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USAID/Croatia 

Operational Plan 

FY 2006 

June 13, 2006 
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Please Note: 

The attached RESULTS INFORMATION is from the FY 2006 Operational Plan and was assembled 

and analyzed by the country or USAID operating unit identified on the cover page. 

The Operational Plan is a "pre-decisional" USAID document and does not reflect results stemming 

from formal USAID review(s) of this document. 

Related document information can be obtained from: 

USAID Development Experience Clearinghouse 

8403 Colesville Road, Suite 210 

Silver Spring, MD 20910 

Telephone: (301) 562-0641 

Fax: (301) 588-7787 

Email: docorder@dec.cdie.org 

Internet: http://www.dec.org 

Portions released on or after July 1, 2006 
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Program Performance Summary FY 2005: The opening of accession negotiations with the European 

Union (EU) in October 2005 opened a new chapter in Croatia's history. The negotiations present both 

challenges and opportunities for economic and democratic reform in Croatia. The Government of Croatia 

(GoC) has committed itself to enacting and implementing reforms in business regulation, the judiciary, 

ethnic minority rights, and political process. Moreover, the prospect of EU accession provides an 

opportunity for new alliances to improve the business climate and Croatia’s competitiveness in open 

markets and increases stability in the region. USAID is well-positioned to promote constructive policy 

and regulatory reforms. 

Economic Growth 

USAID's priorities for economic growth in Croatia include: supporting an innovative and dynamic small 

and medium enterprise (SME) sector that is producing goods and services competitive in open markets; 

creating new jobs; and spurring private sector growth. The implications of EU membership affect 

USAID's Economic Growth initiatives in a number of ways. The demand for enterprise development 

training and technical assistance has increased as firms attempt to improve their competitiveness in 

global markets. A similar surge in demand for quality standard certification for export products has 

already been experienced and should intensify in 2006. USAID/Croatia will increase assistance in both 

areas to accommodate heightened demand. 

USAID's economic development program is comprised of five components: Increased Agricultural 

Productivity; Increased Private Sector Growth; Strengthened Financial Sector Contribution to Economic 

Growth; Expanded and Improved Access to Economic and Social Infrastructure; and Improved Economic 

Policy and Governance. All are focused on establishing the conditions to generate investment and 

private sector employment. In FY 2005, USAID directly assisted farmers, producer organizations, 

processors and other market actors to raise the competitiveness of the Croatian agricultural sector in 

order to compete in national and open markets. Croatian businesses, especially SMEs, received 

assistance to acquire skills, financing, and services to improve their product quality and broaden their 

markets. USAID provided technical assistance and training to the GoC to strengthen its independent 

energy regulatory authorities and assist the national electrical utility with its restructuring and 

modernization efforts. USAID provided expert assistance to the Central Bank of Croatia and other 

regulatory institutions that enabled them to meet stringent EU accession requirements. 

USAID's economic development program produced many positive results in FY 2005. The private 

sector's share of employment increased to 63%, a 2% increase over 2004. The annual total buyoff (total 

value of sales of domestic agricultural products) achieved 97% of target. The number of jobs created 

among assisted SMEs far surpassed the target with 2,869 jobs created. Finally, investment promotion 

initiatives yielded exceptional results, with $51.6M in new Foreign Direct Investment (FDI) and a draft 

national investment promotion strategy. 

Democracy and Governance 

FY 2005 was a productive year for democratic reforms and processes. National and local elections were 

successfully held, once again ably monitored by NGOs. On the legislative front, the Government of 

Croatia (GoC) adopted a national corruption prevention program and a new law decentralizing more 

functions to local governments. In March 2005, Parliament adopted amendments on the law to local 

elections, extending voting rights to all Croatian citizens, regardless of residency. With USAID assistance, 

amendments to the law on local government were drafted. Also, a draft law for the direct election of 

mayors and county prefects entered into parliamentary procedures and will be passed in FY 2006. 

Civil society organizations have shifted from a primarily human rights focus to a much broader set of 

issues such as corruption, electoral process, rule of law, minority rights, and environmental protection. 

Local governments created new relationships with non-governmental organizations (NGOs). Several 

signed charters on NGO-government cooperation. The business sector is also becoming more active 

implementing corporate social responsibility programs, and in supporting NGOs active in social services, 

culture, sports, and youth education. The National Foundation for Civil Society Development, a national 

support organization for NGOs, improved its grant-making capacity, providing funds to many NGOs. 
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Key challenges remain decentralization legislation and policies to support local governments, and 

improving the environment for NGOs. Another challenge is improving the efficiency of two institutions 

critical for NGO-government cooperation - the National Council for Civil Society Development, an advisory 

body to the government, and the Government Office for Cooperation with NGOs. Effective functioning of 

these two leading bodies and their closer partnerships with NGOs should improve NGO-government 

cooperation and raise the role of Croatian NGOs within the EU accession process. Finally, as in many 

transition countries, an additional challenge facing NGOs is financial sustainability caused by decreased 

foreign funding and insufficient local funding bases. 

 

USAID's democracy program is focused on assisting Croatia reform policy and legislation to improve the 

environment for NGO development and for fiscal and administrative decentralization to local 

governments. It supports institutions to ensure that Croatia will have enduring advocates for 

decentralized, transparent, and participatory local government. To increase local government capacity to 

manage resources, it guides local governments through an asset inventory and management model. 

Through e-government, the Local Government Reform Program (LGRP) improves a local government’s 

overall internal efficiency and makes its operations more transparent and accessible to citizens. The 

USG will work with the EU to introduce an accession-compatible local government procurement model to 

provide local governments with guidance, best practices, and training required to carry out competitive, 

transparent and cost-effective procurement. To support civil society development, activities will provide 

advocacy skills to NGOs, helping them partner with government to promote policy reforms in areas such 

as corruption, legislative oversight, ethnic minority rights, local government, corporate governance and 

entrepreneurship. Another key priority is improving the legal framework that will support NGO 

development. 

In FY 2005, performance targets in the local governance sector were exceeded. LGRP expanded the 

number of local governments using modern public administration practices to 250. Additionally, assisted 

local governments awarded over 111 contracts and grants, thereby improving municipal services and 

reducing costs through outsourcing. In support of civil society strengthening, 40 additional CSOs were 

awarded grants, mobilizing citizens in vulnerable areas to participate in community development projects. 

One unmet target was Croatia’s rating on the NGO Sustainability Index-Legal Framework, which declined 

slightly from 3.2 to 3.5. Lack of progress on legislative change, the laws on foundations and 

volunteerism, and the code of good practices for government grant-making contributed to Croatia's 

decline on the index. 
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FY 2006 Program 

SO: 160-0130 Growth of a Dynamic and Competitive Private Sector 

Improve Private Sector Competitiveness 

Improve Private Sector Competitiveness ($4,656,339 AEEB, $412,000 AEEB carryover, $1,672,272 

AEEB prior year recoveries). USAID’s SME development activity will accelerate job creation through 

strategic investments that increase business sales and exports. These objectives will be achieved 

through technical assistance to business associations and business clusters that help them improve 

enterprise efficiency, reduce costs, and improve market access. USAID is also increasing SME access to 

finance by working with lending institutions to create new financing products and improving and 

simplifying the loan application process, the result of which is expected to be the creation of 4,000 new 

jobs in FY 2006. The program includes policy advice to the Croatian Government which encourages 

economic reforms that create an improved environment for SME development. The program will also 

support a national investment promotion strategy that integrates regional economic development 

agencies and other local initiatives. USAID assistance to promote foreign direct investment will be 

particularly relevant as prospects for EU accession lead to greater awareness of and interest in Croatia 

as an investment destination. Principal contractor: Development Alternatives Inc., Nathan Associates 

Joint Venture (prime). 

Increase Agricultural Sector Productivity 

Increase Agricultural Sector Productivity ($2,384,661 AEEB). USAID's agricultural assistance is making 

Croatia’s food products more competitive by reducing production costs and strengthening market 

linkages. In FY 2006 the program will reduce farm-to-market transaction costs and on-farm production 

costs. Further program expansion among commercial farmers and producer organizations in FY 2006 will 

expand markets and improve prices for both Croatian farmers and food processors. In addition, more 

emphasis will be placed on increasing the commercial viability of subsistence farmers located in 

economically distressed areas including Croatia’s war-affected regions. As a result of this effort USAID 

expects that at least 450 subsistence farmers in these areas will become sustainable commercial farmers. 

Principal contractor: Development Alternatives Inc. (prime). 

FY 2006 Program 

SO: 160-0210 More Effective Citizen Participation and Improved Governance 

Strengthen Civil Society 

Strengthen Civil Society ($1,837,000 AEEB, $480,000 AEEB carryover). USAID’s program that works 

with non-governmental organizations (NGO), CroNGO, will focus on the three most challenging areas for 

NGO development in Croatia: improving the legal environment; advocacy and NGO financial viability, 

through training, technical assistance; and NGO capacity-building grants. During FY 2006, CroNGO will 

work with NGOs to advocate at the national level for enactment of a legal framework that will foster 

development of philanthropy, volunteerism, and transparent grant-making. Specific laws targeted are 

those on foundations and volunteerism, and a code of good practices for government grant-making. 

CroNGO will continue to strengthen public advocacy organizations working in the areas of anti-corruption, 

legislative oversight, ethnic minority rights, corporate governance, corporate social responsibility, and 

entrepreneurship. The program will also advance NGO income-generation capabilities to increase 

financial sustainability. Principal grantee: Academy for Educational Development (prime). 

Support Democratic Local Government & Decentralization 

Support Democratic Local Government & Decentralization ($3,199,000 AEEB). USAID’s Local 

Government Reform Program (LGRP) targets legislative and policy change for fiscal and administrative 

decentralization. It provides assistance to 250 city and municipal governments. In its final year of 
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funding, the LGRP will expand asset management, e-government, procurement, investment project 

packaging, local government consultants, and advocacy for legislative change. The project will enable 

local governments to register $1.5 billion assets capable of generating at least $7.5 million in revenues to 

local government coffers. Fifty local governments will introduce new e-government systems that offer 

increased transparency and that will also respond to the needs of businesses planning local investments. 

A new government-wide procurement system conforming to European Union (EU) standards will be 

developed in cooperation with the Croatian procurement office and the EU. To help build the capacity of 

local governments, small infrastructure projects will be initiated in cooperation with the EU and the 

Croatian Ministry of Sea, Tourism and Communications. The Association of Local Government 

Consultants will enable local government to outsource government work, improve expertise and 

implement cost-containment measures. Public administration certificate courses will be instituted in at 

least three higher learning institutions and offered by other training providers. Advocacy for the local 

government sector will be strengthened through the development of a network comprised of 

parliamentarians, mayors and other local government officials, media, and scholars. The network will 

raise awareness on crucial local government issues including decentralization legislation, and will assist 

the central government to address these issues. Principal contractor: Urban Institute (prime). 

FY 2006 Program 

SO: 160-0420 Cross-Cutting Programs 

Program Support 

Program Support ($1,610,000 AEEB, $50,480 AEEB carryover, $996,000 AEEB prior year recoveries). 

The 2006 program has three aims. First, it will continue to place high priority on training and institutional 

development. Specifically USAID will train nearly 500 people in key areas such as local government 

administration, and will provide small training-related grants and technical assistance. Secondly, training 

will place added importance on strengthening institutions that are critical to preserve a market-oriented 

democracy after completion of USAID programs. Finally, USAID will measure performance and evaluate 

assistance programs. Principal grantee: World Learning (prime). 
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Results Framework 

160-0130 Growth of a Dynamic and Competitive Private Sector 

Program Title: Growth of a Dynamic & Competitive Private Sector 

 1.3.2: Strengthened capacity of SMEs to operate and compete 

 1.3.2.2: Strengthened business associations 

 1.3.2.3: Increased utilization of domestic agribusiness product 

 1.3.3: Increased employment and growth in lesser developed areas 

160-0210 More Effective Citizen Participation and Improved Governance 

Program Title: Citizen Participation & Improved Governance 

 2.1.1.1: Community based civic action programs expanded/implemented 

 2.1.1.2: Improved sustainability of the NGO sector 

 2.1.1.3: Improved advocacy and protection for selected vulnerable groups 

 2.1.2.1: Local government capacity to manage resources improved 

 2.1.2.2: Partner local governments award 300 contracts and grants 

160-0420 Cross-Cutting Programs 

Program Title: Cross-Cutting Programs