In trusts we trust?

Pavol Demes and Joerg Forbrig

In recent years, the term trust has made a notable entry into the discourse of the new democracies of Central and Eastern Europe (CEE). On the one hand, it has been observed that transition countries are characterized by low levels of trust in society. As a result, interest has arisen in those aspects of democratic life that are beyond institutions, such as culture, values and trust.

On the other hand, and seemingly unrelated, the term has signalled a new form of philanthropic institution. The recent emergence of several such entities indicates a new trend in American support for civil society and democracy in the region.

Since 1989, US support in CEE has addressed the emergence of a strong civic sector. Driven by the belief that the empowerment of citizens is crucial for vital new democracies, both private foundations and government agencies have rendered massive assistance for civil society development. US support has undoubtedly contributed to the emergence and strengthening of a vibrant web of civic organizations.

Steady progress, together with the foreseeable accession of the more advanced new democracies to the European Union (EU), led many US donors to reassess their involvement in CEE. For some, this meant gradually phasing out support and shifting their attention elsewhere. Others acknowledged the need for continued assistance but decided to develop new ways of allocating the shrinking funds available.

Some donors have focused on strengthening a small number of core institutions of civil society. Significant assistance has gone to grantmaking bodies at national, regional and community level. Others have supported civic structures of a more operational kind, devoted to specific problems such as alternative education, minority rights and community development. This approach could be coined as creating islands of sustainability.

There have also been efforts to build consortia of donors, which have created new funding bodies, typically called trusts, to serve civil society at large. Several trusts are now operating, or about to be launched, in CEE: the Baltic-American Partnership Fund, the Trust for Civil Society in Central and Eastern Europe, the Balkan Trust for Democracy, and the Eurasia Foundation Trust (see box on p12).

What the new trusts have in common

Although initiated by differing sets of donor agencies in different geographical areas, these trusts have a striking number of features in common.

Partnerships
They all involve partnerships. Several donors pool financial resources, develop a new identity and name for the joint grantmaking programme, and determine resource management by consensus. In most cases these are public-private partnerships. USAID[1] and US private foundations have jointly established several trusts. This was also the intended model for the CEE Trust which, however, materialized as a partnership of private foundations.

Long-term regional approach and sinking endowment strategy
All trusts are committed to a grantmaking period of at least ten years in groups of several countries (the Baltic republics, the Balkans, CEE, former Soviet republics). Funds are to be used up within a predetermined period of time. Typically, trusts welcome other, not necessarily US-based, funders to add to the original endowment, and make fundraising efforts accordingly.

Local recipients and local involvement
The beneficiaries of trust grants are mainly local civil society organizations, although trusts may define a broader range of recipients, as is the case with the Balkan Trust. Trusts rely heavily on the knowledge of local experts for grant and asset management and for their decision-making processes.

The notion of trust

Central to this trend – not only in the name of the entities – is the notion of trust. Although initiated by US organizations, trust grantmaking is carried out by local organizations in the beneficiary countries, typically through regranting schemes. Local experts identify projects and organizations worthy of support. Local organizations and individuals are thus entrusted with managing and distributing foreign assistance. The central role of locals in the functioning of trusts is likely to result in significant capacity-building – in expertise, professionalism and transparency – in the countries covered.

This pioneering approach will certainly encounter problems. The very establishment of grantmaking schemes involving several partners will be difficult at times; the public-private nature of most trusts will further complicate this process. New management procedures have to be developed. Different cultural contexts will probably leave their traces. Most likely, each of the trusts described will take its own course of development.

Nevertheless, there is a trend worth noting, and it certainly merits continued observation – US  institutions have long been at the forefront of developing modern philanthropy. For various reasons, it is also a trend that is particularly relevant for the European context. First, eight of the countries in which these trusts are operating will join the EU in 2004. Essentially, this directly imports another American philanthropic model to the EU. Trusts like these could become an excellent example of good transatlantic practice, particularly important at a time when ties between America and Europe are under strain.

Second, the problems addressed by the above trusts and US philanthropy more broadly are equally salient in Europe today. There is, for example, much talk about ‘bringing Europe closer to its citizens’; it would be worth exploring how trusts can be effective vehicles for achieving this.

Third, since 1989 CEE has become a fascinating laboratory for political and social change. A wealth of experience has been accumulated, particularly concerning civic initiative and philanthropic activity. The lessons learned here, including the recent experience with trusts, are no less relevant for Western European democracies.

In all these, and probably many more respects, trusts have much potential for shaping philanthropy in Europe, particularly if successful in attracting European funding. This development would also strengthen the all too often scarce resource of social trust – of Europeans in themselves, in each other, and in their institutions.
The new trusts

Baltic-American Partnership Fund
BAPF was established in 1998 by USAID and the Open Society Institute as a public-private partnership. Each founder contributed $7.5 million to BAPF to be spent over ten years. BAPF is a New York-based public charity; the programmes in the Baltic countries are implemented by the Soros national foundations.[2] Through its local partners, BAPF provides grants to strengthen the capacity and sustainability of local NGOs. BAPF’s priorities are to develop a legal and regulatory framework supportive of NGOs, to foster the emergence of a critical mass of effective NGOs, to diversify sources of long-term sustainable financing, and to assist NGOs in effective public policy advocacy.
See http://www.bapf.org

Trust for Civil Society in Central and Eastern Europe
The CEE Trust was formed in June 2000 by a consortium of private grantmaking foundations as an independent public charity under US law.[3] The Trust aims to support the development and long-term stabilization of civil society in Bulgaria, the Czech Republic, Hungary, Poland, Romania, Slovakia and Slovenia. To achieve this purpose, $75 million will be spent over the next ten years.

The Trust has three mutually reinforcing objectives: to support legal, fiscal and political environments for flourishing civil societies; to strengthen the non-profit sector through institutional capacity-building: to support the long-term financial sustainability of non-profit organizations. Its local partner organizations in the seven target countries act as regranting agencies for local NGOs implementing locally developed programmes.
See http://www.ceetrust.org

Balkan Trust for Democracy
In April 2003 USAID, the German Marshall Fund and the Mott Foundation announced a new $25 million initiative to support good governance in South-East Europe. The Balkan Trust, headquartered in Belgrade, begins operations in summer 2003 and will work in Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Macedonia, Serbia and Montenegro, and Romania.

For a minimum of ten years, nearly $2 million in grants will be awarded annually to indigenous NGOs, local and regional governments, educational institutions, and the media to support local initiatives improving links between citizens and governments. The Trust also endorses cross-border cooperation to promote the region-wide political and civil society development necessary for long-term stability in South-East Europe.

USAID and GMF are each contributing $10 million, with the Mott Foundation granting $5 million. GMF is underwriting the Trust’s administrative expenses, so the full $25 million can be disbursed as grants. Additional donors are being sought.
See http://www.gmfus.org

Eurasia Foundation Trust
The Eurasia Foundation, in partnership with the Open Society Institute, plans to create a trust to support civil society in Russia and other former Soviet republics over a ten-year period, and to carry on Eurasia’s work after its current USAID grant expires in 2006. OSI will contribute $5 million annually for three to five years; the Eurasia Foundation will contribute its current budget of roughly $10 million a year.[4]
Visit http://www.eurasia.org for further information.
1 The United States Agency for International Development (USAID) is the principal government agency for foreign assistance.

2 Open Estonia Foundation, the Soros Foundation Latvia and the Open Society Foundation – Lithuania.

3 Endowing foundations include The Atlantic Philanthropies, the Mott Foundation, the Ford Foundation, German Marshall Fund (GMF), the Open Society Institute, and Rockefeller Brothers Fund.

4 See Alliance, Vol 8, No 2, March 2003, p5.

Pavol Demes is Director for Central and Eastern Europe, and Joerg Forbrig is a programme associate, at the German Marshall Fund of the United States’ Bratislava office. They can be contacted at pdemes@gmfus.org and jforbrig@gmfus.org respectively.


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