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1 1 (November 28, 2017)

handle is hein.crs/govcgxy0001 and id is 1 raw text is: 01;0 November 28, 2017 Foreign Aid: USAID's Legacy Foundations in Europe/Eurasia Historically, the conclusion of an aid program has been due to completion of its development mission, poor behavior by the recipient country, or funding constraints. Whatever the case, the formal closing of a U.S. Agency for International Development (USAID) mission in the past has been viewed by many U.S. policymakers as diminishing avenues for U.S. influence in a country and by host country governments and their public as a loss of U.S. goodwill. The United States has sometimes, and with considerable success, sought to extend its influence, goodwill, or development efforts to former beneficiaries beyond a period of direct aid intervention through a variety of legacy mechanisms. For example, a leading think tank in South Korea today, the Korean Development Institute, was established in 1971 with a $70 million endowment from USAID. The Costa Rica United States Foundation for Cooperation (CRUSA), founded in 1996 with a $12 million endowment, continues its work promoting economic growth. In the period from 2000 to 2010, nine so-called legacy foundations were established in East Europe and Eurasia. They share a common origin in the USAID-supported, private sector-managed enterprise funds that were created following the fall of communist systems beginning in 1989. These entities sought to stimulate free market economic growth, in part by making equity investments in small and medium firms, many of which had difficulty finding capital in the early years of capitalist development. While the development record of the funds is mixed, in many cases, the equity investments were profitable. As the time approached for fund liquidation-they had been expected to last about 10 years-the question arose of what to do with the profits. Foreign policy leaders in Congress and USAID generally agreed that a portion of the profits, representing half of the original grant, would be returned to the U.S. Treasury; the remainder would go to endow newly established grant-making foundations. In practice, the proportion going to Treasury and an endowment has varied. Profits from the Central Asia and Slovak funds were too small to accommodate both a Treasury contribution and an endowment; in these cases, all profits went to an endowment. Disposition of Treasury's portion of the Russia enterprise fund has been subject to two congressional holds since 2007, some Members wanting all proceeds to go to the U.S.-Russia Foundation or another endowment. In the case of Albania, Bulgaria, and Romania, profits greatly exceeded the original grant, and the endowment, rather than the Treasury, received the preponderant share. The total endowment for all nine foundations equals more than $1.2 billion. A 10th enterprise fund, the Western NIS Fund- encompassing Ukraine and Moldova-has not yet been terminated. Because the need for equity investing and other private sector development activities was, if anything, considered to be as critical to Ukraine now as it was in the 1990s, a decision was made both to extend the life of the fund, including making new investments, and, at the same time, to allow it to undertake legacy foundation-like activities. In 2015, it began to implement a $35 million legacy program similar to those in other countries. Table I. Legacy Foundations and Their Endowments (in $ millions) Polish-American Freedom Foundation (est. 2000) $263.0 Hungarian-American Enterprise Scholarship Fund (2003) $15.0 America for Bulgaria Foundation (2007) $422.5 U.S.-Central Asian Education Foundation (2007) $17.5 U.S.-Russia Foundation for Economic Advancement $150.0 and the Rule of Law (2008) (to date) Albanian-American Development Foundation (2009) $200.0 Romanian-American Foundation (2009) $125.0 Baltic-American Freedom Foundation (2010) $37.5 Slovak-American Foundation (2010) $4.0 Western NIS (New Independent States) Enterprise $35.0 Fund-still operating (to date) Source: USAID. In accordance with federal regulations (2 C.F.R. 200.307) and the grant agreements with the foundations, the profits of the enterprise funds have to be used for the same purpose as the funds-private sector development. That objective has been interpreted flexibly by the foundations in some cases to include economic governance and rule of law if those affect the private sector, but also independent media, civil society, local community development, education, cultural heritage, and tourism. The four foundations with smaller endowments use the funds exclusively for scholarships and internships in the United States. The smallest, the Slovak-American Foundation, focuses on grants to start-up entrepreneurs to participate in short-term programs in the United States targeted to their business interests. Those foundations with larger endowments are able to undertake a broader range of activities. Several provide entrepreneurship grants that seek in a variety of ways to iiii:g.'< ;//< . %. e gc. !t. gnom ggmm , q a 'S

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