Eurasia Foundation going local

Bill Maynes

Founded in 1992, the Eurasia Foundation has made more than 7,700 grants, dis-bursed more than 450 loans and invested more than $335 million in support of pro-grammes in the successor countries of the Soviet Union. Today the Foundation has undertaken a new challenge: creating independent institutions throughout the re-gion and supporting these new independent foundations as a partner.

The first re-gional office to be localized was the Russian office, with the launch of the New Eurasia Foundation in 2004. The plan is to have independent regional offices estab-lished in Central Asia, Caucasus and Ukraine by the end of 2006. It may not be an easy process but it’s a logical and inevitable step, as Eurasia Foundation President Bill Maynes explained to Alliance.

The Eurasia Foundation’s first efforts to establish independent local institutions began in 2001 with institutional development grants to two grantees to help them grow into self-sustaining entities: the Economic Education and Research Consortium (EERC) and the Small Business Loan Program.[1]

Localizing the regional offices

The process of localizing the regional offices began a year later with the appointment of regional vice presidents. A regional vice president was appointed for Russia in 2002, for Central Asia a year later, for the South Caucasus and Ukraine in 2004.

The official opening of the first independent regional office came in 2004, with the launch of the New Eurasia Foundation (FNE) in Moscow.[2] Eurasia Foundation pro-grammes in Russia were then transferred to the new foundation. FNE is registered in Russia, headed by a Russian citizen, and overseen by an international board initially comprising seven Russians, five Europeans and five Americans. The westerners were re-quested by the Russians to help strengthen the independence of the board.

Eurasia Foundation Central Asia (EFCA), based in Bishkek, Kyrgyzstan, will be launched in February 2006.[3] Plans to create local institutions in Caucasus and Ukraine are less advanced, but they are expected to be registered in 2006.

Disappointments along the way

The lack of funding from Europe has been a disappointment. ‘We hope that there will be European core funding,’ says Bill Maynes, ‘which there isn’t at this point, though there is some project money.’ But he remains hopeful that European money may come in when the Ukraine foundation opens because there is a clear European interest in their ‘new neighbours’.

How long will there be foreign money going to FNE? ‘Three or four years ago, Putin said that money to support Russian NGOs should come from Russia. Well, I happen to agree with that,’ says Maynes. ‘Not that foreign donors should generally be barred from sup-porting Russian NGOs, but support should increasingly be coming from Russian donors.’ Apparently FNE has raised about $2 million so far from Russian donors – less than had been hoped for, but still a significant sum. ‘We were hoping for something like $10 mil-lion, but something called the Khodorkovsky affair took place.’

The Khodorkovsky factor

The significance of this is not so much that FNE was expecting money from him – though they were – as ‘the fear factor that has affected other donors’. The $2 million has come mainly from Russian businesses, and it’s mainly for community development. ‘Many of these businesses are extracting resources, and they’ve developed what we in the West would call a one-company town,’ explains Maynes. ‘These businesses are carrying on functions that governments elsewhere would perform. But they want to get out of it. For that to happen, a community has to develop. So now they’re trying to find a way to develop small businesses and stronger communities around the core business, and to help local communities deliver services.’

About 80 per cent of Russia’s 450,000 NGOs are probably supported entirely by Russian sources – those working in safe areas such as orphanages, education, sport and opera. To date most Russian organizations that deal with human rights or the free press – ‘basically institutions that give the ordinary citizen a larger voice’ – or based in sensitive regions of Russia such as Chechnya, have been funded by the West. ‘But Russians were beginning to creep into these areas,’ says Maynes. ‘One of the tragedies of the Khodorkovsky affair is that it has frightened a number of Russian donors away.’

Difficulties in registering the grant

But this is not the only difficulty FNE has been experiencing. Any grant to a Russian or-ganization now has to be registered by a government committee, otherwise it will incur profits tax at 30 per cent. Although FNE was registered in 2004, its grant from the Eura-sia Foundation still hasn’t been registered. ‘They’ve told us that we will not be turned down,’ says Maynes. ‘What I think is happening here is a classic case of a bureaucrat avoiding making any decision. I think to myself, if I turn you down it’s going to be a big scandal, and if I approve it maybe in six months’ time it’s going to be a scandal. So just nothing is happening.’

The only alternative for a foreign donor is to make a donation,[4] but this means that the donor loses all control over the grant. ‘It’s like my giving you $1,000 at Christmas. It’s yours, at least legally, without any obligations whatsoever. A number of foundations have in fact done this, and we are going to as well, but from a donor’s standpoint it’s a big step.’

FNE has continued to work with some money from Russians and some money from the Eurasia Foundation in the form of a donation, but they haven’t solved the key issue of registering a large institutional grant.

Will the new NGO Law cause further difficulties? ‘We don’t know yet,’ says Maynes. ‘But certainly, just like the Khodorkovsky affair, it’s given pause to people about being involved in organizations that support free speech, human rights, etc.’

The risks of independence

The obvious risk in creating independent organizations is that they may not do what you want them to. The Eurasia Foundation hopes that the four organizations will form a net-work and work with each other. ‘A new UNDP study emphasizes that many of these countries don’t have much of a future unless they cooperate with each other,’ says Maynes. They will be encouraged to work together through core funding from Washing-ton or elsewhere, but they won’t be institutionally linked in any way. ‘We’re going to try to hardwire their charters and the interests of the people appointed to their boards in that direction. But of course there’s no guarantee because they really are independent organi-zations. That’s a risk, we know that.’

According to Maynes, the donor’s big fear is that they will create a ‘runaway foundation’. If the new foundations can raise local money and decides to adopt a totally new mandate, they will have the legal basis to do it. ‘I think there are ways to deal with that, through selection of the right board, through core grants, etc. They’re not going to wander too far off if in order to turn on the lights they need help from key donor sources.’ But there is a real dilemma here. ‘You want them to have more independence, more responsibility, oth-erwise when is the transition ever going to end?’

Why localize?

‘I think it’s clear that we’ve come to an end of a period in our relationship with these countries,’ Maynes explains. ‘In 1991, these countries mostly wanted to join Europe, and to join Europe you had to be a democratic society and have a totally different economic system. So they welcomed our help in the transition. Donors poured in, and a lot of out-side experts (some not so expert). Over ten years on, there’s less need for outside experts. What was help at the beginning begins to become patronizing and less and less accept-able. We should be moving to a transition.’

Unfortunately, recent political developments in the region such as misplaced perceptions of the colour revolutions and new and unfavourable NGO laws have not been helpful. Nor have external events helped, ‘though the scandal of the British “spy rock” reinforces the desirability of our doing what we’re doing,’ says Maynes. ‘Basically governments should get out of the democracy business and find vehicles that give some distance be-tween the governments and their efforts to promote democracy, and the only way you can do that is through an independent foundation.[5] It gives a certain necessary distance.’

One disadvantage of independent foundations is that they may make decisions the donor governments don’t like. ‘I’ve had US embassies protest to USAID about a few of our de-cisions. To its credit, USAID has seen the overall value of an autonomous foundation.  But obviously there are limits,’ says Maynes. And if you follow that logic further, creat-ing independent local organizations is a natural next step. ‘It’s basically a matter of em-powerment.’

What long-term role for the Eurasia Foundation?

Once the four independent regional offices are established, the Eurasia Foundation will become a US-based donor making grants to the new organizations. No reduction in fund-ing is planned at present, but ‘if the transition takes place in the way I would hope, the core funding from the US would end up at maybe half of what it has been and they’d make up the difference from local contributions and contributions from others.’ In Maynes’ view, there are only a very few countries in the region that are potentially wealthy enough that one can imagine funding coming entirely from local sources. The Eurasia Foundation would also provide technical assistance, for example help with grant applications to other organizations and with quality control and monitoring.

1 In 2003, EERC became an independent organization, though the Eurasia Foundation continues to be a major donor and a member of its board. The Izmirlian-Eurasia Univer-sal Credit Company (UCC), successor to the Small Business Loan Program, which oper-ated in Armenia for 10 years, received its licence from the Central Bank of Armenia in 2004. In its first year of operation, UCC built a revenue stream sufficient to cover core expenses.

2  FNE was co-founded by the Dynasty Foundation of Russia, the Madariaga European Foundation of Belgium and the Eurasia Foundation.

3 Most of the local money is coming from Kazakhstan, but the foundation is being estab-lished in Kyrgzystan because it was easier to get registered there.

4 A donation may still be liable for VAT but not for profits tax.

5 An article by Timothy Garton Ash in the UK Guardian newspaper (26 January) makes the same point. The Westminster Foundation for Democracy plays the same role in rela-tion to British government money as the Eurasia Foundation does with USAID funds.


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