Janine Wedel - Collision and Collusion - The Strange Case of Western Aid to Eastern Europe

And information did not always flow well from Washington. USAID officials in the field sometimes learned about contracts signed in Washington only when contractors arrived on assignment. As USAID’s Budapest representative remarked in 1991, “I get surprised every day [when] people on contract for USAID call and I don’t know anything about it.”72 Following congressional direction that authority be delegated to the field (“in order to avoid planning and contracting in Washington for specific activities without the concurrence of the people in the field who have more intimate knowledge of the particular country”), Washington-based management changed somewhat in early 1993,73 although field representatives still lacked the authority of their Third World counterparts.

Throughout the aid effort, Central European recipients pointed out that they had little or no input into aid decisions, and often were not consulted in advance or even informed of decisions.74 Officials in Warsaw, Budapest, and Prague complained that their concerns were ignored despite the presence of American-government aid bureaus in these cities and numerous fact-finding missions from the West.75 Polish officials responsible for aid coordination were unable to obtain reliable information about how much U.S. money was being spent on particular projects, although the local USAID office was just several blocks away. In 1992, the GAO looked into U.S. aid to Poland and Hungary, the major recipients of U.S. aid to the region at the time. GAO reported that, in Hungary, many assistance transactions, including those of the United States, occurred without the knowledge of the Hungarian government’s assistance coordination unit.76

As late as 1994, speaking before a Polish parliamentary commission, Minister Jacek Saryusz-Wolski, aid coordinator of Poland, reported:

The principle of distribution of [American aid money] is such that we, as an agency, are simply informed about what they are doing with that money. At the most, we can protest, or object to a particular type of activity that we don’t like. But the Americans do what they like, and we must accept that, at the most voicing our veto.77

In contrast to U.S. aid, EU assistance to Central and Eastern Europe was structured to compel input from recipients, as well as from in-country representatives. Many of the EU’s PHARE programs were administered through Program Management Units (PMUs), which were set up either inside the government ministries or in parallel with them.78 Although EU representatives typically were assigned as advisers to PMUs, the PMUs were staffed and directed by recipients, who naturally had access to local contacts. EU representatives sometimes worked alongside their local counterparts, shared office complexes for several years, and developed collegial relationships. Some high-level EU representatives were keenly aware that their host officials were to be treated as equals. One such official remarked that “One day he [the host official] may well be my boss [in the EU structure].”

Responding at least in part to recipients’ requests and political considerations, the EU began to supply more capital assistance to finance trans-European network projects, in the form of railway lines, roads, and border infrastructure, following a Copenhagen summit in June 1993.79 As one EU official explained, “Investment finance is more visible to the public. That’s one of the reasons we’re going into it.… [Investment] can be seen and touched.”80 In the mid-1990s, as U.S. assistance to Central Europe was winding down, the EU’s PHARE program continued to evolve. PHARE began to fund projects to support pending EU members in the EU’s “pre-accession strategy.” PHARE became a major component of this strategy, “designed to help them [selected Central and Eastern European countries] align their political, economic and legal systems with those of the European Union.”81 In June 1998, the European Union adopted guidelines reorienting the PHARE program from a “demand-driven” program to one addressing the priorities of the “Accession Partnerships.”82 The new PHARE guidelines emphasized institution-building and investment support.83

However, the EU was much less partnership-oriented in its TACIS (technical assistance for the Commonwealth of Independent States, or CIS) program. Because Russia, unlike some Central European nations, was not a pending EU member, the EU was not driven by the necessity to harmonize laws with Russia. Although PHARE was composed both of technical assistance and investment, TACIS was confined almost entirely to technical assistance, as the acronym indicates.84 Further, TACIS, which was centered in Brussels, entailed much less delegation to its in-country representatives than did PHARE. (TACIS had a coordinating unit in all NIS countries, but with delegations only in Russia, Ukraine, Georgia, and Kazakhstan.)85 Although there was to be increasing decentralization away from Brussels, Michael B. Humphreys, counselor for the European Commission Delegation in Ukraine, explained that the TACIS countries should first prove themselves: Brussels, he said, has “less confidence in the ability of [TACIS] countries” [to manage their own programs] than it did in the PHARE countries.86

The EU and most other donors operated in standard (Third World) fashion in that they structured aid through government-to-government relations. By contrast, the target of U.S. assistance was almost exclusively the “private” sector. This allowed the United States to develop some “innovative ways of delivering assistance,” as Ambassador Robert L. Hutchings of the Department of State rightly stated in congressional testimony.87 One notable example of this innovation was the Enterprise Funds designed to support private business, discussed in chapter 5.

However, such a radical avoidance of government also resulted in problems. Supporting “private” actors was a way of bypassing recipient governments that were seen as suspect and full of holdover communist bureaucrats. Government-to-government links were intentionally weak. A 1992 letter from the Department of State to the GAO stated: “We have also designed our programs to deliver assistance primarily to the private sector rather than to the government. Indeed, we have intentionally avoided government-to-government aid agreements, which contrasts with the EC PHARE program approach.” As the GAO concluded, the fundamental drawback of this approach was that the U.S. assistance program “lacked coordination in working with the host governments.”88 The weakness of government-to-government links sometimes resulted in a lack of mechanisms to establish aid priorities and instruments. This made it difficult for aid coordinators in the recipient countries to anticipate and coordinate projects.89 Thus, in the case of U.S. assistance to Central Europe, neither government was systematically involved, communication channels were often unclear, and consultation on the recipient side was weak. As we will see especially in chapter 2, this meant that U.S. economic aid to Central Europe was not set up for optimal access to recipient governments or local contacts.

By contrast, as detailed in chapter 4, there also were cases in which aid contractors, with carte blanche from the donor, colluded with selected recipient elites, bypassed aid regulations, and were subject to little or no donor oversight. For example, U.S. aid to Russia delegated its economic aid portfolio to a private entity—the Harvard Institute for International Development (HIID)—which worked exclusively with a specific circle of “reformers” in (and out of) government and excluded other reformer groups in (and out of) government. As we shall observe, both extremes—of avoiding government contacts, as in the U.S. economic aid strategy to Central Europe, and of working with only one group in the government, as in the U.S. aid economic strategy to Russia—had problematic outcomes. Whatever the results, the tension between policies that regarded Central and Eastern Europeans as potential First World partners (and usually allowed for more recipient input and flexibility in programming) and the practice of aid as usual (bureaucratic procedure and precedent) became a significant feature of aid efforts.