UKRAINE CONFIDENCE

BUILDING INITIATIVE II

SEMI-ANNUAL REPORT APRIL 2017 – SEPTEMBER 2017

SWIFT IV IQC AID-OAA-I-14-00006 TASK ORDER AID-OAA-TO-17-00009

NOVEMBER 2017

This publication was produced for review by the United States Agency for International Development. It was prepared by Chemonics International Inc. The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

CONTENTS

ACRONYMS ...... ii PROGRAM DESCRIPTION ...... 1 UCBI Program Areas ...... 1 NATIONAL AND REGIONAL COUNTRY CONTEXT ...... 3 GRANTS SUMMARY ...... 5 ACTIVITY HIGHLIGHTS ...... 6 Objective 1: Increase acceptance of the Ukrainian civic identity based on common values ..... 6 Objective 2. Broaden participation in Ukraine’s reform process ...... 8 Objective 3. Build trust and acceptance of objective pro-reform information ...... 9 PROGRAM EVALUATION ...... 10

i UKRAINE CONFIDENCE BUILDING INITIATIVE II SEMI-ANNUAL REPORT, APR 2017-SEP 2017

ACRONYMS

ASC Administrative Service Center DDGS Direct Distribution of Goods and Services EU European Union IDP Internally Displaced Person IRI International Republican Institute IT Information Technology M&E Monitoring and Evaluation NGO Non-Governmental Organization OTI Office of Transition Initiatives SCORE Social Cohesion and Reconciliation Index SeeD Centre for Sustainable Peace and Democratic Development SME Small and Medium-sized Entrepreneurs SRS Strategic Review Session STTA Short-Term Technical Assistance UCBI II Ukraine Confidence Building Initiative II USAID United States Agency for International Development

ii UKRAINE CONFIDENCE BUILDING INITIATIVE II SEMI-ANNUAL REPORT, APR 2017-SEP 2017 PROGRAM DESCRIPTION

In April 2017, USAID’s Office of Transition Initiatives (OTI) launched the second phase of the Ukraine Confidence Building Initiative (UCBI II) project focusing on Ukraine's historic democratic transition. While the government has implemented some national level reforms since 2014, threats such as political and social division, an unstable economy and malign Russian influence continue to effect national unity and successful implementation of further reform. The UCBI project was established to complement USAID’s ongoing efforts to support a successful democratic transition and promote national cohesion in the wake of the conflict in the East. The goal of UCBI II is to contribute to efforts that ensure has greater confidence in Ukraine’s democratic reform process and European integration. UCBI II assistance comes in the form of small, in-kind grants (goods, services, and technical support) and fixed amount awards to a range of partners, including national and local civilian government entities, civil society organizations, and community leaders. UCBI II provides targeted assistance in order to:

● Increase acceptance of a Ukrainian civic identity based on common values; ● Broaden participation in Ukraine’s reform process; and ● Build trust and acceptance of objective pro-reform information.

UCBI Program Areas As a result of a Strategic Review Session (SRS) conducted by the project team in August 2017, UCBI II updated and streamlined its strategic framework in order to incorporate lessons learned by the project to date and remain responsive to evolving contextual needs. During the reporting period, the revised framework served as basis for program level analysis, monitoring, and evaluation. The framework prioritizes the following program areas:

1 UKRAINE CONFIDENCE BUILDING INITIATIVE II SEMI-ANNUAL REPORT, APR 2017-SEP 2017

During the period of April 2017 – September 2017, UCBI II deepened its geographic focus in ( and oblasts) and occasionally supported activities in the neighboring Khakivska, Zaporozka, and Dnipropetrovska Oblasts.

2 UKRAINE CONFIDENCE BUILDING INITIATIVE II SEMI-ANNUAL REPORT, APR 2017-SEP 2017 UKRAINE NATIONAL AND REGIONAL COUNTRY CONTEXT

National

The summer of 2017 marked three years of a slower than anticipated reform process initiated by the 2014 Maidan revolution (also referred to as the Revolution of Dignity) and the occupation of parts of Donbas and by Russian-backed forces. While the war continues, 2017 also marks the first time in over two years that are showing some signs of optimism on a national level. Modest economic gains and key reforms, such as the introduction of visa-free travel to Europe, have resulted in the first increase in national mood in the last year according to polls by the International Republican Institute (IRI) and others. However, this optimism is not shared in the East, including the non-government-controlled portions of Donetsk and Luhansk. Ukrainians in these regions continue to be the most skeptical about the national government and reform process, most pessimistic about the economy, and most influenced by malign Russian influence. Populist politics are resonating across the country and could continue to sow mistrust and skepticism of the reform process. A few specific national-level updates of note are as follows: EU visa-free travel for Ukraine comes into force On June 11, 2017 the decision of the Council of the European Union (EU) to introduce a visa-free regime for short trips by Ukrainian citizens to 30 countries of the EU and the Schengen zone came into force. The law also extends to citizens of Ukraine living in occupied Crimea and the non- government-controlled territories of Luhansk and Donetsk, so long as they have biometric passports issued by the Government of Ukraine. The launch of the visa-free regime is an important step bringing Ukraine and the EU closer together.

EU Association Agreement ratified In July 2017, the EU ratification of the Association Agreement was completed, and it entered into force on September 1. The agreement is an important step towards deepening the EU’s relationship with Ukraine and promotes deeper political ties, stronger economic links, and respect for common values.

The President of Ukraine issued a decree on the blocking of Russian internet resources The President’s move to restrict access to online services and websites operated by Russian holdings Mail.ru and Yandex created controversy among Ukrainian netizens. The restrictions extend to social networks Vkontakte and Odnoklassniki, postal services mail.ru and Yandex, movie portal Kinopoisk, and antivirus software by Kaspersky Lab and Dr.Web. Moreover, the decree imposes sanctions on 1C accounting software, which currently occupies an astonishing 98% of the Ukrainian market. Although contentious to many, the government’s decision to ban Russian internet resources is a response to 's aggressive information campaign and potential risks to user data safety. Users wishing to bypass the ban could use VPN services or other anonymizers and the Ukrainian authorities have already stated that they are not planning to prosecute people for such actions. The ban also presents an economic opportunity for the Ukrainian information technology (IT) industry, as it works to find substitutes for the banned platforms. Immediately following the ban, western social networks, such as Facebook, saw a significant increase in usage. However, that is not the case in the eastern and southern regions of the country

3 UKRAINE CONFIDENCE BUILDING INITIATIVE II SEMI-ANNUAL REPORT, APR 2017-SEP 2017 where up to three quarters of people relied on Russian social media outlets. Some studies suggest that perhaps as many as half of former users are non-longer connected to social media.

Donetsk and Luhansk Oblasts

A few specific local-level updates of note are as follows: Ukrainian media broadcasting strengthened in the occupied areas of Donbas On June 2, 2017, the first Ukrainian Radio station started its broadcast to the separatist-held territories of Donetsk and Luhansk regions from the government-controlled town of Chasov Yar. Television towers were also erected along the line of contact this summer, hoping to reach the underserved audience in occupied Donbas, and special “blocking” technology was installed by the military aiming to disrupt Russian and separatist radio and television signals. UCBI II’s media consumption research finds that the audience for terrestrial broadcast is small and has shrunk since last year, to perhaps 20 percent of the audience. Most viewers in the heavily urbanized Donetsk and Luhansk rely on satellite and cable to access television and many are tuning into Ukrainian television stations.

Brand new state-funded program for small and medium-sized entrepreneurs (SMEs) launched in Donbas State Administration launched a $5 million financial grant program this summer to support SMEs in government-controlled Donetsk. The maximum individual award under the program is $18,800, half of which comes from the regional budget, and half allocated by local territorial community or rayon budgets. Each project should have an innovative component – they must be created with advanced technologies and aimed at manufacturing products according to world quality standards – as well as a social and employment generating component.

The new building of the Donetsk State University of Management opened in The new five-story building of the Donetsk State University of Management opened in August 2017, funded by the Mariupol City Council and other donors. The new building is designed for 930 full-time and part-time students, including 343 internally displaced persons (IDPs). Mariupol now hosts three universities relocated from Donetsk city.

4 UKRAINE CONFIDENCE BUILDING INITIATIVE II SEMI-ANNUAL REPORT, APR 2017-SEP 2017 GRANTS SUMMARY

Between April 1, 2017 and September 30, 2017, UCBI II initiated a total of 28 activities, including sub-grants, short-term technical assistance (STTA), and direct distribution of goods and services (DDGS) for a committed total of $ 2,271,877.

9

8

7

4

Jun-17 Jul-17 Aug-17 Sep-17

Figure 1 Number of grants cleared: April 2017 - September 2017

$704,277.79 $699,049.55

$528,370.33

$340,179.63

Jun-17 Jul-17 Aug-17 Sep-17

Figure 2 Dollar amount of grants cleared per month, April 2017 - September 2017

5 UKRAINE CONFIDENCE BUILDING INITIATIVE II SEMI-ANNUAL REPORT, APR 2017-SEP 2017 ACTIVITY HIGHLIGHTS

UCBI II works primarily in eastern Ukraine, focusing on population centers in the regions close to the conflict which have been targeted by external aggression. The primary focus of the program is the government-controlled areas of Donetsk and Luhansk oblasts, while also seeking to access people across the line of contact through activities. During the reporting period, the project issued grants to non-government organizations (NGOs), civic initiatives, state and local authorities, and other organizations on the international, national, and local levels. UCBI II activities work towards the following objectives:

Objective 1: Increase acceptance of the Ukrainian civic identity based on common values Expanding engagement in modern Ukrainian culture and common values among more diverse groups: One of UCBI II’s most significant achievements has been building and strengthening a community of young, reform-orientated Ukrainians in eastern Ukraine. This community has organized around the civic values of social engagement, creativity, innovation, tolerance and respect, and is the core of a growing pluralism noted in the Social Cohesion and Reconciliation Index (SCORE).

Ukraine’s Donbas region remains largely Russian leaning and skeptical of the country’s direction. The population is aging, and there are few opportunities for young people who are the drivers of reform across Ukraine. To address these issues, UCBI II has helped to establish a network of creative spaces in the East where young, reform-minded Ukrainians can participate in activities that help foster their IT skills, incubate small businesses, and come together to improve public spaces in their cities. These hubs and creative initiatives also serve as resource centers for activists and youth through the organization of training, workshops, and community development initiatives. These initiatives help expand the community of people who embrace tolerant, civic values in areas most skeptical of Ukraine’s transition. In total, UCBI II has supported more than 12 creative space initiatives and youth platforms in Severodonetsk, , , Pokrovsk, , Rubizhne, and . UCBI II has continued working with local organizations in Ukraine to implement a series of cultural and activism activities in the East aimed at exposing people to Ukrainian culture and igniting social engagement. One such activity organized eight service camps in eight cities engaging over 640 participants, bringing together young people from across Ukraine to experience

6 UKRAINE CONFIDENCE BUILDING INITIATIVE II SEMI-ANNUAL REPORT, APR 2017-SEP 2017 new environments and perspectives as well as to share their own regional experiences. Camps also brought young people from Donbas to western towns of Chortkiv and Mukachevo, with 70% of camp participants coming from eastern Ukraine, which sought to foster cross-regional cooperation. These camps included public service activities ranging from cleaning and revitalizing parks to renovating houses of culture and residences of vulnerable citizens. Other UCBI II activities engaged local citizens as volunteers in activities that benefited their respective communities. A total of 459 (99 local and 360 visiting) volunteers, including 66 Donbas residents, assisted 29 families in-need, and created 20 public spaces for communities in target settlements. The public spaces ranged from children’s playgrounds, park benches, parklets, and murals. In Podilsk, volunteers and community members designed and revitalized a playground with a small football field, sandbox, and swing. These activities demonstrated and conveyed a message that both young activists and ordinary residents can rebuild Ukraine by making practical contributions to houses and public spaces in their community. In Luhansk and , volunteers worked on renovating public areas in parks. In , the volunteers assisted in renovating houses of IDPs. In , the volunteers helped with renovations of the family- type orphanage and two other households and supported a youth center “Kherson Art Hub” to create a mural and make some renovations in the hub space. Another grantee supported by UCBI II created modern and innovative public spaces in six cities in Donetsk and Luhansk reflecting those cities’ identity, network, and interests. These spaces included: a youth athletic center in ; an open scene in the city park in Bakhmut; a street space for children and youth in the yard of the youth library in Severodonetsk; a public space near the university’ hub in Pokrovsk; and a public space on the banks of the river in the post-industrial zone in . Curators and artists helped citizens to uncover the underlying beauty of their city. Each of the locations has a dedicated team who will continue the work started with UCBI II support. The grantee managed to engage residents, local officials, businesses, and media in the project revealing that cooperation was not only possible, but more productive if they worked together. Improve optimism about the economic transformation among key stakeholders: Anxiety about the future of the economy is overwhelmingly the main concern in the Donbas region, and this is influencing opinions about the direction of the country. To counter this, UCBI II is empowering young people, universities, and forward-leaning local governments to present a new vision for the economy, based on the values of innovation, self-reliance, and entrepreneurship. As one example, UCBI II is increasing opportunities for young Ukrainians by helping the largest academic and scientific center in southeastern Ukraine to develop, launch, and promote the first “Center of Innovative Entrepreneurship” in Donetsk region. The center will support Mariupol's transition from a declining, industrial economy dominated by large enterprises to one fueled by entrepreneurship. UCBI II will equip and modernize the center, which will serve as a space for

7 UKRAINE CONFIDENCE BUILDING INITIATIVE II SEMI-ANNUAL REPORT, APR 2017-SEP 2017 students to work on startups and provide training to students and teachers on the basics of business idea development, implementation, and promotion. The establishment of the center will help to improve the community's perception of Mariupol's economic future and boost morale and confidence by increasing business sophistication and enhancing entrepreneurial capacity in Donbas. To help encourage more people to engage in the opportunities offered by the innovation economy in Ukraine, one of the project’s partners established the first creative entrepreneurship hub in Kramatorsk in 2016. UCBI II will expand this successful model through the development of two new creative entrepreneurship hubs in Kramatorsk and Kostiantynivka and deliver a comprehensive training, learning, and sharing program of events that will engage nearly 500 existing and prospective entrepreneurs in becoming part of the innovation economy in northern Donetsk oblast. As a result of this activity, the NGO will help promote and improve optimism about the economic transformation among key stakeholders in northern Donetsk oblast.

Objective 2. Broaden participation in Ukraine’s reform process Improve local government service delivery in key reform areas: While the slow pace of reforms frustrates Ukrainians across the country, eastern Ukrainians are most skeptical that the agenda set off by the Maidan will result in tangible improvements. Opinion polls show that they are the least willing to sacrifice for reforms and most dissatisfied with the efforts of national leaders. Demonstrating reform in these parts of Ukraine is essential to ensure that the East is supportive of the direction of the country toward European integration.

At the national level, the reform process is characterized by a series of sectoral reforms, and while there has been some success, the process is slow and plagued by corrosive politics, misinformation, and the pressures of the war and economic crisis. However, at a local level, reformers are taking advantage of progress in areas of decentralization of powers to demonstrate a new relationship between citizens and the state. This new commitment to openness, efficiency, and engagement with citizens is an opportunity to shift the conversation about reform and make it a reality. However, it will continue to be essential to connect local improvements in governance to national reforms. UCBI II is linking eastern Ukrainians to their government in positive ways by assisting local authorities to provide improved, more transparent, and streamlined services. The project has collaborated with local governments to establish administrative service centers (ASCs) in Kharkiv, Donetsk, and Luhansk, which allow citizens to obtain a wide range of services, pay taxes, and do other business that previously required bribes and involved long waits, visits to multiple locations, and poor treatment by bureaucrats. For example, a pilot to automate change of address registration in Lysychansk city decreased processing time from two days to less than 10 minutes, allowing residents to complete this task in one trip - which has been especially important for people displaced by the conflict.

8 UKRAINE CONFIDENCE BUILDING INITIATIVE II SEMI-ANNUAL REPORT, APR 2017-SEP 2017 To maintain the momentum among local government employees who are changing how they work and serve the public, and to help prepare local administrations in the East to make the move to e- governance, UCBI II has equipped local centers with IT hardware and software. UCBI II program staff and international experts identified interventions and equipment support that directly resulted in improved service delivery. Examples of assistance under this activity include computers, multifunction devices, electronic queuing systems, information terminals, software solutions that improve data security and storage, and automation of service delivery. As a result of this activity, local administrations in Donetsk and Luhansk oblasts now deliver priority government services in a more efficient way and residents can interact with the government in a more transparent and customer-orientated way. Increase perception of citizen oversight/participation in local government decision making: A new class of civil society has emerged in the communities and is changing perceptions of the role of citizens in government decision making. The project continues to engage with these groups, help them achieve visible and relevant victories in order to enhance their credibility and reach.

To this end, UCBI II supported an activity to cultivate responsibility and encourage local government to deal with the local problems in 16 cities of Luhansk and Donetsk Oblasts -- Rubizhne, Severodonetsk, Lyman, Bakhmut, Slovyansk, Kramatorsk, , Kostiantynivka, , , Pokrovsk, Selidove, Mariupol, and Oleksandrivka as well as (Lokhvytsia) and (). Demonstrating that local problems can be solved with the support of local stakeholders based on successful cases of other Ukrainian regions may motivate communities to be more proactive. A strong community movement, administered by one partner NGO, also helps the people of Donbas to keep accountable and influence government through trainings for activists, analytical materials, information campaigns, and direct actions. With support from UCBI II, this NGO, with other partners, will conduct an analysis of common problems in 16 target cities, develop action plans, and run advocacy campaigns to support the implementation. The project expects that outcomes of the activity will make local decision-making processes more inclusive, transparent, and accountable.

Objective 3. Build trust and acceptance of objective pro-reform information Increase production of diverse, tailored pro-reform content on local and national media: In South and East Ukraine, common Russian narratives persist and fuel the skepticism and perceptions that are pulling Russian-speaking audiences away from the democratic reform process. This is in spite of the fact that very few people are watching Russian news and information. Viewers in these regions have significantly less trust in Ukrainian media than viewers in other parts of the country and often view Ukrainian media as propaganda. The increasing use of , one-side portrayal of the war, and proliferation of politically charged news and analysis is turning off viewers in these regions and research suggests that non-news products, such as entertainment, play a greater role in shaping opinions and perceptions. National and local media content does not resonate with audiences in the East, nor do they effectively present positive views of the country’s

9 UKRAINE CONFIDENCE BUILDING INITIATIVE II SEMI-ANNUAL REPORT, APR 2017-SEP 2017 direction or accurate portrayals of the conflict. This is resulting in a broad rejection of Ukrainian media content, allowing common misperceptions and malign narratives to persist.

To address this issue, UCBI II has developed a number of initiatives with national and local media to enhance effective communications with the East. For example, in collaboration with one of the largest national broadcasters, UCBI II will pilot a scripted television program, Marsrhutka, that presents a nuanced narrative about the conflict, highlighting the civilian experience and promoting a balanced view on reintegration. , the Ukrainian word for a bus that transports people from the government-controlled areas to non-government-controlled areas and back, will feature life stories of the bus driver and some of his passengers that live on both sides of the conflict line. By producing and evaluating the TV pilot, UCBI II and 1+1 TV channel aim to develop a high- quality media product that will deliver unbiased and positive messages about the life of people affected by the conflict in the East to the broader Ukrainian audience. According to the preliminary negotiations with 1+1 TV channel, the entire TV series will air in a prime-time slot tentatively in autumn.

UCBI II also provided support to Hromadske Radio, a Ukrainian media initiative that was created shortly before and during the Revolution of Dignity. Independent online talk radio is currently very popular in Ukraine and needs some strong key actors. Dynamically developing communication and marketing technologies could potentially provide greater opportunities for the further development of Hromadske Radio; however, to take advantage of these opportunities, it needs to upgrade its programming format and technology and to introduce more business-like practices. UCBI II’s support to Hromadske Radio focus on developing a new business strategy, with the possibility of supporting its marketing and sales. The development of the new radio approach goes hand-in-hand with the creation of new content. By the end of September 2017, a new strategy for the radio was provided and new ideas of content were presented.

PROGRAM EVALUATION

UCBI II engages in four tiers of monitoring and evaluation (M&E). In the first tier, grantees are required to undertake a number of monitoring activities and submit regular reports to project staff for review. This process helps to build the internal M&E systems of emerging civil society groups. In the second tier, UCBI II project staff visit project sites, interview participants and beneficiaries, and use other data collection tools to monitor implementation and evaluate impact of specific activities. In the third tier, UCBI II relies on third party sub-contractors to triangulate information received from project staff and grantees. Lastly, USAID/OTI personnel also review M&E documents from all three tiers and themselves engage in direct site visits, networking, and research to monitor and evaluate programming.

In July 2017, Social Impact, Inc. provided a Mid-Term Evaluation Report of the UCBI program from 2014 – 2017. This evaluation confirmed many of the program’s key assumptions, highlighted UCBI’s positive impacts, and identified several lessons learned. The expert recommendations were presented to the program team during the first SRS held in early August 2017 and were drawn upon during the revision of UCBI II’s Strategic Framework.

In August 2017, UCBI II launched the second phase of SCORE, led by Centre for Sustainable Peace and Democratic Development (SeeD). Field research will be conducted between November

10 UKRAINE CONFIDENCE BUILDING INITIATIVE II SEMI-ANNUAL REPORT, APR 2017-SEP 2017 2017 and January 2018. This second round of SCORE will be instrumental to guiding the development of future UCBI II programs and assessing the impact of its work.

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