On Thursday, February 6, 1997, the Administration presented the President's FY 1998 budget to Congress. Included in this budget request is a new initiative, the partnership for Freedom, which will:
-- refocus our assistance strategy to the New Independent States (NIS) of the former Soviet Union on economic growth and grass roots linkages,
-- request an increase in funds to $900 million in FY98, and
-- extend the duration of our assistance.
The new initiative would change the emphasis of our engagement, first with Russia and subsequently with the other NIS, from assistance to partnership. It builds on successes in our assistance program while focusing on trade and investment, exchanges and cooperative activities. This initiative will support U.S. business and help support partnership activities by private U.S. organizations.
Reform in the NIS: Our National Interest
The establishment of market democracies in the NIS is among the most important goals of U.S. foreign policy. A democratic, market-oriented Russia, Ukraine, Armenia and other NIS will contribute directly to international stability and prosperity. By the same token, a slowing or reversal of reform could again pose a menacing threat to U.S. national security. Reform in the NIS, unfortunately, is not yet assured. The United States must stay engaged in the generational changes now taking place in this strategically important region of the world.
The Partnership for Freedom is based on the premises 1) that democratic government and market economies in the former Soviet states are in our national security interest and 2) that these transitions will take at least a generation. Hence, we need to encourage economic growth that will sustain these changes, and we need to establish lasting ties to the peoples of the NIS that will further the generational transformation.
The New Initiative
The Partnership for Freedom represents a significant change in approach to our activities in this region from advising on mechanisms of democratic and economic reform to cementing the irreversible nature of those reforms. As economic and political reform gradually take root in the NIS, the cooperative activities of the Partnership for Freedom will help move the NIS economies from stability to growth and will help establish lasting ties between Americans and the people of the NIS. This program is consistent with congressional suggestions dating from the Russian trip report by Congressmen Gingrich and Gephardt in 1994.
The new initiative has two themes: economic growth and partnerships that sustain civil society and people-to-people linkages.
To encourage and support economic growth, we are asking Congress to provide new funds to support:
-- American investment in the NIS through a new trade finance facility
-- implemented by EXIM and other financing mechanisms such as enterprise funds and other small lending organizations -- that will expand trade credits to more NIS countries and regions and allow more private sector lending to smaller U.S. and NIS companies;
-- regional investment, enterprise funds and small loan programs;
-- assistance in removing impediments to trade and investment -- tax reform, WTO accession and accounting standards, as examples;
-- training for managers of projects receiving investment support from the United States;
-- assistance to facilitate the flow of World Bank and other IFI loans; and
-- partnerships and exchanges that strengthen NIS private organizations, such as business and professional associations and business schools.
To encourage U.S.-NIS linkages in support of civil society, we are asking for funds to support:
-- endowments for selected foundations or NGOs for activities in democracy building, independent media, legal reform and economic development;
-- professional and academic community-based exchanges to bring NIS students, professionals and business people to the United States and Americans to the NIS;
-- institutional, professional and community-based partnerships that foster U.S.-NIS cooperation, strengthen democratic institutions and build lasting linkages, in areas such as environment, health and science; and
-- significantly increased cooperative anti-crime and law enforcement activities.
The Budget Request
Appropriations for NIS assistance have fallen over the past four years. After the large appropriation in FY94 of $2.5 billion, assistance levels fell to $850 million in FY95, $641 million in FY96 and $625 million in FY97. This trend has reduced our support for reform in the NIS. The FY98 request would reverse this trend and refocus the program. As shown in the attached chart, the technical assistance component of our assistance will continue to decline over the next several years; the cooperative activities of the Partnership for Freedom will make up an increasing proportion of the overall program.
We are asking for a 44 percent increase in overall NIS assistance next year -- $900 million, up from $625 million this year. Across the NIS, nearly 60 percent of the $900 million will go toward these cooperative, partnership activities; in Russia over 90 percent of the funds will go toward these partnership activities.
These additional funds will allow us to support cooperative activities in Russia and other reforming NIS and increase technical assistance that supports economic and democratic reform in Central Asia and the Caucasus -- two regions of strategic and commercial importance that have not been adequately supported.