematic magazines and educational materials on war crimes issues and cases, and radio coverage and analysis of war crimes trials conducted in Croatia.
Under the restrictions of ASPA, IMET and FMF programs have been suspended. However, the U.S. Department of Defense continued to provide other engagement activities not restricted under ASPA. This included: 23 bilateral events conducted under the Joint Contact Team and State Partnership Programs; 15 Partnership for Peace exercises and seminars; resident courses and seminars provided by the George C. Marshall European Center for Security Studies; bilateral and multilateral exercises sponsored by the U.S. European Command; and humanitarian assistance projects.
USG assistance for law enforcement initiatives under the SEED-funded ICITAP program and the War Crimes program will end with FY 2006 funds. The NADR funded EXBS program and humanitarian demining program are ongoing. Department of Defense programs are ongoing and could be expanded to include IMET and FMF should Croatia meet the requirements of ASPA.
MEASURES OF PROGRAM EFFECTIVENESS
In order to determine how USG 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 the most relevant indicator in the area of Security, Regional Stability and Law Enforcement. 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 USG 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: Judicial Framework and Independence Rating. This indicator highlights constitutional reform, human rights protections, criminal code reform, judicial independence, the status of ethnic minority rights, and 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 2005. This volume covers events from January through December 2004. Found online: www.freedomhouse.org/research/nattransit.htm.
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CY 2003 Baseline |
CY 2004 Rank |
CY 2005 Rank |
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4.25 |
4.50 |
4.50 |
Despite USG assistance, the 2005 rank, which is based on 2004 data, reveals no change from 2003. This indicator is being watched closely as the first class of 272 new police officers completed training in the USG-funded overhaul and revitalization of the basic police school in 2005. After formal training, most of these students began their service with a six-month, one-on-one mentorship, partnering with USG trained senior police officers. As a result, Croatian police display enhanced knowledge of human rights protections, equality before the law, and humane treatment of suspects and prisoners. Additionally, USG-trained state prosecutors lead a successful search for ICTY indictee Ante Gotovina.
Click for FY 2005 Funds Budgeted for U.S. Government Assistance to Croatia [PDF format]
