USAID ECONOMIC RESILIENCE ACTIVITY: QUARTERLY PROGRESS REPORT APRIL 1 – JUNE 30, 2019

This publication was produced by the USAID Economic Resilience Activity under Contract No. 72012118C00004 at the request of the United States Agency for International Development (USAID). This document is made possible by the support of the American people through the USAID. Its contents are the sole responsibility of the author or authors and do not necessarily reflect the views of USAID or the United States Government.

USAID ECONOMIC RESILIENCE ACTIVITY

Quarterly Progress Report (Fiscal Year 2019 Quarter Three)

Program Title: USAID Economic Resilience Activity

Sponsoring USAID Office: USAID Ukraine

Contract Number: 72012118C00004

Contractor: DAI Global, LLC

Submission Date: July 31, 2019

Author: DAI Global, LLC

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CONTENTS

ACRONYMS AND ABBREVIATIONS ...... v I. INTRODUCTION ...... 7 II. CONTEXT UPDATE ...... 8 III. KEY NARRATIVE ACHIEVEMENTS ...... 9 IV. PROGRESS AGAINST TARGETS ...... 14 V. PERFORMANCE MONITORING, EVALUATION AND LEARNING ...... 15 VI. LESSONS LEARNED ...... 16 VII. ENVIRONMENTAL MONITORING...... 16 VIII. PROGRESS ON LINKS TO OTHER ACTIVITIES, DONOR-FUNDED PROGRAMS, AND TO HOST GOVERNMENT ...... 18 IX. PROGRESS ON INCLUSIVE DEVELOPMENT ...... 19 X. SUB-AWARD DETAILS ...... 20 XI. ACTIVITY ADMINISTRATION ...... 22

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TABLE 1: Select FUTURE EVENTS ...... 14 TABLE 2: RESULTS BY PERFORMANCE INDICATOR ...... 15

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ACRONYMS AND ABBREVIATIONS AFB Award Fee Board AMEL Activity Monitoring, Evaluation, and Learning AMELP Activity Monitoring, Evaluation, and Learning Plan APS Annual Program Statement BEO Bureau Environment Officer CDM CDM Engineering Ukraine COP Chief of Party COR Contracting Officer’s Representative DAI DAI Global LLC DGE Democratic Governance East DRC Danish Refugee Council EBRD European Bank for Reconstruction and Development EE Energy Efficiency EIB European Investment Bank EU European Union EMMP Environmental Mitigation Measures Plan ERA Economic Resilience Activity ERC Environmental Review Checklist E3 Bureau for Economic Growth, Education and Environment FAA Fixed Amount Award GDIP General Directorate for Servicing Foreign Representative Offices GoU Government of Ukraine GUC Grants Under Contract HR Human Resources HO Home Office HVA High Value Agriculture ICT Information, Communication and Technology IDPs Internally-Displaced Persons IFC International Finance Corporation IM Innovative Manufacturing

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IT Information Technology KfW Kreditanstalt für Wiederaufbau ("Credit Institute for Reconstruction”) LGBTQI Lesbian, Gay, Bisexual, Transgender, Queer (or Questioning), and Intersex LNAU National Agrarian University MEDT Ministry of Economic Development and Trade MEL Monitoring, Evaluation, and Learning MEO Mission Environmental Officer M&E Monitoring and Evaluation MoU Memorandum of Understanding NEFCO Nordic Environment Finance Corporation NGCAs Non-Government-Controlled Areas NGO Non-Governmental Organization NIP Neighborhood Investment Platform OTI Office of Transition Initiatives PPP Private and Public Partnerships REG Regional Economic Growth Project RFP Request for Proposal SDAA Senior Deputy Assistant Administrator SMEs Small and Medium Enterprises TVET Technical and Vocational Education Training SMM Social Media Marketing UCBI Ukraine’s Confidence Building Initiative ULA Ukrainian Leadership Academy USAID United States Agency for International Development VET Vocational Education Training WFD Work Force Development

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I. INTRODUCTION DAI Global LLC (DAI) is pleased to submit this Quarterly Report for the USAID Economic Resilience Activity (ERA/Activity) covering the period of April 1 to June 30, 2019. The Activity aims to improve the overall economic resilience of in response to ’s aggression, which has left industry ransacked, communities divided physically and politically, and the social, financial, and physical assets that underlie resilience nearly nonexistent. The Activity will directly contribute to USAID/Ukraine’s Development Objective 2: Impacts of Russia’s Aggression Mitigated and Intermediate Results 2.1: Conditions Improved for Reintegration and 2.4 Common Civic Values Increasingly Embraced.

BRIEF SUMMARY OF ACTIVITY

Over the next five-year period, USAID ERA will help eastern Ukraine reorient its economy toward sustainable, diverse, inclusive growth by working through three interrelated objectives:

Objective 1: Provide assistance to stabilize the economy of eastern Ukraine. This objective will build on previous work under Office of Transition Initiatives (OTI) programming and humanitarian assistance. USAID ERA will continue to support quick response, high-impact interventions that address the immediate needs of conflict-affected individuals, including internally-displaced persons (IDPs), returnees, women, youth, veterans, IDP host communities, and businesses (likely microenterprises with up to 10 employees and small enterprises with 10-50 employees).

Objective 2: Support the sustainable development of small and medium-sized enterprises (SMEs). This objective will support medium-term results by starting with end-markets, improving SMEs’ ability to deliver in-demand goods and services, and building the surrounding market infrastructure— from information to finance to knowledge and skills—that enables longer-term growth. Objective 2 will focus primarily on SMEs with up to 250 employees, in select cases, will support innovative western- leaning companies with up to 1,200 employees that are near the line of contact, which provide much- needed employment in stressed areas.

Objective 3: Build confidence in the future of the eastern Ukrainian economy. This objective will play a critical role in the integration and coordination of all USAID ERA interventions over the period of performance and culminates in the most important Activity result: a path forward to a viable economic future for eastern regions as an integrated part of the Ukrainian economy, one which is understood and supported by the population of the region, and one that energizes people into entrepreneurial action. By orienting interventions under Objective 3 around current and potential end markets for growth sectors that are a combination of traditional and new, USAID ERA will simultaneously promote the diversification that will lead to a more resilient economy and create opportunities for innovation and transformative ideas. The initial set of Objective 3 interventions will be based on the outputs and outcomes of the initial Objective 1 and 2 interventions as well as the Joint Planning Conference.

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II. CONTEXT UPDATE

CONFLICT WITH RUSSIA

Between January and June of 2019, there were 58 instances of shelling or small arms reported on critical civilian infrastructure (i.e. water and sanitation systems). OSCE reports that during that timeframe, the number of civilian casualties reached 81 (10 deaths and 71 injuries). The situation deteriorated extensively towards the end of June, with an increase in the number of armed clashes causing harm to civilians and soldiers as well as an increase in the use and presence of landmines on the contact line. Despite overall increased aggression in June, the international community acknowledged the beginning of disengagement of forces and hardware on both sides of the contact line around , , based on the 2016 framework of the Trilateral Contact Group. ERA is continuously monitoring the situation and taking into consideration potential impacts on ongoing and planned interventions in ERA-targeted communities closer to the line. Events to date have not deterred the Activity. On June 10 th , the Permanent Court of Arbitration began the hearing in the arbitration concerning Coastal State Rights in the Black Sea, Sea of Azov, and Kerch Strait, brought by Ukraine against the Russian Federation. ERA continues to monitor this case and implications of strategic importance to our work in the Sea of Azov.

ELECTIONS & KEY APPOINTMENTS

The second round of Ukraine’s Presidential elections took place on April 21 st . Comedian won the election with a resounding 73%. The results of the election confirm a rejection of incumbent ’s “Army; Language; Faith” conservative-nationalist platform. In contrast, President Zelensky has prioritized removing parliamentary immunity and has suggested he might be more interested in furthering dialogue with Russian authorities regarding eastern Ukraine. President Zelensky appointed – former lawyer to oligarch Ihor Kolomoyskyi – to head his presidential administration. President Zelensky announced a planned overhaul for many of the regional governors. ERA is keeping a close eye on the political situation and what changes it might mean for eastern Ukraine and our interventions.

Ukrainian parliamentary elections are scheduled to be held on July 21 st . “” is predicted to get over 40% of support. The pro-Russian party “Opposition Platform – For Life” led by oligarch Vadym Rabinovych and Viktor Medvedchuk – whose daughter calls Russian President her godfather – is predicted to get around 12% of support. Other parties predicted to get seats in the next parliament include ’s “Fatherland,” former president Poroshenko’s “European Solidarity”, and rock-star Svyatoslav Vakarchuk’s “Voice.” Political parties “Servant of the People” and “Voice” are the only two parties with full slates of candidates that have never served in Ukrainian parliament.

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III. KEY NARRATIVE ACHIEVEMENTS START-UP DELIVERABLES

After several rounds of revisions in response to USAID feedback, the following start-up deliverables were approved:

 Grants Under Contract (GUC) Manual - April 1st  Second Six-month Implementation and Coordination Plan - April 10 th  Activity Monitoring, Evaluation, and Learning Plan (AMELP) - May 3 rd

On June 4th, USAID (including E3 engineers from USAID/Washington), DAI, and CDM met to discuss the infrastructure component of ERA and to go through USAID comments on the most recent version of ERA’s Construction Plan. DAI began revising the document based on USAID feedback and plans to submit a revised version in early July. Once approved, all start-up deliverables will have been finalized.

On April 4th, ERA’s COP and HO Project Manager joined the COR and third-party Monitoring and Evaluation (M&E) reviewer, Resonance, at the U.S. Embassy in Kyiv to present their respective assessments of DAI’s performance during the first six months of implementation (August 27, 2018 – February 26, 2019) to the Award Fee Board (AFB) based on the award fee criteria established in the ERA contract. The assessment focused on the quality of start-up and start-up deliverables. DAI will be awarded a percentage of the maximum available award fee for that period based on the AFB’s recommendation to the Fee Determination Official.

TECHNICAL INTERVENTIONS

With an approved Second Six-month Implementation and Coordination Plan in place, this quarter marked the first full period of technical implementation since start-up. Below are key interventions that were launched under each objective.

Objective 1 : Vulnerable Population Economic Inclusion The Objective I team identified and selected 15 grant applications in support of NGOs and enterprises benefiting vulnerable populations for further development. An application was finalized and submitted to USAID for approval on June 21 st . Once approved, the grant will go to the Ukrainian Center for Civic Initiatives “Svitlo” to support the promotion of MSMEs from the and Luhansk Oblasts through the development of e-commerce and an online trading platform. This service is expected to benefit unemployed populations, non-educated and unemployed youth, women, including single mothers, IDPs, and members of the LGBTQI community.

During the next quarter, the team expects to finalize the other grants in the pipeline, submit them to USAID for approval, and begin implementation.

Infrastructure ERA staff identified key players financing large municipal infrastructure development in eastern Ukraine and the Sea of Azov region and programs they have in place, including those captured in the following table.

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TABLE 1: SELECT INFRASTRUCTURE DONOR FINANCING FACILITIES FACILITY GOALS AND INSTITUTION PROGRAM CONDITIONS EIB Early Recovery Program for Eastern Ukraine, EUR Small -scale investments, averag ing EUR 200 million loan to GoU (Ministry of Regional 200,000 Development) EBRD No specialized program Minimum transaction: EUR 10 million, with focus on public transport and roads, often co-financing with IFC or EIB, “market rate” loans, term 10 to 15 years. IFC No specialized program Three instruments: 1) equity positions in private sector projects; 2) funding of municipal infrastructure – often co- financing loans with EBRD; 3) PPPs with private sector operators. Minimum transaction EUR 10 million, co-financing with EBRD or EIB, “market rate” loans, term up to 15 years, technical assistance available at a cost KfW Energy Efficiency (EE) in Municipalities I and II EE modernization of public buildings, one city might be in Eastern Ukraine; EE for urban transportation in two cities, one of which will be in Eastern Ukraine. Launch evaluation is still being conducted. NEFCO EU Neighbourhood Investment Platform (NIP) - Berdiansk and Melitopol. Improve EE NEFCO Water and Wastewater Treatment and reduce CO2 emissions in municipal water and wastewater systems by replacing old, high-energy consuming equipment, pumps at wastewater pumping stations, and water mains, as well as b y installing water meters.

In the upcoming quarter, ERA will further explore opportunities to help unlock financing for specific infrastructure projects. Two opportunities already being looked into include rehabilitation and expansion of a Berdiansk airport as well as a railroad connector project in .

On June 11 th , USAID (including E3 engineers from USAID/Washington) and the ERA infrastructure team visited three potential infrastructure project sites: the waste-sorting facility at Lyman, the phyto-sanitary laboratory in , and the pedestrian bridge in . In response to concerns expressed by the visiting engineers related to these sites, DAI began the process of revising ERA’s pre-feasibility assessment/screening process for project identification and is reassessing the three projects in the pipeline using the revised tool. The new process will also ensure closer alignment between site selection and Objective 3 efforts. Based on the results of these assessments, DAI will determine whether to move forward with these projects.

In additions to these adjustments, ERA is assessing its infrastructure team staffing structure to determine whether sufficient resources are in place to adequately implement the Activity’s infrastructure component.

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Objective 2 : IT ERA played a major role in organizing the “MRPL-2019 IT Conference” in held on May 28 th and 29 th . This was the first conference of its kind in the city with over 200 people attending on each day. The conference included 15 lectures and eight workshops (three of which were geared toward children) on IT-related topics, such as graphic illustration, animation, games, and robotics. Guest lecturers and speakers included IT sector representatives from Kyiv, Zaporizhzhia, and ; three of the most successful children’s robotics teams in Ukraine (including the champions of the World Robot Olympiad in Ukraine); winners and awardees of the First Lego League Championship; and winners of the RoboCXID festival competition in Kramatorsk earlier in May. During the conference, seven companies signed an association memorandum of understanding (MoU) formally establishing the “Mariupol IT Cluster”. The signing ceremony was attended by USAID Senior Deputy Assistant Administrator (SDAA) for Europe and Eurasia, Margot Ellis, who offered opening remarks, and USAID Ukraine Mission Director, Susan Fritz. The IT Cluster, created with ERA’s support, unites local firms and gives them the opportunity to accelerate their development, attract new specialists to the industry, and diversify/increase their skills and qualifications.

ERA also began the process of developing a grant to SocialBoost, a civic tech NGO aimed at using technology to create positive social change in Ukraine. The grant, which will be finalized and submitted to USAID for approval next quarter, will go toward creating an incubator for IT start-ups, providing co- working space for those companies as well as an internship program and career center in Mariupol.

Agriculture ERA staff accompanied members of the Ovochi Stanichnikiv vegetable cooperative in Stanytsia Luhanska to Enerhodar, Zaporizhzhia Oblast, to study how similar cooperatives built cold storage facilities in order to access national retail value chains. The farmers also attended the seminar “Selling greenhouse vegetables. How to maximize profit?” by consulting firm SmartAgro. This was part of ERA’s efforts to facilitate the first sale to national retail value chains by ERA-supported “Pathfinder Farmers” in Stanytsia Luhanska. ERA’s ongoing support to these farmers has proven to be successful. In June, three tons of cherry tomatoes grown by the farmers were shipped to Kyiv. These were the first vegetables ever shipped from Stanytsia Luhanska to Ukraine’s capital. This success story demonstrates the potential of working with national retail chains to replace lost markets in the non-government-controlled areas (NGCAs) of eastern Ukraine. With ERA’s support, the shipment went to a large wholesaler that serves the hotel-restaurant-café sector and works with national chains. Additional shipments to supermarket chains throughout Ukraine are expected in the months to come.

Honey ERA continued providing training to improve bee-keeping practices. Two training sessions on diseases affecting the bee population and their treatment were offered in Pokrovsk and Sievierodonetsk to veterinarians. A study tour in Poltava focused on breeding is scheduled for next quarter and partnerships with three large honey producers are currently being developed and should also be finalized next quarter.

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Innovations for Manufacturing (IM) Between December 2018 – April 2019, the IM team met with and interviewed 22 local manufacturing companies. They developed detailed company profiles, which provided insight into local manufacturing in the region and helped shape ERA’s Innovations for Manufacturing strategy, which was finalized and shared with USAID in May. In June, an international expert was brought in to help implement the strategy.

The IM team lead has started providing three companies 1 with regular export advisory support, including: re-designing of their websites for English-speaking users and establishing LinkedIn accounts for expanding networks and communication channels with potential overseas clients.

Furthermore, ERA signed an MoU with BIIR Ukraine. The company has committed to opening an engineering office in Rubizhne in 2020, which could help create over 150 jobs. Simultaneously ERA is cooperating with the East Ukrainian Volodymyr Dahl National University (Dahl University) to better prepare their engineering students for these types of jobs based on qualifications that companies such as BIIR look for. Next quarter, ERA will facilitate the provision of key software training to Dahl University engineering professors.

Access to Finance In addition to completing a mapping of opportunities to unlock infrastructure financing through IFI programs (included in the infrastructure section above), the Access to Finance team developed key partnerships aimed at increasing private sector access to finance.

ERA had discussions with banks and credit unions in the Donetsk Oblast in order to discuss lending to small/family farms, potential demand for microcredits, and the timing of loan issuances. ERA worked with the Association of Credit Unions to encourage them to conduct a study of the lending market for farmers and family farms, formalize the procedures for assessing borrowers. The Association of Credit Unions (UNASKU) applied for a grant that would be used towards financing local credit unions throughout Donetska Oblast. ERA is in the process of helping UNASKU finalize the grant.

Biofuels The biofuel sector lead completed the value chain assessment. The document is currently under review and will be shared with USAID during the upcoming quarter.

Through the Ovochi Stanychnykiv grant, ERA provided training to farmers on the use of biofuel stoves. This in-kind grant is supporting small-holder greenhouse farmers in assessing new heat sources to replace natural gas and coal as well as firewood. The grant is serving as a pilot to help test the financial and household labor saving benefits for intensive vegetable producers to switch from wood to the use of locally sourced bio pellets.

Objective 3 :

1 SVOD (Severodonetsk, anti-scale water filters), Chemproject (Severodonetsk, BIM-modelling and construction management services), and Kontakt (, gas pressure equipment)

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During the quarter, the Objective 3 team engaged 6 cities and 2 consolidated communities and trained 130 government, civil society, and business leaders. These efforts serve as a means of building trust and as the foundation for an inclusive process for creating a vision for the region. Enthusiasm and engagement at the local level exceeded the team’s expectations. Based on discussions with these groups, the following themes have emerged and will inform the vision for the region: o Diversified economic structure (SMEs as engine of growth) o Quality of life, especially for youth (parks, public spaces, cleanliness, business enabling public utilities and infrastructure) o Strong service sector (tourism, IT, etc.) o World standards/innovation o Building on existing pride (industrial powerhouse) o Revamping traditional industries for the 22nd century.

Advancing the Mariupol Vision Cooperation with the city of Mariupol was also positive and productive, leading to concrete economic development opportunities. Events like the MRPL-2019 IT Conference in Mariupol , the formation of the Mariupol IT Cluster, described under Objective 2, are already creating a buzz. These initiatives play a key role in creating a vision of the east as a forward-leaning, diversified economy that is more reliant on the service sector. In addition to IT sector support, ERA will continue advancing the “Mariupol vision” through the following interventions:

 Launch of Ukrainian Leadership Academy (ULA) branch in Mariupol in September of this year, offering the city and region’s youth an opportunity to learn new skills that will equip them with the tools to become successful leaders but also engaging youth from other parts of Ukraine to come to the east.  Improving Pryazovsky State Technical University ’s curriculum and technical resources by establishing partnerships with other higher education institutions and enterprises to help the University prepare highly qualified, market-demanded specialists.  SME Support Service Center , anticipated to open its doors in 2020, providing necessary administrative services, consultations, expert support, and training for business representatives. ERA anticipates providing infrastructure support to create the Center as well as technical assistance to build the capacity of experts and consultants to provide quality services to local businesses.

Sea of Azov Following Russia’s temporary blockade of the entrance to the Sea of Azov in November 2018 and its imprisonment of 24 Ukrainian sailors, the Mission decided to study the effects of these actions on the region and the necessary programmatic response. On April 4 th , USAID tasked ERA with carrying out a rapid assessment to outline (1) the problem statement for the Sea of Azov region; and (2) a USAID programmatic response to alleviate constraints identified. ERA management quickly assembled a team of 11 experts; the assessment team leader arrived in country and work started on April 11 th . The ERA team carried out field work in two phases: in the first phase, a team looked at problems and constraints and gathered information for the growth sector selection process. In the second phase, specialized teams analyzed tourism, IT, high-value agriculture (HVA), access to finance, and infrastructure needs, and did a rapid labor market assessment. Concurrently, the French nongovernmental Agency for

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Technical Cooperation and Development (ACTED) that operates the Research Etudes d’Aide a la Coordination Humanitaire (REACH) initiative carried out a random sample survey of 100 small and medium enterprise (SME) key informants in the Sea of Azov region.

The resulting Sea of Azov assessment, submitted to USAID on May 31 st , concludes that a $15 million initiative from USAID in the region is warranted. The findings include that the initiative should (a) enable SMEs to grow and flourish, creating jobs, income, and a middle class, and (b) accelerate the strategic rebuilding of infrastructure services that both support SME development and provide confidence to the populace that things are improving and encourage them to remain in the region and build a future there.

The confluence of various, intertwined causes has created a complex problem in the Sea of Azov region. However, some weigh more heavily than others on the local economy. One of the biggest factors is the slow re-orientation of the economy around new urban poles. As such, the team has recommended a much heavier emphasis on, and investment in, the most likely replacement poles: Mariupol, Berdiansk, and Melitopol. To accelerate development, the team has prioritized the most likely growth sectors for each city: IT in Mariupol, Sea of Azov tourism centered around Berdiansk, and agro-processing and high value agriculture (HVA) cold chain in Melitopol. Below is the high-level analysis and suggested programming for each. Highlights include:

 Tourism: Building on the under-developed potential for eco-tourism, heritage, and cultural tourism while expanding the season and increasing the number of high-quality tourism services and products.

 IT: Focusing on industry-driven IT skills development.

 High Value Agriculture: Expanding the shelf life of HVA produce with pre-cooling, cold storage, packing, grading and sorting, and cold chain to supermarkets, as well as adding freezing and packaging capacity.

In addition to continuing the implementation of interventions described above, other events planned during the next quarter are listed in the following table.

TABLE 1: SELECT FUTURE EVENTS FUTURE EVENTS

DATE EVENT/ACTIVITY/DELIVERABLE WHERE July 10 th Communications strategy working group Kyiv July 15 th – 18 th Pause and Reflect/Year 2 Workplanning Retreat Kyiv August 8th DG East Coordination and Sea of Azov Working Group Kyiv

IV. PROGRESS AGAINST TARGETS

During the reporting period, ERA reached 186 direct beneficiaries, including 22 that fall under the definition of MSME (8 women-owned or women-led), mostly smallholder farmers and 164 individuals. Of the total, 141 received training, 29 received technical consultations, and 16 took part in study tours. Six of the beneficiaries were reached through the first ERA-issued grant, Ovochi Stanychnykiv, which

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provided training to farmers on the use of biofuel stoves. Specific training and study tours during the quarter included:

 Strategic Planning (training of trainers)  Local Strategy Development (training for community members)  Study Tour to Unit City (Kyiv)  Bee Diseases and their Treatment (Sievierodonetsk)  Bee Diseases and their Treatment (Pokrovsk)

The number of women trained (82) represents 44% of the total. All beneficiaries fall under the definition of at least one of 18 categories of the vulnerable and hard to reach populations defined in the ERA AMELP.

During the quarter, ERA also reached an estimated 66,194 individuals through public outreach efforts. For example, informational and communications events attracted an estimated 1,951 attendees. Where possible, the ERA MEL team collects sign-in sheets. Those collected account for 1451 attendees, including 585 women and 866 men. To the extent feasible and appropriate, the team also collects surveys from attendees. The surveys reveal that ERA has engaged a diverse pool of stakeholders.

The ERA Facebook Page was launched in April and has since reached an estimated 37,872 users. In terms of coverage of ERA in local and national online media platforms (e.g. Donetskie novosti (dnews.dn.ua), http://lugansk.info/, mrpl.city) the number of followers reached is estimated at 26,371.

These figures are captured in the table below by performance indicators.

TABLE 2: RESULTS BY PERFORMANCE INDICATOR Performance Indicator FY1 (2019) FY1 Q3 Total 1.2 Number of individual beneficiaries from vulnerable and hard- to-reach populations in the target regions, including GNDR-2 186 186 3.1 Number of contacts made through informational and 66,275 66,194 communications events Social media outreach (ERA Facebook page) 37,872 37,872 Online media 26,371 26,371 Attendees of informational and communication 2032 1951 events CC.1 Number of people trained during the Activity 186 186

V. PERFORMANCE MONITORING, EVALUATION AND LEARNING

On April 9th, ERA management held a Pause and Reflect Session to discuss the results of the Resonance baseline survey. Discussions resulted in a revision to one of the ERA perception indicators. Indicator 3.3 was originally the Percentage of population in targeted communities that think industries and sectors other than the most traditional for the region will be important to the local economy in five years . The revised version reads as follows: Percent of population in target communities who think that in five years there will be more or better economic opportunities in the region which allow residents to stay/live in the region.

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On May 14th, 20 ERA staff met for a full-day Pause and Reflect Session on gender integration to assess the Activity’s performance in that area and discuss programming adjustments that might be needed to help achieve inclusion objectives. DGE’s Inclusion Specialist also participated in this event. An action plan was developed to increase engagement of women in ERA interventions, which included launching a gender assessment.

Following the completion of field work, on May 17th the Azov Sea Strategy assessment team held an all- day Pause and Reflect Session on findings and recommendations surfaced thus far. USAID representatives also joined the session. Following the Pause and Reflect, the team compiled a Synthesis Report, which was submitted to USAID on Friday, May 31st.

VI. LESSONS LEARNED

With implementation fully underway, several critical lessons emerged during the quarter.

Management: The team needs to reassess resources, make roles and responsibilities clearer.

Coordination : Coordination should have begun earlier with DGE on a joint approach to the CXID campaign and Objective 3 strategy.

Technical:  Rapid Assessment methodology as applied to infrastructure was inadequate; a more deliberate and comprehensive pre-feasibility is required to identify projects that are more aligned with ERA objectives  APS is not an ideal tool for targeted support to a specific group of people. More targeted outreach is needed to support vulnerable populations.

VII. ENVIRONMENTAL MONITORING

As recommended by the BEO, ERA brought on an expert to support the Environmental Compliance Specialist in carrying out testing for potential hazards on construction/rehabilitation interventions and grant sites under renovation.

The Environmental Compliance Specialist developed and put procedures in place for environmental screening of grant interventions. Now every grant is subject to a screening for determination of Categorical Exclusion or Negative Determination with Conditions. ER/ERC is prepared for interventions which fall under Negative Determination with Condition. All relevant forms are saved in grant files once completed.

Specific reviews included that of the Luhansk National Agrarian University (LNAU) grant with 14 sub- activities within one intervention. Simplified Environmental Reviews (ER) were prepared for interventions which have no potentially significant adverse environmental, health, or safety effects, and

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Informational requests were prepared and sent to the set of the first priority grantees including PE Sviatchenko (Provision of Internet services to remote rural areas) and PO SocialBoost (“1991 Mariupol” coworking center). Relevant consulting on environmental compliance was provided for these grantees, and ERC/EMMPs will be prepared for their interventions in July and August.

The Environmental Compliance Specialist also reassessed three infrastructure projects in the pipeline based on the revised screening process described in the infrastructure section.

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VIII. PROGRESS ON LINKS TO OTHER ACTIVITIES, DONOR- FUNDED PROGRAMS, AND TO HOST GOVERNMENT

Over 30 meetings and events in coordination with other activities, donor-funded programs, and local governments were held during the quarter. Key links or initiatives resulting from coordinated efforts include:

Partners  A Traction Camp 2 in Kramatorsk on May 20 th and 21 st followed by children’s robotics festival “RoboCXID” on May 26 th , organized in collaboration with the Regional Economic Growth (REG) Project. The Traction Camp offered creative local start-ups in the IT and IM spheres an opportunity to exchange ideas with leading experts who have successfully launched similar products. The event was advertised to over 1000 people via social media.  IT conference “MRPL IT 2019” on May 28 th and 29 th , the biggest IT event in eastern Ukraine that united over 200 participants. The team developed promotional and information materials for the event, including banners and flyers and provided PR and SMM support in collaboration with DGE based on CXID branding. The video announcement about the conference published on the ERA Facebook page reached 5,399 people.

Government  An MoU signing with the Mariupol City Council on April 16 th . The event attracted 16 media outlets, including four TV channels.  A meeting with vocational education training (VET) experts from the Volyn Resource Center (VRC) and the Donetsk and Luhansk Oblast administrations in May. ERA is supporting a grant to VRC to develop the Oblasts strategies for reforming their vocational education systems, identifying specific institutions that can become "vocational centers of excellence" and improving their capacity to attract funding to support reform efforts.  Both Oblast administrations expressed a desire for this support.  A series of MoU signing ceremonies with partner-cities and consolidated communities held in May and June, including an MoU signing with , , Kramatorsk, Pokrovsk, Starobilsk, Bilovodsk, and Novopskov.  A series of events organized in the framework of USAID SDAA Margot Ellis’ visit to Mariupol and Berdiansk on May 28th to the 30th. To showcase USAID contribution through ERA and DGE to the local economic development of the Sea of Azov region, the ERA team collaborated with DGE to organize a meeting for SDAA Ellis with the Mayor of Mariupol, site visits, press-briefings with local media, DGE’s Community Development Forum, taking advantage of convenings around the Mariupol IT conference and MoU signing ceremonies of the IT Cluster.

2 http://www.tractioncamp.me/

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IX. PROGRESS ON INCLUSIVE DEVELOPMENT

During the quarter, ERA onboarded a Kramatorsk-based Gender and Vulnerable Populations Inclusion Specialist. On May 14 th , the ERA team gathered for a Gender Integration Pause and Reflect Session in Kramatorsk. The team was joined by the DGE Inclusion Specialist. Michael Pillsbury launched the session emphasizing that the project management takes gender inclusion seriously. Next, the ERA Monitoring, Evaluation, Adaptation and Learning Director reviewed ERA gender targets, gender data from the Activity oblasts, and gender tendencies noted by Resonance’s baseline survey.

After this, ERA subcontractor Danish Refugee Council (DRC) presented their historical gender inclusion data on their most relevant livelihoods project. Interestingly, more women than men applied for and received grants under this DRC livelihoods project. Furthermore, DRC had carried out a quick phone survey from women who had been sent the call for grants to ask them why they had not yet applied (see summary PPT below). DRC referenced their understanding that international best practices calls for a minimum of 30% of either gender being included in a donor program.

The group then moved into some experiential activities to get them to think about the differences between men and women in business. The discussion was rich and at least one male participant commented “we never thought about it like this before”.

Next, the group looked at some successful examples from other similar projects and then identified the main barriers to participation that Ukrainian women face such as lack of time, greater childcare and domestic duties, and expectations that men are better leaders, which lead to less promotion and therefore a disadvantage in leadership experience and confidence. The day ended with creating a gender integration action plan of next steps (see below). The new Gender Integration Specialist benefitted greatly from working with the team throughout the day and brought the Ukrainian Women’s Business Fund experiences and lessons learned to the discussion.

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X. SUB-AWARD DETAILS

ERA expanded its interventions to the Sea of Azov region. Given this new development, the following updates were made to the APS and corresponding online platform:  “Southern Zaporizhzhia Oblast” was added to the list of areas from which the Activity is accepting applications;  “Tourism” was added to the list of economic sectors from which the Activity will consider applications. The team went on more road shows in Kramatorsk, Mariupol, Sievierodonetsk, , Manhush, Bakhmut, , , and Pokrovsk to share information about the APS and attract a greater, more diverse pool of applicants, including potential grantees in hard-to-reach places. By the end of the reporting period, 1078 users were registered on the online platform. The Activity received 337 completed concept notes, out of which technical and grants teams evaluated 94 and selected 43 for development into full grants applications. The total value of the selected concept notes exceeds $5 million.

Ovochi Stanychnykiv, the first grant package submitted for review during the previous reporting period, was approved by USAID on April 5 th . This in-kind grant is supporting small-holder greenhouse farmers in assessing new heat sources to replace natural gas and coal as well as firewood. This grant serves as a pilot to help test the financial and household labor saving benefits for intensive vegetable producers to switch from wood to the use of locally sourced bio pellets.

In June, ERA submitted the “Svitlo” grant to USAID for approval. As described above, this grant will support the promotion of MSMEs from the Donetsk and Luhansk Oblasts through the development of e-commerce and an online trading platform. During the quarter, the team started developing several other grants. At a minimum, the following will be submitted to USAID for approval next quarter:

 Private Entrepreneur (PE) Tsyhankov Oleksandr Viktorovych grant to assist the sewing company in developing and growing by increasing the quality and quantity of products produced;  Ukrainian Women’s Fund grant to set up three Women’s Business Support Centers to empower and support women in starting micro-businesses by providing long-term entrepreneurship training, legal counselling, public awareness raising, and mobilizing funding;  PE Izuita Oleksandra Oleksandrivna grant for a children's entertainment and development center and youth hub in Kreminna;  Volyn Resource Centre grant to assist the Donetsk and Luhansk Oblasts in developing their strategies for reforming their vocational education systems, identifying specific institutions that can become "vocational centers of excellence" and improving their capacity to attract funding to support reform efforts;  Grand Expert grant for modernizing/upgrading and maintaining the system for monitoring chemical treatment of plants;

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 SocialBoost grant that will contribute to the growth of the IT sector in Mariupol through the creation of an incubator for IT start-ups and provision of a co-working space for those companies as well as an internship program and career center for youth interested in careers in the sector.  ULA grant for launching a branch in Mariupol in September of this year, offering the city and region’s youth an opportunity to learn new skills that will equip them with the tools to become successful leaders, and also engage youth throughout Ukraine to come to eastern Ukraine

On May 21 st , the Activity released its first Request for Application (RFA) for strengthening technical capacity of vocational educational institutions in the Donetsk and Luhansk Oblasts. The RFA attracted 36 applicants within a month of its release. This RFA targets educational institutions that can institute system-wide changes in the Oblast’s vocational education system to improve students’ skills.

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XI. ACTIVITY ADMINISTRATION

BASE OF OPERATIONS FOR THE ACTIVITY. On April 1 st , the Kyiv team moved into a permanent office space previously occupied by the USAID Municipal Energy Reform Project in Ukraine (MERP). MERP transferred its furniture to ERA, thus lowering costs required to outfit the office.

As a cost-saving measure, the Activity signed the lease for its first “Guesthouse” in Kramatorsk on April 22 nd . This fully-furnished one-bedroom apartment is within walking distance to the office and is available for ERA STTA, staff from other offices, and subcontractors.

SECURITY . The team received ID cards (certificates) from GDIP, which will help identify ERA staff at security checkpoints in the Activity’s area of operation. ERA anticipates the cards will speed up the process of transiting through these checkpoints.

Access control security equipment was installed in the ERA Kramatorsk office. Now, in addition to a personalized pin-code alarm system, ERA staff can access the office either with a biometric finger print scanner or a personalized electronic key.

ACCREDITATION AND REGISTRATION . The Activity received an updated accreditation from MEDT due to the change of address of the ERA Kyiv office and subsequently updated seals for the Kyiv, Kramatorsk, and Sievierodonetsk offices. The registration card was also re-issued on May 29 th with a new recipient, Ovochi Stanychnykiv, included.

OPERATIONS PROCUREMENT . ERA is currently in the procurement process for 6 SUV vehicles. The procurement team has completed a tender for the purchase of vehicles in accordance with USAID and DAI policies and procedures. Based on this tender, a formal request for the purchase of vehicles was submitted to USAID on June 28 th . Several other procurements were completed during the reporting period, including a blanket purchase agreement for travel services and furniture for the Mariupol office.

CONTINUED RECRUITMENT AND HIRING OF STAFF. The recruitment efforts to build a technically and operationally sound team continued for Kramatorsk and Kyiv offices. During the reporting period, USAID ERA hired 7 new members in addition to the 34 onboarded during the first seven months of the Activity.

As of June 30 th , 2019, the Activity had a total 41 staff members, including twenty-four in Kramatorsk and nine in Kyiv. The number of staff in Sievierodonetsk and Mariupol offices—six and two employees respectively—remained unchanged. All new hires were given a customized orientation upon arrival.

During this quarter, recruitment for ERA administrative staff has been almost completed. The Activity onboarded a long-term HR Manager and IT Systems Administrator, the two positions the HR team was challenged to fill. The team also identified an expat ICT Sector Specialist candidate, who accepted a provisional offer. His approval package is currently being prepared and will be submitted to USAID for review/approval during the next quarter.

Through the next quarter of implementation, recruitment will be focused on expanding the teams in Kramatorsk (Event Coordinator, Media Analyst, Procurement Officer and Assistant, and Office

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Administrator), Sievierodonetsk (Project Coordinator and Administrative/Logistics Assistant), Kyiv (Payroll Accountant) and Mariupol (Grants Officer) as Activity interventions expand. The team also envisions onboarding 6 drivers for all four ERA offices. This recruitment effort is contingent on CO approval of the SUV procurement.

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