Croatia
The Development Challenge
Croatia has made significant, if still fragile, progress toward macroeconomic stability, growth, and strengthening of democratic institutions. Croatia's advancement toward integration into regional and Euro-Atlantic institutions and developing positive relations with other states in Southeast Europe is essential to achieving U.S. foreign policy goals of improving regional stability in the Balkans and managing transnational threats.
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Recent parliamentary elections witnessed the reemergence of the Croatian Democratic Union (HDZ), the same political party that voters rejected in elections in January 2000 for its corrupt, nationalist policies that led to Croatia's isolation. The next Croatian government will be led by the HDZ, which captured a majority of the parliamentary seats, making it the only party able to form a coalition government. During nearly four years in opposition, the HDZ went through significant internal changes that it claims have transformed it into a responsible, democratic party capable of continuing reform efforts in Croatia. These assertions are untested, however, and the HDZ has not participated in some of the national-level democratic reform processes supported by U.S. assistance in the past three years. The most important task of USAID will be to consolidate these reforms and to convince the new government that it is in its interest to continue to work toward building Croatia's civil society.
Two of the leading challenges facing the new government are judicial reform and reintegration of refugees, both top conditionalities for European Union (EU) accession. Croatia's judiciary continues to lag behind other areas of democratic development, and lack of progress in judicial reform is hampering Croatia's economic development. Civil cases can take years to come to trial. Inefficient courts, untrained jurists and outdated, often contradictory, legislation led to huge case backlogs, predominantly in civil courts.
Progress toward re-integrating Croatia's ethnic Serb minority displaced by the war was irregular and disappointing. Although the Government announced a series of measures aimed at encouraging the return of refugees and the restitution of their property, implementation lagged far behind expectations. One bright spot, however, was the passage of the new Constitutional Law on National Minorities, which gave minorities a new level of representation at both the local and national levels.
The USAID Program: USAID's program continues to be an integral tool in achieving U.S. national interests. SEED assistance resources enable the U.S. to support and, in some cases, accelerate Croatia's successful transition from Communism and the legacy of ethnic war. USAID programs are aimed at ensuring that Croatia develops a fully democratic society and productive market-oriented economy that will serve as a cornerstone for peace and stability in Southeast Europe while promoting Croatia's aspirations for membership in NATO and the EU.
USAID funds in FY 2004 and FY 2005 will be used to assist Croatia in accomplishing these goals. Economic programs will address small and medium enterprises (SME) and agribusiness development, improve the investment climate by accelerating the privatization process, and support the development of a competitive energy sector and energy-sharing agreements between Croatia and its neighbors. Democracy activities will concentrate on local government reform, strengthening non-governmental organizations (NGOs), political party and legislative strengthening, judicial reform, and anti-trafficking in persons. Refugee return and reintegration interventions will continue to revitalize the economic sector in the war-affected regions. Social sector programs will strengthen Croatia's pension reform and social dialogue programs.
Based on the results of a SEED assistance review last year that confirmed Croatia will be ready to graduate from SEED assistance, with the last year of funding in FY 2006, USAID's portfolio will be consolidated from the current four Strategic Objectives to two. To maximize Croatia's likelihood of achieving sustainable reforms comparable to Northern Tier countries at graduation, economic reform, good governance, and civil society will be the focus in FY 2005. The specific activities to be funded by FY 2004 and FY 2005 appropriations are described in more detail in the following Program Data Sheets.
USAID's existing program to accelerate the return and reintegration of war-affected populations, will end as planned in 2004. USAID assistance will continue to target resources within its economic and democracy programs through FY 2006 to improve economic opportunities in war-affected communities and improve the environment for returnees. USAID's program for mitigating adverse social conditions and trends will end in September 2004. Social sector activities that merit continued support will be merged into the main program. U.S. transnational concerns regarding vulnerable groups, such as Anti-Trafficking in Persons, will be integrated into the democracy strategic objective through FY 2006.
Other Program Elements: USAID's Regional Infrastructure Program (RIP) provides assistance to targeted Croatian cities in developing private sector participation in the provision of local utility services. RIP seeks to attract private investment to finance capital improvements to local infrastructure such as water facilities. The Small Enterprise Assistance Fund (SEAF) provides early-stage financing and expansion capital to SMEs in Croatia through equity investments in those companies and is part of the Trans Balkan Fund. RiskNet, the Southeast Europe Regional HIV/AIDS Prevention Project, increases outreach activities for HIV prevention among vulnerable populations. The Balkan Children Youth Foundation provides capacity building assistance to youth groups to enhance their service-delivery skills and sustainability. The Balkan Trust for Democracy raises youth and policymaker's awareness of the role non-governmental youth organizations play in civil society through a series of workshops and seminars to be held throughout Croatia.
Other Donors: As U.S. resources decline, EU and international financial institution (IFI) programs are increasing significantly to support harmonization of Croatian laws and policies with the EU. Croatia sees its future in EU membership, both in political terms and as the engine for future economic growth. This is a key underlying principle of USAID's graduation strategy, including its timeline and recommended funding levels.
USAID has made progress with the Commission and EU member state donors (as well as the IFIs) in ensuring programs and long-term visions are complementary and reinforcing. For example, collaboration on a common case-management system for the Croatian courts facilitated a real step forward by the GOC toward improved judicial efficiency. USAID has been able to achieve similar excellent cooperation on police assistance and refugee-return programs and see it evolving in other program areas as well.
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