USAID ECONOMIC RESILIENCE ACTIVITY: QUARTERLY PROGRESS REPORT October 01, 2019 – December 31, 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. This document is made possible by the support of the American people through the United States Agency for International Development. Its contents are the sole responsibility of the author or authors and do not necessarily reflect the views of USAID or the U.S. Government. Quarterly Progress Report (Fiscal Year 2020 Quarter One) Program Title: USAID Economic Resilience Activity Sponsoring USAID Office: USAID Ukraine Contract Number: 72012118C00004 Contractor: DAI Global, LLC Submission Date: January 30, 2020 Author: DAI Global, LLC CONTENTS ACCRONIMS AND ABBREVIATIONS 1 I. INTRODUCTION 3 BRIEF SUMMARY OF ACTIVITY 3 II. CONTEXT UPDATE 4 INCLUSION 5 INCREASING CAPABILITIES 5 INCREASING OPPORTUNITIES 6 GROWTH 7 MARKET EXPANSION 7 INVESTMENT ACCELERATION FOR MSMES 10 TRANSFORMATION 11 DRIVING VISION 11 SUPPORTING INFRASTRUCTURE INVESTMENT (ERA CONSTRUCTION) 12 III. PROGRESS AGAINST TARGETS 13 IV. PERFORMANCE MONITORING, EVALUATION AND LEARNING 14 DATA QUALITY ASSESSMENT 14 AMELP REVISION 15 SPECIAL STUDIES 15 PAUSE AND REFLECT SESSIONS 16 V. LESSONS LEARNED 17 VI. FINANCIAL INFORMATION ERROR! BOOKMARK NOT DEFINED. CASH FLOW REPORT AND FINANCIAL PROJECTIONSERROR! BOOKMARK NOT DEFINED. PROJECT FINANCIAL PROJECTIONS FOR USAID ECONOMIC RESILIENCE ACTIVITY FY 2020 Q1 ERROR! BOOKMARK NOT DEFINED. VII. ADMINISTRATION 17 VIII. SUB-AWARD DETAILS 18 ACCRONIMS AND ABBREVIATIONS AMELP Activity Monitoring, Evaluation, and Learning Plan APS Annual Program Statement ATO Antiterrorist Operation B2B Business-to-Business CdA Chargé d’Affaires CDM CDM Engineering Ukraine CDC Career Development Center CEP Competitive Economy Program COP Chief of Party DAI DAI Global LLC DG-East Democratic Governance East DOSA Donetsk Oblast State Administration DNTU Donetsk National Technical University DQA Data Quality Assessment DRC Danish Refugee Council EBRD European Bank for Reconstruction and Development EIB European Investment Bank ERA Economic Resilience Activity EUR Bureau for European and Eurasian Affairs EU European Union FHI 360 Family Health International 360 (NGO) GoU Government of Ukraine GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH IDP Internally Displaced Persons IFC International Finance Corporation IFI International Financial Institutions IOM International Organization for Migration I4M Innovations for Manufacturing IT Information Technology JFO Joint Force Operation LGBTQI Lesbian, Gay, Bisexual, Transgender, Queer, Questioning and Intersex LNAU Luhansk National Agrarian University 1 | USAID ECONOMIC RESILIENCE ACTIVITY FY 2020 QUARTERLY REPORT ONE USAID.GOV LOSA Luhansk Oblast State Administration MEL Monitoring, Evaluation, and Learning M&E Monitoring and Evaluation MIF Mariupol Investment Forum MoES Ministry of Education and Science MoU Memorandum of Understanding MSME Micro, Small, Medium Enterprises MSRA Market Systems Resilience Assessment NGCAs Non-Government-Controlled Areas NGO Non-Governmental Organization OTI Office of Transition Initiatives PWD People with Disabilities Q&A Questions and Answers SMEs Small and Medium Enterprises UITT Ukraine International Travel and Tourism Exhibition ULA Ukrainian Leadership Academy UNDP United Nations Development Program USAID United States Agency for International Development VET Vocational Education Training USAID.GOV USAID ECONOMIC RESILIENCE ACTIVITY FY 2020 QUARTERLY REPORT ONE | 2 I. INTRODUCTION DAI is pleased to submit this Quarterly Report for the USAID Economic Resilience Activity (ERA/Activity) covering the period of October 1 to December 31, 2019. The Activity aims to improve the overall economic resilience of eastern Ukraine in response to Russia’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. This report details the Activity’s accomplishments during the first quarter of the second year and describes the interventions completed, benchmarks achieved, and performance standards. BRIEF SUMMARY OF ACTIVITY Over the next five years, ERA will help eastern Ukraine reorient its economy toward sustainable, diverse, and 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 U.S. Government humanitarian assistance. 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 to 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 and 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 ERA interventions and culminates in the most important result: a path forward to a viable economic future for the eastern region as an integrated part of the Ukrainian economy, one that is understood and supported by the population and 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, ERA will simultaneously promote the diversification that will lead to a more resilient economy and create opportunities for innovations and transformative ideas. 3 | USAID ECONOMIC RESILIENCE ACTIVITY FY 2020 QUARTERLY REPORT ONE USAID.GOV II. CONTEXT UPDATE To help mitigate the ongoing conflict in eastern Ukraine, Ukrainian President Volodymyr Zelenskyi met with Russian President Vladimir Putin on December 9, 2019, per the Normandy Format in Paris, France. This meeting, attended by leaders of the Normandy Four countries (Russia, Ukraine, Germany, and France), was the first in-person meeting between presidents of Russia and Ukraine since 2016. In the lead up to this meeting, the GoU successfully restored and repaired a bridge connecting Stanytsia Luhanska to the Non-Government-Controlled Areas (NGCA) in an effort to build confidence in the negotiation process. After a day of closed-door deliberations, the four leaders emerged with a joint declaration of their reaffirmed commitment to peace and a series of agreed-upon steps to de-escalate hostilities and lessen the suffering of those affected by the war, including a newly-promised ceasefire, a comprehensive “all-for-all” prisoner exchange, a renewed program to safely extract mines from the conflict zone, and other steps to disengage troops along the contact line. The leaders also affirmed a commitment to meet again for another summit in March 2020. At the concluding press-conference, President Zelenskyi announced that his commitment to peace would not come at the expense of diminishing Ukrainian sovereignty over its entire territory and declared that any comprehensive settlement was “impossible without ensuring security in eastern Ukraine.” While this issue was not resolved at the summit, Zelenskyi promised to return to the question at the next Normandy summit in four months. Following the Normandy meeting, another successful diplomatic victory was realized by President Zelenskyi. On December 29, 2019, the Ukrainian authorities swapped 124 prisoners for 76 prisoners held by Russian-backed separatists in the NGCA. The latest swap comes three months after Ukraine carried out a long-awaited exchange with Russia of 35 prisoners each. The positive recent diplomatic negotiations have created some optimism about further stabilization in eastern Ukraine that might lead to expanding the impact of Activity-supported interventions. The ERA team continues to monitor the security situation in eastern Ukraine and has taken the extra step of hiring a security officer, coming on board in January 2020, to enable real-time assessment of security in the east. KEY NARRATIVE ACHIEVEMENTS As ERA kicked off its second year, the team began implementing under the new technical structure presented in the Year 2 Implementation and Coordination Plan. The matrix-style structure shown below in Figure 1 aims to achieve more synergy and integration across Activity interventions and is organized around the following workstreams: 1) Inclusion, 2) Growth, and 3) Transformation.