MARCH 9, 2000

Mr. Chairman, I wish to thank you and the committee for the opportunity to testify on the state of the SEED Assistance program in Central and Eastern Europe. I will review briefly the major developments of the past year and then outline the President's budget request for SEED in 2001. In addition, the President has submitted to Congress a supplemental request for SEED funding in Southeast Europe. Given the urgency of this supplemental request, I will devote most of my testimony to a description of the President's proposal and an appeal that Members of Congress support the rapid approval of this vitally needed additional funding.

Since I last appeared before this committee, there have been important positive developments in the SEED program. We are well along in our preparations for the graduation of three countries from SEED bilateral programs at the end of FY 2000. The graduation of Poland, Lithuania, and Slovakia reflects our considered judgment that these countries have made substantial and durable progress toward democracy, implementation of market economic reforms, and establishment of the rule of law. By the end of FY 2000 eight SEED countries will have graduated, allowing us to focus our assistance on the needs of Southeast Europe. The graduation of all the countries of Central Europe and the Baltics validates the vision of successive Administrations and Congresses that have supported SEED as a vital tool to promote democratic and market transition, not a prescription for long-term dependency on foreign assistance. Graduation is also our eventual goal for the countries of Southeast Europe, but these countries began the transition later and will need our help longer than originally anticipated.

While we are committed to a strategy of graduation from bilateral assistance programs, we must maintain the partnerships that have been built during the first decade. We are continuing regional programs to sustain these partnerships with the SEED graduate countries. Our regional support will consolidate reforms in the graduate countries themselves and empower them to offer their experience and expertise to countries that are still in earlier phases of the transition. We are particularly mindful of the special needs of Slovakia. Our decision to proceed with the graduation of Slovakia from bilateral assistance underscores our confidence in the current Slovak government and in the commitment of the Slovak people to reform. At the same time, we know that Slovakia continues to need our support. We intend to provide an appropriate mix of assistance for Slovakia in the framework of regional SEED programs in order to consolidate reform in that country.

One of the most hopeful and encouraging developments of the past year was the implementation of our proposal to wind up the affairs of the highly successful Polish-American Enterprise Fund and to establish the successor Polish-American Freedom Foundation. The Polish-American Enterprise Fund was so successful that it is committed to making unprecedented payments to the U.S. Treasury totaling $120 million by the end of FY 2001. The remaining assets of the enterprise fund will endow the new Polish-American Freedom Foundation to continue to foster the development of the private sector in Poland.

Building upon the SEED success story of the past decade, President Clinton has requested $610 million in SEED funding for FY 2001. This request focuses almost entirely on Southeast Europe - a region in transition where vital American interests are at stake. Our assistance funds support American military forces deployed in Kosovo and Bosnia to implement peace agreements that brought an end to war, ethnic cleansing, and major human rights abuses. The President's budget request will allow us to support the newly elected government in Croatia as it works to overcome the pernicious authoritarian legacy of the previous Croatian regime. This request will also enable us to continue essential support for Montenegro as it struggles to maintain its democratic orientation and establish economic self-sufficiency in the face of relentless political and economic pressure from Belgrade. Our assistance will support efforts by the Serbian opposition to offer the Serbian people a credible alternative to the dictatorship of Slobodan Milosevic and his fellow indicted war criminals. The President's budget requests the resources we need to support our partners in Bulgaria, Romania, Albania, and Macedonia and to do our part in the European-led effort to realize the promise of the Stability Pact for Southeast Europe.

Mr. Chairman, in addition to his 2001 budget request, the President on February 7 sent to Congress a request for supplemental FY 2000 appropriations for Southeast Europe. The supplemental requests a total of $624 million in non-defense funds, $609 million of which would fund urgent requirements in Southeast Europe. The supplemental request contains:


With your permission, Mr. Chairman, I would like to focus the remainder of my statement on an appeal for the support of Members of Congress for the $194.5 million in supplemental SEED funding requested by the President for FY 2000. The President's request contains $92.8 million in supplemental SEED funds for Kosovo. If approved by Congress, this would bring total SEED appropriations for Kosovo to $242.8 million in FY 2000. The President also requests $107 million in contributions to international peacekeeping operations, including in Kosovo. The recent events in Mitrovica underscore that both the SEED and peacekeeping funds are essential to support UNMIK's efforts to establish public order, assure protection of human rights, and begin the process of economic recovery in Kosovo. UNMIK's success in these areas is vital to enable U.S. forces to accomplish their mission and ensure their security. The supplemental funds requested for Kosovo include $11 million in new support for the UNMIK budget for Kosovo. UNMIK has made substantial progress in establishing a budget that meets essential expenditures for education, health care, and other essential public services. While progress has been made in raising revenues to meet these expenditures, there remains a gap that must be met through donor support. In FY 2000 the United States has to date contributed $12 million of more than $116 million pledged by the international community. The additional $11 million requested by the President would enable the United States to do its fair share to support the Kosovo budget and close the remaining funding gap for 2000.

The Administration's FY 2000 supplemental request for Kosovo also contains funds to raise the U.S. contribution of police for the international police contingent in Kosovo from 550 to 685. The U.S. pledged to supply 14.4% (450) of the original complement of 3,110 international police authorized by the UN Security Council. When the Security Council raised its authorized level of international police to 4,718, the U.S. contribution dropped to only 9.5%. We subsequently pledged an additional 100 civilian police, which brought our share up to 12.4% of the total. The supplemental request would allow us to restore the original U.S. share of the new authorized level of police. The events of recent days in Mitrovica underscore the vital importance of international police deployments, so that KFOR does not have to bear the full responsibility for maintaining public order.

The remaining $58.10 million of the Administration's supplemental request for Kosovo would allow us to implement urgently needed programs to begin economic recovery, stimulate market reform, prepare for elections, and promote the rule of law. These longer-term programs are essential to build sustained stability, promote tolerance, and provide hope to ordinary Kosovars. Funding this Kosovo supplemental now will make it less likely that U.S. and other KFOR troops will confront future disorders like those that have plagued Mitrovica.

As our contribution to police forces shows, our commitments in Kosovo are only a minor share of a broader effort in which our European partners play a key role.

European countries and the European Commission pledged more than 70% of the contributions to the Kosovo budget already pledged and have disbursed more than 70% of the voluntary contributions received by UNMIK. On a broader perspective, our European partners pledged 61% of the total amounts pledged up to now for Kosovo reconstruction in FY 2000 (other non U.S. donors pledged 25% of the total).

The President's request also contains $35.7 million in supplemental funding for Croatia; if approved, this would bring total SEED funding for Croatia to $50.8 million in FY 2000, in addition to $5.0m of FY 99 SEED funds allocated to Croatia after the elections. The recent Croatian elections and subsequent formation of a new government led by the opposition are the most hopeful developments in the Balkans since Dayton. In a peaceful democratic election the Croatian people rejected the previous authoritarian government in favor of new leaders committed to democracy, market economic reform, the rule of law, and human rights. Since the elections, Secretary Albright has twice visited Croatia for talks with the country's new leaders. These conversations and the initial actions of the new government give us confidence that the change in Zagreb is real and profoundly hopeful.

Croatia's new leaders have pledged to implement faithfully the Dayton Agreements, including in neighboring Bosnia. They have underscored their intention to work constructively with the International Criminal Tribunal for the former Yugslavia. In addition, Croatia has signaled a desire for closer cooperation with NATO and formally applied for membership in PFP. The new government has also stressed its commitment to real market reform and has urgently requested the assistance of the international community to overcome the legacy of the failed economic policies of the Tudjman era.

Mr. Chairman, Croatia deserves our urgent assistance. We have an historic opportunity to consolidate a major gain in the Balkans. With our help, Croatia can go from "a problem to be managed" to "a partner in pursuit of a regional peace." The President's supplemental request for 2000 would allow us to offer the new government a comprehensive package of technical assistance to help in the formulation of the government's new economic strategy. This assistance is needed now so that no time is lost in formulating a new economic plan that can win the confidence of the Croatian people and the international community. The President's request also contains funding to support a major new effort to repatriate and resettle minority refugees (primarily Serbs) in Croatia. This proposal has been formulated by the new government with the full support and approval of the UNHCR and OSCE. If this proposal could be implemented successfully, it could stimulate the return of minority refugees throughout the former Yugoslavia. It could be a key to unblocking the situation in Bosnia, where some 40,000 Croatian Serbs are occupying homes of Bosnian Bosniaks.

Mr. Chairman, the president's request also contains $34 million in supplemental SEED funding for Montenegro. Last year the U.S. provided a total of $35 million in flexible assistance to Montenegro, all but $3 million in support of Montenegro's budget. Food aid, refugee assistance, and other non-SEED assistance brought our total support for Montenegro to more than $55 million. It is imperative that our assistance in FY 2000 keep pace with Montenegro's needs as its democratically elected government struggles to cope with unrelenting psychological and economic pressure from Belgrade. Slightly over $11 million in ESF funds are available, leaving a gap of $24 million if we are to meet last year's total of $35 million in flexible budget assistance. Without this supplemental funding we would be forced to meet this need by allocating the entire $24 million in FY 2000 SEED funding currently available for Montenegro to meet its immediate budget requirements, leaving us with no resources to support vital long-term economic development and democratization programs. With the support of Congress, the President's supplemental request for Montenegro would allow us to meet both urgent requirements for budget support and essential longer-term developmental needs. If Congress approves the President's supplemental request, total SEED funding available for Montenegro in FY 2000 would be $58 million.

Montenegro stands as a vital alternative within the Yugoslav Federation to the authoritarian rule, failed economic policies, and gross human rights abuses of the Milosevic regime. President Djukanovic has maintained Montenegro's democratic course despite escalating economic pressure and the threat of hyperinflation exported from Belgrade. Montenegro has clearly signaled its eagerness to participate fully in the Stability Pact and to cooperate constructively with the international community to help stabilize and transform Southeast Europe. President Djukanovic needs and deserves our support. The most effective tangible sign of American resolve to support Montenegro would be rapid congressional approval of President Clinton's request for supplemental SEED funding for Montenegro in FY 2000.

The United States must also continue and broaden its support for the opposition to Milosevic within Serbia. American support encourages the Serbian opposition to come together around common goals of promoting democracy, building a market economy, and establishing the rule of law. The Serbian opposition needs to make further progress toward unity in order to offer the Serbian people a credible alternative to rule by the war criminals currently at the top of the regime in Belgrade. We have allocated $25 million in SEED funds to support for this process in FY 2000. The President's supplemental budget request of $15 million would enable us to provide robust democratization assistance to Serbia's opposition political parties, independent media and trade unions, and emerging NGO sector. With additional funding, we could offer expanded support to the opposition in developing a strong market economic reform plan as the alternative to the failed communist style management of Serbia's economy by the Milosevic regime. Additional funding would allow us to accelerate efforts already under way to diversify delivery mechanisms for humanitarian assistance to at-risk populations within Serbia, in order to bypass structures controlled by the Belgrade regime.

We have no illusions that it will be easy to increase American assistance to Milosevic's opponents within Serbia. Milosevic will certainly seek to divide the opposition and impede delivery of our assistance. But we are determined to continue our efforts and succeed. Those who have the courage to stand-up to Milosevic expect and deserve our support. We urge the Congress to support President Clinton's request for supplemental funding for the Serbian opposition.

The President's supplemental request also contains $17 million in additional funding for regional programs in Southeast Europe. These funds are needed to support small and medium enterprise development in the region through a new U.S. Trust Fund at the European Bank for Reconstruction and Development. This funding would also support concerted new initiatives to increase the effectiveness of our existing efforts to fight organized crime in Bosnia, Kosovo, and Albania. Organized crime and corruption remain major impediments to economic development, as well as peace and stability, in Southeast Europe. Our partners in the region want and need our help in countering well-armed and financed international criminals who operate across the borders of the region. If approved, the supplemental request would bring total funding for regional programs in Southeast Europe to $106.87 million. A further $22 million requested in the supplemental for USAID operating expenses will help ensure the effectiveness and safeguard the integrity of our assistance programs in the region.

Mr. Chairman, I recently returned from a trip to Southeast Europe including visits to Kosovo, Croatia, and Macedonia. In each of these countries, I had the opportunity to see at first hand how our embassies and USAID missions are using SEED funds to achieve vital U.S. foreign policy objectives. Our people in the region often work in difficult and dangerous conditions; we owe them the support that would be provided by full funding of the President's request for State and USAID operating expenses and the construction of secure diplomatic facilities in Pristina, Tirana, and Sarajevo. President Clinton's supplemental request for FY 2000 and budget request for FY 2001 will help us to implement peace and overcome the terrible legacy of ethnic cleansing in Kosovo and elsewhere in this troubled region. This funding will also enable us and our partners in the region to build a brighter future and serve U.S. interests, by taking full advantage of hopeful new developments such as the new government in Croatia. That is why we would welcome early Congressional enactment of the President's proposal for supplemental funding for 2000, as well as the Administration's 2001 budget request.

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