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THIS DOCUMENT IS IN FOUR PARTS. THIS IS PART IV
USAID-Moscow, jointly with GKI and the Russian Privatization Center; it
relied on consultants from the Harvard Institute for International
Development and the Center to help monitor the project. Nonetheless,
USAID did not monitor the project adequately. Even though IBTCI filed the
required reports, these reports failed to describe how much the roll-out
deviated from the Perm' model. Center officials said they first became
aware that the pilot was not being implemented in other cities in late May
1994, long after the roll-out could be redirected to other cities.
When problems were known in some cases, USAID did not take any corrective
action. For example, a Harvard consultant who visited some sites raised
questions about the cities selected for the roll-out, but USAID took no
corrective action. Similarly, the problem with the State Privatization
Program Act and its implementing regulations was mentioned in reports in
January 1994, but no action was taken to resolve it. Finally, USAID
officials said they were aware of the tensions between BCG and IBTCI, but
simply told IBTCI to work the problem out themselves. USAID-Moscow
officials said they did not have enough staff to intervene when problems
arose, visit the project sites, and talk with beneficiaries about how the
project was progressing.
AGRIBUSINESS PARTNERSHIPS PROJECT--TRI VALLEY GROWERS
The lack of quantifiable objectives or time frames in the Tri Valley
Growers' (TVG)21 project design makes it difficult to measure the
project's success. TVG helped to facilitate the work of two agribusiness
partnerships in Russia; nevertheless, USAID concluded that TVG did not
perform adequately. It is too early to determine the long-term economic
viability of the partnerships; however, the involvement of U.S. companies
increases the likelihood the partnerships will be maintained. The
partnerships will probably not have any measurable effect on Russia's
agricultural sector because of their limited size and number.
Tri Valley Growers is an agribusiness association based in California.
Its members are involved in value-added fruit and vegetable preserving,
processing, packaging, distribution, and marketing.
SECTOR PROBLEM
Agriculture plays an important role in the Russian economy. Although
estimates vary, Russia has approximately 27,000 large state and collective
farms, which cultivate approximately 90 percent of Russia's arable land.
Approximately 270,000 private farms cultivate 5 percent of the arable
land. The remaining 5 percent is made up of private garden plots. The
total farming population comprises about 26 percent of the country's
population. Subsidies and income transfers to the agricultural sector
represent 25 percent of Russia's public expenditures. Some of these
subsides could be expected to be eliminated if the agricultural sector
were privatized.
Russian agriculture is a low-productivity sector. For example, milk cows
and potato and grain crops yield about half of western levels, and labor
productivity is probably as low as one-tenth. In addition to low
productivity, Russia has been plagued by losses of up to 50 percent in its
storage and handling systems. Finally, Russia's food processing system
suffers from poor management and a lack of quality produce, additives,
ingredients, and packaging materials.
Although the Russian government has begun reforming the agricultural
sector, the actual transformation of farms and agribusiness enterprises
into market-oriented, productive entities is moving slowly. In 1992, it
reorganized state and collective farms and agricultural input and output
distribution enterprises into joint stock companies. However, most farms
have not altered their operations to increase productivity and
competitiveness.
This information was obtained primarily from the Rural Development
Institute's report, Agrarian Reform In Russia (May 1993); a report
produced by Chemonics International for USAID, Agriculture
Post-Privatization In Russia (Jan. 1994); and USAID project documents.
PROJECT OBJECTIVES
In August 1992, USAID developed the agribusiness partnerships project as
the cornerstone of its Food System Restructuring Project. The
agribusiness partnerships project was designed to create efficient systems
for providing inputs to agriculture and for processing and distributing
agricultural products. USAID intended to catalyze NIS private sector
activity by facilitating the involvement of private U.S. agribusinesses.
Between January and May 1993, USAID signed cooperative agreements with
three agribusiness cooperatives: Citizens Network for Foreign Affairs
(CNFA), TVG, and Agricultural Cooperative Development International. We
reviewed USAID's cooperative agreement with TVG, which had obligated $5.2
million for the region.
To achieve the project's objective, TVG was to facilitate partnerships
between American and NIS private agribusiness-related enterprises.
However, the agreement did not specify the number of partnerships or the
related time frames.
At the time of our review, USAID's Inspector General was reviewing the
cooperative agreement with CNFA.
The combined budget for the three cooperative agreements under the
agribusiness partnerships project was $59.3 million. As of February 1995,
$52.5 million had been obligated.
PROJECT APPROACH
TVG established an office in Moscow staffed by one American director and
three Russian nationals. This office was supported by several TVG
headquarters staff in California. The American director did not have an
agribusiness background but was responsible for managing the office,
identifying potential Russian and American agribusiness partners,
reviewing partnership proposals, and submitting the proposals to USAID for
final subgrant approval.
According to TVG officials, TVG identified potential Russian agribusiness
partners through a network of contacts at the Ministry of Agriculture,
Association of Individual Farms and Agricultural Cooperatives of Russia,
World Bank, European Bank for Reconstruction and Development, Peace Corps,
investment funds, and regional and local administrations. To identify
American partners, TVG canvassed its members in the United States,
advertised in agricultural publications, contacted agribusinesses via
telephone, and looked for firms already operating in Russia.
Once identified, TVG worked with the American and Russian partners to
develop proposals for USAID's approval. After receiving USAID approval,
TVG awarded subgrants to U.S. agribusinesses working in Russia primarily
to provide technical assistance and agricultural training to help create
efficient food systems. The American agribusiness partner was required to
provide at least 2.5 times the level of funding provided by USAID, to
ensure its commitment to the partnership and the long-term economic
viability and sustainability of the joint venture.
The items purchased with the USAID subgrants are referred to as
"additionality" components, or those components that might otherwise not
be included in the joint venture without USAID funding. Additionality
components include additional training and facility expansion.
CONTRACTOR PERFORMANCE
TVG established six partnerships in five NIS countries, with two in
Russia. As of March 1995, one additional partnership in Russia was
awaiting USAID approval. The first partnership established in Russia was
with Petoseed Company, Inc., and is located in Krasnodar. Petoseed
produces vegetable seeds that will be sold in the NIS and internationally.
During the 1994 growing season, Petoseed produced 11,000 pounds of seed in
Russia. The second TVG Russian partnership involves CTC Foods Company,
which is building a potato processing facility in Pushchino. If finished,
the facility will produce dried potato flakes that will be sold primarily
to hospitals and schools.
The two American agribusiness partners exceeded the required level of
partnership funding in both partnerships. Contributions by USAID, U.S.
agribusiness partners, and Russian beneficiaries to the TVG partnerships
in Russia are shown in table III.1.
Table III.1
Agribusiness Partnerships Established by
Tri Valley Growers in Russia
Su
bg
ra Russian
nt Total U.S. firm firm Grant U.S. firm
ee partnership USAID grant share share\a expended expended
Pe $1,085,975 $309,250 $776,725 0 $44,054 $181,338
t
o
s
e
e
d
CT 4,300,000 800,000 2,200,000 $1,300,000 428,249 1,624,789
C
F
o
o
d
s
To $5,385,975 $1,109,250 $2,976,725 $1,300,000 $472,303 $1,806,127
t
a
l
a The Russian partners' contributions are generally in-kind
contributions.
Source: TVG statistics as of May 25, 1995.
TVG had difficulty identifying partnerships. TVG staff had difficulty
beginning work in Russia because of poor telecommunication and office
facilities, the chaotic Russian business environment, the limited number
of American firms willing to invest in Russia, limited funding, and a
small staff. According to a TVG official, Petoseed and CTC Foods
contacted TVG to participate in the project. However, both companies were
already working in Russia before USAID had established the agribusiness
project and located Russian partners on their own. He said they would
have invested in Russia without USAID involvement. An official at the
Association of Individual Farms and Agricultural Cooperatives of Russia
told us that the Association tried to work with TVG to identify Russian
partners but received only "empty promises."
Although USAID never specified the number of partnerships that it wanted
to establish within a given time frame, it concluded that TVG had not
performed adequately. Between May and December 1993, USAID expressed
concern about the number of partnership proposals TVG was submitting and
the quality of the proposals. A February 1995 USAID review of the
agribusiness project stated that TVG required more support by USAID staff
and was less committed to the project than CNFA. TVG closed its office in
Moscow in August 1994 and has stopped the Russia part of its program
because USAID terminated the agribusiness partnerships project in Russia.
Nevertheless, USAID's review noted that the partnerships to which TVG had
made subgrants were doing well. However, a TVG official told us in May
1995 that because of financial problems, CTC Foods may not be able to
continue its work in Russia. Consequently, the processing facility in
Pushchino may never be constructed. According to a USAID official, TVG's
Moldova office now monitors the Russian subgrants.
Petoseed also established seed production facilities in Ukraine and
Moldova through TVG.
RESULTS
The agribusiness partnerships developed by TVG in Russia have not been
operating long enough to adequately judge their impact. However, due to
their limited scope, it is unlikely that the partnerships will have a
significant effect on reforming Russia's agricultural sector.
USAID MANAGEMENT
USAID-Washington designed the agribusiness partnerships project in 1992,
before the USAID-Moscow mission was opened. USAID-Washington and
USAID-Moscow split the oversight responsibilities: Washington was
primarily responsible for TVG's compliance with the cooperative agreement
and Moscow was responsible for subgrant proposal evaluation. Final grant
approval was a joint Moscow-Washington effort.
Although USAID-Moscow raised continued concerns about the agribusiness
partnerships project's ability to influence systemic reform, the project
proceeded. USAID-Moscow officials called for a review of the project as
early as November 1993, and they developed a statement of work for an
evaluation team. However, USAID-Washington told USAID-Moscow to "forget
the assessment and get on with the job." Consequently, no assessment was
conducted. According to USAID officials, an evaluation is planned for
June 1995.
According to USAID officials, the agency wanted to implement the project
quickly and demonstrate results. TVG's Moscow director stated she was
pressured to submit proposals quickly because USAID was being pressured by
Congress. However, both CNFA and TVG officials complained that USAID's
subgrant approval process was arduous and lengthy. They said it took
several months for USAID to accept or reject a proposal and added that
USAID-Washington caused most of the delay. USAID-Washington officials
said the delays were caused by the time required to research legal issues,
conduct environmental audits, and work through the Washington bureaucracy.
The cooperative agreement with TVG called for quarterly program
performance reports and annual progress reports. An independent
accounting firm was to audit TVG's financial statements. Although USAID
officials said that TVG met all of its reporting requirements, our review
indicated that TVG had not submitted annual reports. According to USAID
officials responsible for the project in Russia, USAID staff visited only
half the project sites established by TVG, CNFA, and Agricultural
Cooperative Development International between May 1993 and November
1994.
USAID was required to annually assess the performance and program
direction of the cooperative agreement and contract for an independent
external evaluation. As of March 1995, it had done neither. However,
CNFA completed an evaluation of the agribusiness partnerships project in
August 1994 at USAID-Moscow's request. It reported that the project had
not started agribusiness partnerships quickly, had not made a significant
contribution to sectoral reform, and had little to show for the
"additionality" purchased with USAID funds. CNFA's internal evaluation
did not address TVG's performance. USAID completed an internal review in
February 1995, but the review did not cover the additionality components.
The review stated that it was unrealistic to expect the overall project to
have a significant, measurable impact on the food system in the NIS.
USAID has discontinued the agribusiness partnerships project in Russia
and, as of September 1994, stopped accepting proposals for Russian
agribusiness partnerships. In addition, USAID has decided not to obligate
any additional funds for the project. Agency officials stated that the
project itself cannot adequately address the obstacles of reforming the
agricultural sector and indicated that other projects, such as the
Russian-American Enterprise Fund, were better vehicles for financing joint
ventures.
OFFICER RESETTLEMENT HOUSING PILOT
The Russian officer resettlement pilot project has been successful in
providing the required housing units, although not within the original
time frames. The project's secondary objectives--to provide job skills
training for demobilized officers and to help facilitate housing sector
reform--were only partially met. By implementing a pilot program, USAID
was able to test the viability of a housing construction project and apply
lessons learned to the $160-million follow-on project.
Planning and Development Collaborative International (PADCO), the
contractor tasked to provide construction management services, was
successful in part because it (1) had experience in working on housing
sector reform in Russia, (2) established a physical presence in Moscow and
in the field, (3) obtained at least some buy-in and involvement from the
local Russian government, and (4) employed Russian staff to oversee
construction activities.
SECTOR PROBLEM
The Russian Ministry of Defense has traditionally provided qualifying
retired and demobilized military officers with a dwelling unit or plot of
land and some job skills training. After the Soviet Union dissolved,
between 200,000 and 350,000 officers needed housing; approximately 42,000
were located in the Baltic Republics of Estonia, Latvia, and Lithuania.
However, since the dissolution, the Russian government has lacked the
housing stock to resettle all the demobilized military officers. Further,
Russia's severe economic problems, housing shortages, and lack of "social
guarantees" for these retired officers has delayed troop withdrawals.
PROJECT OBJECTIVE
President Clinton announced the Russian officer resettlement program at
the Vancouver Summit in April 1993. Later, in July 1993, he stated at the
G-7 Heads of State meeting in Tokyo that the program should encourage
rapid withdrawal of demobilized Russian officers from the Baltic
Republics. The Russian Officer Resettlement Initiative is being conducted
in two phases--a $6-million pilot and a $160-million follow-on project.
The pilot's primary objective was to construct 450 housing units by July
1994 for the resettlement of demobilized Russian military officers. The
follow-on project was to provide up to 5,000 units (2,500 constructed and
2,500 voucher certificates) by November 30, 1996, for officers demobilized
in the Baltics or other countries outside Russia. The pilot project's
secondary objectives were to provide job skills training, experiment with
new housing technologies, assist private firms in housing development and
construction, and expand the scope of housing choices.
PROJECT APPROACH
To implement the pilot project, USAID contracted with PADCO for
construction management services. It also awarded fixed-price contracts
to five Russian builders and one private voluntary agency to construct
housing units in five cities. Finally, it provided a grant to the
International Catholic Migration Commission for training.
According to project officials, PADCO assisted the project design team
that included officials from USAIDWashington and USAID-Moscow. This team
visited potential project sites, evaluated projects, and negotiated
construction contracts. PADCO was responsible for managing the
construction activities and monitoring contractor performance. U.S.
officials said the design team created the pilot with only minimal input
from the Ministry of Defense or the Ministry of Construction. USAID
officials added that the design team conducted its own field assessment to
select participating cities and worked almost exclusively with the local
authorities in these cities. The local authorities were to provide
infrastructure services such as heating, water, and road access for the
housing units.
USAID relied on the Russian Ministry of Defense to select the officers to
receive the housing. The initial design for the pilot program did not
stipulate where the officers should come from, but as a result of the
Tokyo G-7 meetings in July 1993, USAID established criteria that gave
priority to demobilized officers living in the Baltics.
The criteria also included housing for officers from other areas outside
Russia because two cities were reluctant to provide infrastructure for
officers exclusively from the Baltics. Under this criteria, officers
demobilized in other areas would be included. USAID's compromise with
these cities allowed some demobilized officers from their own
jurisdictions to receive housing. In Nizhniy Novgorod, half the officers
could come from its jurisdiction, while in Volgograd, 40 percent of the
officers could come from its jurisdiction. USAID and PADCO officials said
beneficiary composition would also be an issue in the follow-on project.
PADCO's project staff established a long-term presence in Moscow and
traveled regularly to the various building sites. It also hired and
trained Russian construction specialists to supervise the construction in
each city. USAID officials said PADCO's experience in Russian housing
issues helped facilitate this project.
CONTRACTOR PERFORMANCE
PADCO and Russian contractors generally met the program's primary
objective of providing housing units, although not within established time
frames. As of July 1994, only 94 (21 percent) of the 452 units were
completed, although as of February 15, 1995, the project had provided 422
units (93 percent) through a combination of construction and voucher
certificate activities. (See table III.2 and figs. III.1 and III.2.)
Table III.2
Status of Russian Officer Resettlement Pilot Project as of February
15, 1995
Pending
Originally Added Completed completion Transferre
Location planned Terminated allotted issued approval d to owner
Construc
tion
Lipetsk 40 40
Nizhniy 128 128 45
Novgorod
1
Nizhniy 50 50 0
Novgorod
2
Novosibi 180 180 0
rsk
Tula 1 14 14 12
Tula 2 16 16 9
Tula 3 30 30 0
Volgogra 32 32 29
d 1
Volgogra 80 80 75
d 2
Volgogra 72 72 0
d 3
Subtotal 460 270 182 342 30 170
Voucher
certifi
cates
Novgorod 40 40 2 38
Pskov 40 40 2 38
Subtotal 80 80 4 76
Total 460 270 262 422 34 246
Figure III.1: Housing Units Built in Volgograd for Russian Officers
(See figure in printed edition.)
Figure III.2: Duplexes Built
in Tula for Russian Officers
(See figure in printed edition.)
Of the 10 project sites in 5 cities, USAID terminated 3: one because
newly elected local officials refused to meet the previous
administration's commitments to provide infrastructure support to the
housing units and 2 because contractors defaulted on their building
commitments.
In Novosibirsk, USAID and PADCO officials said federal and oblast'
officials were not involved in the initial agreements. Therefore, they
had no authority to require the local administration to abide by the
contract, and they would not allocate additional funds for the
infrastructure.
In Lipetsk, the contractor was a private voluntary agency that
subcontracted with a local Russian construction firm to execute the work.
When the subcontractor defaulted, the agency was unable to find a
replacement to complete the work. At the Nizhniy Novgorod 50-unit project
site, project officials said the Russian contractor ran into financial
problems and stopped work, claiming that the $8,500 per unit allowed in
the contract was not enough to cover costs. Although the city offered
several incentives, including a $300,000 letter of credit and land for
additional construction, USAID and PADCO officials said the contractor was
unwilling to spend his own funds and the contract was terminated by
USAID.
USAID officials said the contractor at the 128-unit Nizhniy Novgorod site
was concerned that $8,500 per unit was not enough to cover the cost of
construction. The contractor had completed almost 70 percent of
construction when increased construction costs, caused by rapidly rising
inflation (9 percent a month) and the devaluation of the ruble, forced him
to stop work. According to USAID officials, because the contractor had
done a good job, used his own funds from other projects, and was
well-connected with city and oblast' officials, he negotiated an agreement
so that the oblast' and USAID would cover the increased costs of the 128
units. To ensure the project's completion, USAID and the oblast'
administration each provided an additional $700,000, thus increasing the
per unit price to $19,500.
Because contracts were terminated months after they were awarded, USAID
developed a method to meet the housing requirements quickly. It awarded a
contract to the Urban Institute to implement a voucher certificate
program, which allowed officers to purchase existing local housing in a
participating area or housing under construction. Because of increased
construction costs, the inclusion of land, and infrastructure costs, the
vouchers were increased from the $8,500 per unit in the construction
program to a maximum of $25,000 per unit. According to USAID officials,
using voucher certificates allowed the pilot program to provide housing
units much quicker than through direct construction. As of January 30,
1995, 80 vouchers had been disseminated to the officers, and 76 (95
percent) of the them had been used to purchase units, which were turned
over to the officers.
The International Catholic Migration Commission's efforts to address one
of the project's secondary goals of job skills training has shown limited
results, according to USAID housing officials. As of December 1994, it
had arranged training for 46 beneficiaries who attended business courses
in Pskov, Novgorod, and Volgograd. The USAID official said construction
delays and the subsequent delays in officers relocating to their
respective cities affected start-up activities. Further, the official
said the Commission did not adequately identify the officers' training
needs and failed to recognize that many of them were not interested in
training.
Project officials said only minimal progress was made in addressing other
secondary goals, such as demonstrating new housing technologies, expanding
customer choices, and implementing more stringent quality control
standards. For example, in Tula, contractors constructed 14-, 16-, and
30-unit duplexes, which took as long or longer to build than traditional
high rise structures. (See fig. III.2.) PADCO field representatives
worked with local builders to ensure that quality control measures were
introduced and achieved.
RESULTS
The officer resettlement pilot project accomplished its objective of
providing housing to demobilized officers. The project was not designed
to address systemic reform or to be sustainable, and it did not do so.
PADCO officials said the attempts to sustain the effects of the project's
secondary objectives were short-lived, although the lessons imparted by
PADCO--new housing technologies, housing choices, and quality control
measures-- may have some positive effect on the building industry and
contractors. USAID and Urban Institute officials said the lessons learned
from implementing the voucher certificate activity by the banks, realtors,
and local governments may be used to facilitate the local governments'
transition to a private housing market.
As a result of the pilot project, USAID incorporated the lessons learned
as it designed the $160-million follow-on initiative to provide 5,000
units to officers from the Baltics. The primary changes included (1)
obtaining total support, involvement, and buy-in from all three levels of
Russian government; (2) using the voucher certificate program to expedite
the relocation of 2,500 officers; (3) stipulating that a maximum of 10
percent of the demobilized officers could come from local jurisdictions;
(4) using a U.S. construction management firm as the prime construction
contractor and subcontract to the individual builders; (5) using only
experienced, well-connected Russian builders; (6) selecting partially
completed buildings and sites with existing infrastructure; (7) using a
traditional Russian housing design; and (8) providing a more realistic per
unit cost ($25,000 versus $8,500). According to USAID officials, these
changes are expected to allow the follow-on project to proceed more
quickly and efficiently than the pilot.
USAID MANAGEMENT
USAID-Moscow had management responsibility for the project and generally
did a good job of managing, monitoring, and overseeing it and coordinating
with USAID-Washington. PADCO officials said USAID-Moscow actively
assisted the contractors in reaching acceptable compromises with
government officials and contractors. The USAID-Moscow project team
reviewed project status reports, visited project sites, and held regular
meetings with contractors. Finally, AID terminated work when problems
could not be overcome.
(See figure in printed edition.)Appendix IV
COMMENTS FROM THE U.S. AGENCY FOR
INTERNATIONAL DEVELOPMENT
(See figure in printed edition.)
The following are GAO's comments on USAID's letter dated June 1,
1995.
GAO'S COMMENTS
1. We have incorporated these comments into the report where
appropriate.
2. Although we noted project shortcomings, we also recognized the
contribution Deloitte & Touche made toward the privatization process and
considered the project a success. Moreover, we recognized USAID's
positive contribution to the overall privatization effort.
3. We conducted a detailed review of Tri Valley Growers' performance, one
of the three contractors responsible for implementing the agribusiness
partnerships project, to determine whether this expenditure of funds had
any sustainable impact. We concluded that it did not. Although we did
not draw any conclusions about the agribusiness partnerships project as a
whole, our analysis casts doubt on whether the project can have a systemic
impact if the individual partnerships are not having an impact. (See
comments 29 and 30 for additional discussion.)
4. It is too early to know whether USAID's prediction concerning the
outcome of ongoing activities in the energy sector will result in
significant sector reform. Many of these projects are just starting and
must overcome many obstacles. For example, in our September 1994 report
on nuclear safety, we reported that there are no guarantees that the
international assistance effort will result in safer reactors or expedite
the closure of the riskiest reactors.\1 In fact, in the absence of a
commitment to close down the reactors, the assistance may encourage their
continued operation. We noted that donor countries face formidable
challenges in promoting the closure of the Soviet-designed reactors
because the countries operating them depend on the nuclear power to meet
their needs for domestic energy and export income.
5. We agree that the new evaluation system is promising in that it should
provide an improved basis to evaluate USAID's programs in the NIS.
However, since the first report is not due until November 1995, it is too
early to know whether the system will fulfill its promise. The value of
the system will depend on the indicators selected, the reliability of the
data, and the subjective judgments of USAID officials preparing the
reports. For the system to have credibility, USAID will have to be able
to identify shortcomings as well as successes.
6. We have modified the report to reflect this information.
7. We were able to reconcile obligations and expenditures in the USAID
financial report with other USAID documentation. Accordingly, we have
deleted the examples from the report.
8. Our draft report included information on the work of the Consuls
General. We have modified our report to update the information on
increased site visits.
9. Although market forces played a role in the limited use of some of the
centers, the lack of local support as well as other factors also caused
the low activity levels at some centers. More importantly, it is
questionable whether USAID should spend funds on activities without a
market unless it has a strategy to create demand for the product it is
financing.
10. We visited only one site (in Siberia during February) because of the
limited amount of time we had in country. Vorkuta can be reached by plane
in the winter. USAID can visit the sites at other times during the year.
We believe that three site visits--two occurred after we began our
audit--in 31 months is inadequate for monitoring purposes. Day-to-day
contacts with PIER staff are important; however, they do not substitute
for site monitoring or provide USAID with an objective basis for
evaluating the project's success.
11. The accomplishments noted in our report are those that have had the
greatest impact. PIER did not provide us with any statistics that
indicated increased mine safety or productivity. Moveover, a September
1994 study produced by the U.S. Department of the Interior indicates that
mine safety in Russia is actually getting worse. The beneficiaries we
spoke with indicated that they were implementing new mining methods
introduced by PIER; however, they did not mention any measurable increases
in productivity. In addition, although productivity and efficiency are
important, overall production for the coal sector is still too high.
Finally, PIER's Moscow director stated that this project has had the
greatest impact in the areas of restructuring, private sector involvement,
and social safety net development.
12. Our report does not state that an interim evaluation is imminent and
may lead to activities being redirected. Our report states that "USAID
management admitted that no annual assessments or midterm evaluations were
conducted," even when required by the cooperative agreement.
13. USAID's new procedures did not affect the program during the time
frames we reviewed. Also, the work plan example should be taken in the
context that several iterations of the plan have been submitted and
revised since November 1994.
14. Our draft report did not recommend that more authority be delegated.
15. Our report was modified to show that the Ministry of Environmental
Protection and Natural Resources was involved in the initial selection of
project activities. However, the Ministry did not participate in
designing the projects as USAID suggests. USAID acknowledges the almost
immediate shift of its relationship from the central to the local
government once the projects were selected. We remain concerned over the
lack of federal involvement, especially regarding the provision of
resources and the limited potential for replicability. We believe that
without outside funding or support from the federal level, sustainability
and replication will be difficult.
16. As indicated in the report, we found that as of February 1995, the
Far East project had contributed little to systemic reform and is
unsustainable without outside funding. The report discusses the project's
attempt to address systemic reform through efforts to maintain and restock
the forestry base.
17. As indicated in the report, the deliverables identified in the
delivery orders generally cited reports and studies as the results. We are
unable to verify USAID's statements regarding the project's results.
18. Although we recognize that this project was only one of many in the
energy sector, we found that the project is unlikely to contribute to
systemic reform because of its design and the lack of monitoring and
follow-up by USAID.
19. USAID suggested that we select this project in part because USAID
represented it as a success, based on an independent evaluation. We
visited only Yekaterinburg for two primary reasons: USAID suggested that
it was a good site to visit and it was one of only two cities where
equipment was installed and extensive energy audits and training were
provided. However, as we reported, the equipment had not been installed.
USAID's assertion that our conclusion is based almost entirely on the site
visit is wrong. Our conclusion is also based on discussions with
representatives from RCG-Haggler Bailly, Joseph Technology, Honeywell, and
USAID officials responsible for the project and our review of numerous
documents on the entire project.
20. We did not make statements or draw conclusions about other projects
in the program or about the overall program. We noted that there was no
indication that the project we reviewed had contributed to systemic
reform. The energy efficiency audits and demonstration sites can only
have an impact on systemic reform if USAID ensures that (1) equipment is
installed; (2) equipment and training is used; (3) the recommendations in
the energy audits are implemented; (4) the results of the project are
monitored, recorded, and publicized; (5) appropriate personnel have access
to the demonstration sites; and (6) problems such as lack of equipment
certification are corrected. At the time we conducted our fieldwork,
USAID was not ensuring any of these elements because the project did not
include any mechanisms for long-term monitoring or replicating the
project. USAID, in its comments, acknowledged that the project alone is
unlikely to have an impact on systemic reform.
21. We agree that the dollar value of the uninstalled equipment
constitutes a relatively small percentage of all the equipment purchased.
The fact that USAID was unaware of the problems in Yekaterinburg and had
not monitored whether any cost savings had been achieved and did not know
whether any systemic improvements had resulted from the equipment, energy
audits, and training provided is the issue.
22. The consultant's evaluation indicated that all of the equipment was
installed in April 1993. The documents we reviewed indicate that the
equipment was provided in April and May 1993. If the equipment did not
arrive until June 1993 as USAID suggests, USAID should have known the
evaluation had problems when it indicated that all the equipment was
installed 1 or 2 months before the equipment ever arrived.
23. We contacted individuals who were identified as participants by
USAID-Moscow.
24. Our conclusion that the training was irrelevant was not based on our
discussions with the participants of the PIET training courses. It was
based on statements by various USAID officials, including the USAID-Moscow
Mission Director and the Chief of USAIDWashington's Europe and the Newly
Independent States- Health and Population Office. For example, USAID
officials told us that a 2-week training course without follow-on
activities could not be expected to result in any systemic reform. In
addition, as we also noted in the report, because USAID had not conducted
any long-term monitoring of the participants, it had no evidence that any
of the participants instituted systemic changes based on the training.
The opinions and views of the participants we interviewed were used to
provide insight as to why no systemic changes had occurred.
25. Contrary to USAID's comments, we referred to the course evaluations
in our draft report. We stated that ". . . most participants were
satisfied with the course and believed it was applicable to their work
conditions." However, our assessment was not concerned with whether the
participants were satisfied with the course but with whether the goals of
the PIET contract and the Freedom Support Act were fulfilled.
26. We question USAID's assertion about the actual positive impact of the
training and follow-on assistance. First, at the time of our review,
follow-on assistance was not planned to begin for another 6 months and no
assessment had been completed to confirm or deny USAID's assertion.
Second, despite repeated USAID statements that the Siberian participants
were involved in follow-on projects, USAID project officials did not know
how many were actually involved. When the contractor compiled this data
for us, the USAID project official in charge of the program was surprised
that 75 percent of the participants in Siberia were not involved with the
planned follow-on activities. Finally, USAID health officials we spoke
with were unanimous in their assessment that the follow-on project's
progress to date has been a disappointment.
27. Contrary to USAID's assertion, we met with the Russian Privatization
Center (RPC) official responsible for the project. This official
questioned the competence of some of the consultants.
We also believe that the characterization of this project as a qualified
success is an overstatement. Project task orders were never modified,
thus the focus of the project remained to increase the availability of
commercial real estate. However, after project completion, large amounts
of commercial real estate continued to be leased in the selected cities
under conditions that encouraged inefficient use, and the municipalities
failed to maximize revenues.
Furthermore, we noted that the Center, in one of the memorandums quoted by
USAID, questioned the reliability of IBTCI representations and indicated
that USAID and the Center believed that the Perm' model was being rolled
out to the other cities. The memorandum stated the following:
At our most recent meeting, on June 2, Jay Kalotra [the project director]
presented a preliminary draft of the wrap-up memo for the project. At
that time, I reminded Jay several times that deviations from the Perm'
model would have to be rigorously defended to both USAID and the senior
management of the RPC. Jay's response was that IBTCI deviated from the
Perm' model in large part because the model was ill-suited to the chosen
roll-out cities. To a considerable extent, this may be true. However,
this obviously does not exonerate IBTCI, since their task was to find
cities where a pure roll-out could be performed. [underscoring supplied]
In its most recent memos, IBTCI suggests that they told us at the outset
they would adopt a broader approach than BCG took in Perm'. While it is
true that IBTCI states some very ambitious goals, it is disingenuous to
suggest that we agreed to replace the Perm' model with something else. .
. . [underscoring supplied]
However, as noted above, even three weeks ago IBTCI was maintaining the
pretense of Perm'-style results. And it was only when we actually visited
the project sites that we could see the extent to which deviations had
occurred. [underscoring supplied]
IBTCI was clearly responsible for selecting the cities. GKI relied on the
contractor, but GKI's approval did not relieve the contractor of this
responsibility. Because the contractor did not attempt to use the Perm'
model during the roll-out phase, it is impossible to determine if the
Perm' model could be applicable to the other cities.
28. Our report draft specifically stated that the IBTCI team spoke
Russian and had meaningful business experience. The issue was IBTCI's
awareness of local conditions in order to replicate the Perm' model.
Although the project manager on the roll-out was also the comanager for
the pilot, none of the city team leaders had worked on the Perm' pilot.
29. Our analysis casts doubt on whether the entire project can have a
systemic impact if the individual partnerships are not having an impact.
30. We did not assess the activities of CNFA because the USAID Inspector
General was evaluating CNFA's work. Discussions with the USAID Inspector
General's office indicate that some of CNFA partnerships are experiencing
problems and consequently are not contributing to systemic reform. In
addition, CNFA's August 1994 evaluation of the agribusiness partnerships
project indicates that the overall project had not achieved the desired
results. Also, USAID's February 1995 review of the agribusiness
partnerships states the following:
It is not realistic to expect the agribusiness partnerships program to
have a significant, measurable impact on overall food systems in the NIS.
The limited number of partnerships being supported suggests such national
level impacts are unlikely during the life of the activity, if ever.
USAID-Moscow staff stated that the agribusiness partnerships project could
not by itself influence systemic reform.
31. Although TVG has established three partnerships in Russia, only one
(Petoseed) is functioning. According to TVG staff, CTC Foods has run into
financial problems; consequently, its potato processing facility may never
be constructed. Finally, the third partnership (Big Sky Foods Trading,
Inc.) has only recently been approved, and it is too early to determine
whether this project will be successful.
32. USAID staff in Moscow and Washington characterized the project as
discontinued because no more partnerships can be introduced and no more
funds will be obligated.
33. USAID-Moscow staff said TVG had not performed adequately and had not
identified appropriate partnerships. The documents we reviewed also
indicated that TVG was not performing well.
34. Our report includes examples of the causes for delays in the approval
process, including the need to deal with legal issues.
35. We modified the report to reflect this foreign policy goal. However,
the primary objective for the pilot project announced in April 1993 did
not focus on relocating officers from the Baltics. The announcement made
in July 1993 focused the program on the removal of officers from the
Baltics.
36. USAID is incorrect in stating that the oblast' was involved in
signing the memorandum for Novosibirsk. It was only signed by USAID and
the municipality of Novosibirsk.
Nuclear Safety: International Assistance Efforts to Make Soviet-Designed
Reactors Safer (GAO-RCED-94-234, Sept. 29, 1994).
MAJOR CONTRIBUTORS TO THIS REPORT
NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C.
Louis H. Zanardi
Eugene D. Beye
Edward J. George, Jr.
EUROPEAN OFFICE
Peter J. Bylsma
David M. Bruno
Jodi McDade Prosser
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