USAID ECONOMIC RESILIENCE ACTIVITY: ANNUAL REPORT: YEAR ONE AUGUST 27, 2018–SEPTEMBER 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
Annual Report: Year One (August 27, 2018–September 30, 2019)
Program Title: USAID Economic Resilience Activity
Sponsoring USAID Office: USAID Ukraine
Contract Number: 72012118C00004
Contractor: DAI Global, LLC
Submission Date: October 30, 2019
Author: DAI Global, LLC
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Contents ACRONYMS AND ABBREVIATIONS ...... v I. EXECUTIVE SUMMARY ...... 8 II. INTRODUCTION ...... 10 III. CONTEXT UPDATE ...... 11 IV. KEY NARRATIVE ACHIEVEMENTS ...... 13 V. PROGRESS AGAINST TARGETS ...... 30 VI. PERFORMANCE MONITORING, EVALUATION, AND LEARNING ...... 33 VII. LESSONS LEARNED ...... 38 VIII. ENVIRONMENTAL MONITORING...... 40 IX. PROGRESS ON LINKS TO OTHER ACTIVITIES, DONOR-FUNDED PROGRAMS, AND HOST GOVERNMENT ...... 41 X. PROGRESS ON INCLUSIVE DEVELOPMENT ...... 44 XII. SUB-AWARD DETAILS ...... 45 XIII. ACTIVITY ADMINISTRATION ...... 48
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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 BIIR Bojer Innovativ Ingeniørrådgivning CDM CDM Engineering Ukraine CEP Competitive Economy Program CIS Commonwealth of Independent States CLA Collaboration Learning Adaptation COP Chief of Party COR Contracting Officer’s Representative DAI DAI Global LLC DGE Democratic Governance East DOSA Donetsk Oblast State Administration 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 ESP Energy Security Program 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 HCCP Hazard and Critical Control Points
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HR Human Resources HO Home Office HVA High Value Agriculture ICT Information, Communication and Technology IDP Internally-Displaced Persons IFC International Finance Corporation IFI International Financial Institutions IM Innovative Manufacturing IT Information Technology KfW Kreditanstalt für Wiederaufbau ("Credit Institute for Reconstruction”) LGBTQI Lesbian, Gay, Bisexual, Transgender, Queer (or Questioning), and Intersex LNAU Luhansk National Agrarian University LOSA Luhansk Oblast State Administration 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 MSM Men Who Have Sex With Men MSME Micro, Small, Medium Enterprises MSRA Market Systems Resilience Assessment 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 RAD Resource Assistance Development REG Regional Economic Growth Project RFP Request for Proposal SDAA Senior Deputy Assistant Administrator
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SMEs Small and Medium Enterprises TVET Technical and Vocational Education Training SMM Social Media Marketing UCBI Ukraine 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. EXECUTIVE SUMMARY The Russia-backed conflict in eastern Ukraine and Russia’s hybrid war in the Azov Sea have upended the economy of the region, cutting it off from important markets, catalyzing the decline of traditional industries, and displacing 1.5 million people from their homes and jobs. More than 13,000 Ukrainians have died in the conflict, families have been torn apart, and tanks have rolled through much of the region creating terror and uncertainty. Adding to the damage, there’s been a banking crisis. Despite the staggering obstacles, the U.S. Agency for International Development (USAID)’s Economic Resilience Activity (ERA/Activity) has achieved exemplary results in its first year using a collaboration, learning, and adaptation (CLA) approach and a market-based private sector engagement strategy. Collaboration. The ERA team created a strong coordination plan that analyzed types of partners and assigned actions. ERA management prioritized USAID partner projects and dedicated time to making that collaboration work, including actively participating in both the Ukraine Confidence Building Initiative II (UCBI II) handover collaboration meeting and the USAID-organized Democracy and Government East (DGE)-ERA collaboration meeting, and establishing regular cross-Activity collaboration meetings with DGE and Competitive Economy Program (CEP). ERA carried out an unprecedented collaborative workplanning session with USAID and other donor projects, subcontractors, and a third-party evaluator. ERA management also shared drafts of the workplan with key partners for feedback. ERA also achieved interesting results through collaboration with local governments and partners, such as attracting Dutch firm Bojer Innovativ Ingeniørrådgivning (BIIR) to the region and collaborating with the East Ukrainian Volodymyr Dahl National University (Dahl University)—displaced due to the conflict— and the Institute of Chemical Technologies Rubizhne in the Luhansk Oblast. Through this partnership, BIIR is helping to make the skills taught in the region more relevant to the demands of working in the global economy and hiring newly trained workers. The partnership is a first step toward drawing international engineering firms to invest more resources in Luhansk, which historically has had a strong engineering base. Learning. The ERA team established a learning culture from day one—starting with data-driven sector selection drawing on sales, beneficiary, and market trends as well as selection criteria designed to maximize inclusion, grow micro, small, and medium enterprises (MSMEs), and bolster developmental benefits. The ERA team quickly assessed value chains, the political economy, and the labor market to provide evidence for workplanning. The management team institutionalized pause-and-reflect sessions along each step, starting with a stocktaking with the core staff of the proposal and contract, as well as best practices in market-based engagement in other countries, followed by analyzing the rapid assessments, the Resonance baseline survey data, gender integration, and Sea of Azov assessment findings—learning that informs the workplanning, market systems resilience, and methods to carry out visioning for economic transformation. The monitoring, evaluation, and learning (MEL) team created a learning harvesting log to help each team articulate hypotheses to test, detail pilot tests, how they would learn from those tests, and with whom they would share the information. Adaptation. The ERA team used learning to adaptively manage the project. For example, ERA was able to quickly mobilize a team to assess the Sea of Azov region in a short timeframe and use those findings to build a program expanding interventions there, quickly move into discussions around transformational support to newly appointed governors on infrastructure and use the gender pause and reflect to redouble efforts to reach women beneficiaries, resulting in 61 percent female beneficiaries for
8 | USAID ECONOMIC RESILIENCE ACTIVITY ANNUAL REPORT – YEAR ONE USAID.GOV the year. Similarly, during the July workplanning pause and reflect, the team laid plans to accelerate the training program when the Monitoring, Evaluation, Adaptation and Learning (MEAL) Director shared the trend line. Results. The pilot, pause-and-reflect, and adapt methodology has yielded concrete and impressive results. For example, ERA began working with a small group of “pathfinder farmers” to help them to grow new agricultural products—in this case, cherry tomatoes—that are in high demand by national retail stores. The pathfinders worked with ERA and each other to learn how to grow new plant varieties, register an official business, market their product, negotiate an agreement with national grocery chains, and get their product to market. On September 16th, 2019, the pathfinders successfully made their seventh shipment of 13 tons of cherry tomatoes to Fozzy Group, which owns more than 500 supermarkets throughout Ukraine including chains such as Silpo, with a total sales value of 423,092 Ukrainian Hryvnia. In addition, the Activity’s innovative manufacturing and workforce development teams have been working together to help realize the inward investment of BIIR in Rubizhne, an investment that would not have happened without ERA. ERA signed an MoU with BIIR after the Innovations for Manufacturing lead had met the head of BIIR at a trade fair and later provided him a tour of Rubizhne, an industrial engineering hub. To date, BIIR has procured $25,000 worth of computers and software and weighed in on curriculum requirements in order to launch the Rubizhne training of trainers’ program at Dahl University with the plan to hire the trained graduates. And finally, the ERA team demonstrated a strong commitment to including vulnerable population groups, assisting 935 vulnerable and hard to reach beneficiaries. All results accelerated at the end of the year at an impressive pace as ERA laid the foundations in relationships, systems, staff training, creating a learning culture so that the engine is full steam ahead.
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II. INTRODUCTION
DAI is pleased to submit its first Annual Report for ERA covering the period of August 27, 2018, to September 30, 2019. While the first year of the Activity ended on August 26, 2019, we have included September to better align the report with USAID’s fiscal year. This report details the Activity’s accomplishments during the first year and describes the activities completed, benchmarks achieved, and performance standards completed—with detailed commentary on each component. BRIEF SUMMARY OF ACTIVITY 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 underpin 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. 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 (Inclusion): 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 (Growth): 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 (Transformation): 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.
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III. CONTEXT UPDATE CONFLICT WITH RUSSIA In April 2014, in response to the Ukrainian Revolution of Dignity marches, Russian-backed paramilitaries made incursions into sovereign eastern Ukrainian territory and declared autonomy and independence under the auspices of the so-called “Donetsk and Luhansk People’s Republics.” Since then, eastern Ukraine has been embroiled in a military conflict that has cost the lives of up to 13,000 people, including the deaths of more than 3,000 civilians. This conflict has not only ruined the livelihoods of inhabitants of the region but has destabilized the economy and created a sense of hopelessness about the future of the region. USAID conceptualized ERA as a way of building economic resilience in eastern Ukraine by strengthening value chains, engaging vulnerable communities, and supporting regional transformation. Near the beginning of ERA in November 2018, Russia continued its incursions on Ukrainian sovereign territory by attacking naval vessels in the Kerch Strait. In response, USAID added the Sea of Azov region to the Activity as a priority and, as part of that support, asked ERA to expedite its presence and interventions in the region. Accordingly, ERA expanded interventions to include southern Zaporizhzhya Oblast in the cities of Berdiansk and Melitopol. In response to the attack in the Kerch Strait, then- president Petro Poroshenko decreed martial law in 10 Ukrainian oblasts. DAI’s Global Security team assessed potential impacts of this escalation on ERA interventions and determined that the Activity would still be able to engage with target communities. In mid-June 2019, the Government of Ukraine changed priorities and began disengagement efforts in eastern Ukraine. The disengagement around Stanytsia Luhanska has thus far been peaceful, with dismantling of fortifications in that region ongoing, as well as preparation for reparations to be conducted to the bridge connecting non-government-controlled Ukraine (NGCU) with government- controlled territory. Moreover, President Volodymyr Zelenskyy has taken steps toward considering the so-called “Steinmeier Formula,” which would address the reintegration of NGCU. This formula calls for elections to be held in the separatist-held territories under Ukrainian legislation and the supervision of the Organization for Security and Cooperation in Europe (OSCE). If the OSCE judges the balloting to be free and fair, then a special self-governing status for the territories will be initiated, and Ukraine will be returned control of its internationally recognized easternmost border. On September 7, 2019, Ukraine and Russia negotiated the exchange and release of 35 Ukrainian prisoners for 35 Russian prisoners—importantly, these prisoners included the 24 captured Ukrainian sailors from the Kerch Strait, Crimean film director Oleh Sentsov, as well as Ukrainian-held prisoner Volodymyr Tsemakh, one of the individuals allegedly involved in the shooting down of the Malaysia Airlines Flight 17. To date, Activity operations have not been impacted by the conflict and the team is proceeding according to plan. KEY APPOINTMENTS & EVENTS On April 21, 2019, Zelenskyy won the presidential election of Ukraine with 73 percent of the popular vote over incumbent Poroshenko. Ukrainian parliamentary elections were held on July 21, 2019. “Servant of the People,” Zelenskyy’s new party, won 251 seats in the Rada and was able to establish a single-party majority, preventing all other parties from forming a coalition. The pro-Russian party, “Opposition Platform—For Life,” won 44 seats and is led by pro-Russian politician Yuriy Boyko and oligarch Vadym Rabinovych. Other parties that won seats in the new parliament include Yulia
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Tymoshenko’s “Fatherland,” with 24 seats; Poroshenko’s “European Solidarity,” with 27 seats; and rock- star Svyatoslav Vakarchuk’s “Voice,” with 20 seats. Political parties “Servant of the People” and “Voice” are the only two parties with full slates of candidates that have never served in parliament. In the aftermath of parliamentary elections, the Verkhovna Rada confirmed the appointment of Oleksiy Honcharuk as prime minister and a new cabinet of ministers. Additionally, Zelenskyy appointed new governors in the Donetsk and Luhansk Oblasts: Pavlo Kyrylenko and Vitaliy Komarnitsky.
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IV. KEY NARRATIVE ACHIEVEMENTS CONTRACT DELIVERABLES AND OTHER REPORTING Over the course of the year, 11 contract deliverables were due, 11 deliverables were submitted, and the following nine were approved as of September 30, 2019:
Other recurring deliverables—such as monthly schedules and weekly progress reports—were submitted to USAID per the schedule outlined in the contract. Following several rounds of revisions, USAID—including Bureau of Economic Growth, Education, and Environment (E3) engineers from USAID/Washington—DAI, and CDM Engineering met to discuss the infrastructure component of ERA and USAID comments on the Construction Plan. DAI revised the document based on USAID feedback and resubmitted it in July 2019. Once approved, all startup contract deliverables will be finalized. Also, in July 2019, the team received the results of the Award Fee Board’s (AFB) evaluation of DAI’s performance based on the award fee criteria established in the contract. The AFB determined DAI’s overall performance during the first evaluation period (August 27, 2018–February 26, 2019) was Very Good. TECHNICAL INTERVENTIONS ERA kicked off its technical interventions with a holistic rapid assessment that integrated damage assessments; information technology (IT), vegetables, and honey end market and value chain analysis; and conflict analyses to elucidate social drivers of economic change. Through this assessment, the team collected and analyzed evidence that supported activity design and ensured that interventions were data-
13 | USAID ECONOMIC RESILIENCE ACTIVITY ANNUAL REPORT – YEAR ONE USAID.GOV driven to maximize impact. The assessment’s key findings were presented to USAID at the end of November 2018, revealing many areas and opportunities for engagement that had promise to stabilize the region, grow sustainable SMEs, and ultimately transform the Luhansk and Donetsk Oblast economies. Building off the work done during the rapid assessment, the technical staff developed the Second Six-month Implementation and Coordination Plan, fully integrating the initial rapid assessment results into workplan interventions. Below are key interventions that were launched under each Objective over the course of the first year: Objective 1 : Provide Assistance to Stabilize the Economy of Eastern Ukraine Public Sector Economic Infrastructure Investment During the rapid assessment conducted in fall 2018, the team identified several damaged sites that would benefit from the Activity’s support and whose quick rehabilitation would help alleviate bottlenecks, create jobs, and unlock economic growth in eastern Ukraine. Contrary to the team’s initial assumptions, there were few sites of a size appropriate for the ERA’s construction budget. Furthermore, the team decided to prioritize public sector infrastructure sites to not distort nascent private sector financial markets available to individual enterprises. As a result, the team turned toward a method of rapidly reviewing a continuous stream of local government-proposed projects to kickstart the process. Even prior to submitting the Second Six-month Implementation Plan in January 2019, the team launched quick-start interventions that included the pre-feasibility planning for the following three infrastructure projects identified during the rapid assessment: Construct a waste-sorting line at the Lyman landfill to decrease the amount of domestic waste generated and provide waste sorting for further reuse or recycling in accordance with Ukrainian environmental legislation. Repair a pedestrian bridge over the railroad tracks in Siversk for the safety and comfort of local citizens. Renovate a phyto-sanitary laboratory in Rubizhne to expand its capacity to provide services and create jobs. The infrastructure team conducted site visits and met with local authorities and infrastructure owners. The team gathered the information necessary to develop corresponding environmental review checklists (ERC)/environmental mitigation measures plans (EMMP), obtaining design permits and initiating designs. In June 2019, a USAID delegation, including E3 engineers from USAID/Washington, and the ERA infrastructure team visited the potential sites. In response to feedback from the visiting USAID E3 engineers related to these sites, DAI revised ERA’s pre-feasibility assessment and screening process for project identification. Going forward, the pre-feasibility assessment will include a thorough examination of the project’s constructability and engineering issues; economic, environmental, social, and development impact; legal issues; sustainability; and context within the local vision for closer alignment between site selection and Objective 3 efforts. Following the workplanning retreat in July 2019, ERA reorganized the infrastructure component, shifting it away from the former “Objective 1” to a newly developed “transformation team” to ensure the future selection of the sites was aligned with emerging local and regional visions. With the revised tool in hand, the team began reassessing three infrastructure projects in the pipeline. Based on the results of these assessments, ERA will determine whether to move forward with these
14 | USAID ECONOMIC RESILIENCE ACTIVITY ANNUAL REPORT – YEAR ONE USAID.GOV projects. Additionally, ERA assessed its infrastructure team staffing structure and determined the need for additional resources to adequately implement the Activity’s infrastructure component. In September 2019, ERA strengthened the team by mobilizing a senior infrastructure manager to lead this component. Highly experienced in implementing construction projects for USAID, the manager will be responsible for conducting more deliberate and comprehensive pre-feasibility assessments to identify projects aligned with ERA objectives. Per USAID’s request, the ERA team conducted a rapid assessment of the Sea of Azov region to identify, among other things, infrastructure needs in the area. An opportunity the team looked into included the rehabilitation and expansion of the Berdiansk airport. Based on the results of the Azov Sea assessment, the team engaged an external consultant to collect preliminary information on regional demand and existing air transportation infrastructure to determine whether a pre-feasibility study was merited. It was determined that an airport in Berdiansk would not only serve the city but also provide better air connectivity for the entire region. Access to air transportation could also be transformative for the Sea of Azov regional tourism industry—mostly domestic tourists with lower incomes who prefer more affordable means of transportation—by delivering new visitors from regions further away. In addition to the airport, the team also explored a possibility of a railroad connector project in Sievierodonetsk. A railroad could ensure energy security of the government-controlled territory of the Luhansk Oblast by providing unimpeded coal delivery by rail to Lutsk; reduce the load on the public highway network, preventing premature destruction; and restore the region’s transit potential, among other things. The team continues assessing these two prospective interventions and will decide whether to proceed with further pre-feasibility studies during the second year of the Activity. Support Local Authorities to Unlock Financing for Infrastructure Investment ERA’s work under this intervention included assessing the extent of the financial support required by consolidated communities (CCs) in the region as well as assisting the Luhansk Oblast State Administration (LOSA) and the Donetsk Oblast State Administration (DOSA) to prepare the presentation of infrastructure projects in time for the Mariupol Investment Forum. After engaging in discussions with 20 different municipalities, the Access to Finance specialist drafted a list of priority infrastructure projects to be financed. This process has been particularly challenging because the ownership and responsibility for local infrastructure is not very clear – there is often an overlap between which level of government manages infrastructure. Additionally, infrastructure projects for rural cities tend to be too small to interest international financial institutions’ (IFI) involvement and engagement. Due to a lack of clarity about what IFIs will champion the financing of these projects, financing workshops are yet to begin. To address this, the ERA Access to Finance team worked on establishing an agreement with the governmental UKRGAZBANK to focus on the financing of infrastructure projects in consolidated communities (CCs). Work on establishing a more concrete financial product with the banks will continue into the second year of the Activity. ERA provided coaching to LOSA on preparation of concept notes that can be submitted to the Ministry of Regional Development for participation in the EIB-funded Restoring Eastern Ukraine fund. A new tranche of funding was announced at the Mariupol Investment Forum of 40-80 million Euros, depending on the quality of submitted concept notes. ERA helped the administration gather a team of application writes and produce 14 concept notes on priority investments including rail
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connection and electrification, a new oblast hospital, renovations to the Luhansk National Agrarian University (LNAU) campus, a waste management facility, etc. These notes will be further refined for submission to the Ministry at the end of 2019. In collaboration with UNICEF and water company Voda Donbasu, the team also worked with DOSA representatives to prepare their concept note on key water infrastructure investment needs in the oblast to be presented at the forum. Vulnerable Population Economic Inclusion During the first year of the Activity’s implementation, the Objective 1 team emphasized quick support to create economic opportunities for conflict-affected vulnerable people and local businesses. ERA relied on its grants fund for its interventions under the workstream of supporting the economic inclusion of vulnerable populations. These grants aimed to reach the most vulnerable and marginalized people living in the conflict-affected Donetsk and Luhansk Oblasts and to improve their economic security by enhancing employment and entrepreneurship opportunities. Following USAID’s approval, the first Annual Program Statement (APS), launched on DAI Grants Portal in February 2019, was widely publicized through social media, email, and personal networks. The team held roadshow events in major cities—namely Bakhmut, Kramatorsk, Manhush, Mariupol, Pokrovsk, Sloviansk, and Vuhledar in the Donetsk Oblast and Lysychansk and Sievierodonetsk in the Luhansk Oblast to share details of the APS grants application process with potential applicants. Along with ERA’s partner, the Danish Refugee Council (DRC), the team conducted an outreach campaign to identify and attract potential grantees, leveraging partner networks and its own knowledge of the needs of businesses and vulnerable communities. The campaign resulted in hundreds of concept note submissions from potential grantees. Having evaluated the concept notes based on demonstrated capacity, commitment, sustainable strategies, and the potential to benefit vulnerable populations, ERA’s evaluation committee worked with selected partners to co-design the final application activities, performance milestones, and budget. By the end of Year 1, the team identified and selected 15 grant applications in support of nongovernmental organizations (NGOs) and enterprises benefiting unemployed populations, non- educated and unemployed youth, women, including single mothers, IDPs, and members of the LGBTQI community. Priority was given to local NGOs and private service providers with grassroots knowledge of the needs of vulnerable groups. Out of 15, the following six applications with a total value of $605,000 were approved by USAID and are currently in the implementation stage: NGO Ukrainian Center for Civic Initiatives “Svitlo”—grant to support the promotion of MSMEs from the Donetsk and Luhansk Oblasts through the development of e-commerce and an online trading platform ($65,388). Ukrainian Women’s Fund—grant to set up three women’s business support centers to empower and support women in starting microbusinesses by providing long-term entrepreneurship training, legal counsel, public awareness raising, and lessons on mobilizing funding ($299,874). Private entrepreneur (PE) Izuita Oleksandra Oleksandrivna—grant to open a children’s entertainment and development center and youth hub in Kreminna ($25,258).
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PE Tsyhankov Oleksandr Viktorovych—grant to assist his sewing company in developing and growing by increasing the quality and quantity of goods produced ($115,999). PE Vinohradov Ihor Volodymyrovych—grant to establish a new Moko Pizza delivery food point in Mariupol ($75,912). PE Svyatchenko Vladislav Yuriyovych—grant to provide internet service in rural areas of the Donetsk Oblast and increase subscribers to the service among vulnerable front-line communities of Dolyna, Krasnopillya, Lozovo, and Sidorovo villages ($23,285).
The team also initiated the development of the following nine grant applications with a value of $675,000 to be submitted during the next year of implementation:
Online Ukraine, LLC—grant to provide internet network coverage in the settlements of the Yasinovatsky rayon of the Donetsk Oblast. PE Vnukova Alla Oleksandrivna—grant to modernize embroidery equipment and a loop machine to expand the range and improve the quality of goods produced, create new jobs for vulnerable people, and improve working conditions for existing workers. Agency for Regional Development of Eastern Ukraine—grant to conduct educational training for women in rural communities on entrepreneurship, legal security, gender equality, and social protection to enhance their business and law competencies. Terre des Hommes—grant to strengthen vocational education training (VET) with a focus on digital and IT competences and to raise employability and entrepreneurial skills among youth. PE Solomka Olha Aleksandrovna—grant to open two branches of Nova Poshta in remote areas of the Donetsk Oblast to facilitate parcel delivery in the countryside. PE Honcharuk Valerii Petrovych—grant to expand the furniture manufacturing business in the Mariinskyi district of the Donetsk Oblast and to create conditions for new or improved employment for vulnerable populations. PE Fedorova Hanna Oleksandrivna—grant to improve the quality and expand the spectrum of services provided by a private family doctor in the Stanychno Luhanskyi district of the Luhansk Oblast and to increase the access of vulnerable populations, namely residents of remote villages, to high-quality medical services. PE Tkachuk Valentyn Valentynovych—grant to improve veterinary services in the Limansky district of the Donetsk Oblast by expanding the spectrum and improving the quality of services provided by the veterinarian clinic White Bear. PE Makoied Vadym Oleksandrovych—grant to assist a small bakery to expand by procuring the necessary equipment and materials and to increase food safety management and product quality through implementation of Hazard and Critical Control Points (HCCP) standards.
The Objective 1 team also made use of a single-stage request for application (RFA) process for rapid response grants where the eligibility and selection criteria were more narrowly defined and targeted at a specific type of partner. For example, following USAID’s approval, ERA released its first RFA in May 2019 seeking applications from lyceums and technical trade schools to strengthen the technical capacity of vocational educational institutions in the Donetsk and Luhansk Oblasts. The Activity will support these institutions with equipment and technological resources to help students to obtain in-demand practical skills. There was a slight delay in releasing the RFA and in selecting the winners, as the team learned that both oblasts were developing strategies on the optimization of professional technical schools that would lead to some schools closing or merging. As such, it was mutually decided (in
17 | USAID ECONOMIC RESILIENCE ACTIVITY ANNUAL REPORT – YEAR ONE USAID.GOV collaboration with both oblasts and UNDP, the lead international agency that has been helping the authorities with lyceum consolidation) to delay any award decisions until after decisions on consolidation had been made. After the process restarted near the end of the reporting period, the team received and reviewed 38 applications, out of which seven from the Donetsk Oblast and two from the Luhansk Oblast were selected for further evaluation. In addition to the existing RFA criteria, the team looked closely at applicants’ geographic locations to ensure the intervention covered all regions where the Activity works and reaches the most vulnerable populations. A coordination meeting with representatives of the Departments of Education of both oblasts was scheduled for early October 2019 to discuss the optimization strategy as it relates to the shortlisted candidates and to select winners. As part of ERA’s goals on conducting research on the most in-demand professions in the region, and to provide data and statistics on occupational vacancies for immediate job placement, the team met with UNDP and discovered that such data are already being collected. Accordingly, ERA plans to collaborate with UNDP to utilize the collected information as a basis for future interventions. Objective 2: Support the Sustainable Development of SMEs Access to Finance Under this intervention, ERA held discussions with banks and credit unions in the Donetsk Oblast on lending to small/family farms, potential demand for microcredits, and the timing of loan issuances. The team worked with the Association of Credit Unions to encourage them to conduct a study of the lending market for farmers and family farms and formalize the procedures for assessing borrowers. The Association of Credit Unions applied for a grant that would be used towards financing local credit unions throughout the Donetsk Oblast. ERA is in the process of helping the Association finalize the grant and hopes that this grant will be signed by December 2019, for optimal implementation by early spring of 2020. In April 2019, ERA hosted a “Financing your Business” workshop that sought to teach the participants how to effectively engage with banks. Workforce Development At the start of Year 1, ERA received a request from the Donetsk and Luhansk employment centers to assist in updating their employer surveys. However, this task had to be put on hold as the team learned that UNDP was conducting a similar research and survey of employment centers. In order not to duplicate the effort, ERA’s collaboration with Donetsk and Luhansk regional employment centers to adapt bi-annual employer surveys to capture labor market information in ERA growth sectors was pushed to Year 2. During the reporting period, ERA cemented its relationships with three displaced universities—LNAU, Dahl University, and Donetsk National Technical University—and continued working on specific activities with each. ERA’s financial and technical support to LNAU served as the key driving force behind its relocation from the NGCA and enabled the university to establish its base of operations in the GOU Luhansk Oblast. As part of the assistance for LNAU, ERA co-created an in-kind grant with the university that will provide material support - including furniture and equipment for laboratories – as well as help develop a partnership with an HR agency to assist the university with recruitment and assist in creating a promotional campaign for the university. The grant
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($268,794) was approved by USAID in October 2019. The team also released an RFP to engage a US partner university in developing and implementing the LNAU strategic development plan. Unfortunately, the RFP received little interest from educational institutions due to misinformation about regional security, the universities’ lack of regional expertise, and a lack of sufficient financial incentive. The team plans to republish this RFP with this feedback and relevant lessons learned in Year 2. Additionally, ERA assisted LNAU in registering for the Ministry of Education and Science pilot project for Dual Education that seeks to incorporate apprenticeships and practical job skills in educational curricula. ERA worked with Dahl University to help it establish a strong partnership with BIIR to increase the capacity and skill set of engineering students based on qualifications that companies such as BIIR look for. To date, ERA’s support included organization of a training course for university professors on two modern engineering software products. As a result of the training course, these faculty members will incorporate the acquired knowledge on the software products into the curriculum for engineering students. Further details on the BIIR and Dahl University partnership are provided under the Innovations for Manufacturing sub-section. The team also initiated the development of the following four grant applications with an approximate value of $614,168 to be submitted during the next year of implementation: Dahl University grant to adjust its curricula according to local and international employers’ needs and to upgrade coaching courses for professors (approx. $175,000) Priazovskyi State Technical University grant to create a vocational education coworking center “Univer” (approx. $167,579) NGO Association Noosphere grant to strengthen STEM education at the Priazovskyi State Technical University and improve the innovative ecosystem of eastern Ukraine (approx. $179,450) Donetsk National Technical University grant to assist with the development of the Youth Innovations Accelerator (approx. $92,139) Vegetables Growth Sector Throughout the year, ERA staff supported members of the Ovochi Stanychnykiv vegetable cooperative in Stanytsia Luhanska by providing extensive coaching and support to connect the vegetable value chain from war-torn eastern Ukraine to national wholesalers in Kyiv. ERA’s ongoing support to these farmers proved to be very successful. In June 2019, three tons of cherry tomatoes grown by the farmers were shipped to Kyiv—the first vegetables ever shipped from Stanytsia Luhanska to Ukraine’s capital. Through September 2019, the farmers shipped 13 tons of Ovochi Stanychnykiv produce from the agricultural cherry tomatoes to the Fozzy Group, the owner of more than 500 supermarkets throughout Ukraine , cooperative including the Silpo and Fora chains. This was the farmers’ first shipment to a national supermarket chain
19 | USAID ECONOMIC RESILIENCE ACTIVITY ANNUAL REPORT – YEAR ONE USAID.GOV conglomerate since receiving agronomic and market training from ERA. Later this year, the team plans to host a business-to-business meeting in Sievierodonetsk with local supermarket chains and send the pathfinder farmers to the largest wholesaler networking-contract development Ovoschi i Frukti Ukraini 2019 expo in Kyiv in December 2019. In August 2019, after the team evaluated the results and lessons learned in Stanytsia Luhanska, ERA established a new pathfinder farmer group in the village of Vasiukivka (Soledar CC in the Donetsk Oblast), mostly consisting of the Meskheti Turk ethnic minority farmers. These farmers specialize in cabbage and pepper cultivation but want to grow higher-value niche crops. ERA will begin market research and pre-season agronomic support to this group in fall 2019. Publicized through local media and the ERA Facebook page, the success story of Ovochi Stanychnykiv drew the interest of local farmers. At the end of the season, more than 40 farmers expressed interest in joining the cooperative, building a lot of anticipation for the expansion of the pathfinder farmer program in 2020. ERA will build on this success to show other communities of farmers the potential of cooperation with national retail chains to replace lost markets in NGCAs of eastern Ukraine. As part of further supporting the vegetable value chain, ERA consultants identified six major local fruit and vegetable producers—Sady Donbasa, Perspektyva Dobropillya, Perspektyva in Ilynivka, Elviko Gigant, Progress Volnovakha, and Vsi Sto—with the operational and financial capabilities to expand. ERA began providing consultant training and technical support to these companies, generating interest from U.S.-based investors. Several of these companies will present pitches at the Mariupol Investment Forum in October 2019 to develop private partnerships with commercial producers, processors, exporters, and agro-input suppliers to co-invest in their business expansion. ERA also moved forward with identifying and supporting equipment infrastructure improvements at farmers markets. In September 2019, ERA specialists completed a survey to evaluate Sievierodonetsk residents’ vision of the ideal farmers’ market in the city, generating a lot of buzz in the community. In November 2019, the team will host a public forum to discuss the results of the survey, which will be followed by a focus group to decide which infrastructure projects to support. In the following year of implementation, the team intends to conduct similar studies in Kurakhove and Vuhledar in the Donetsk Oblast. However, due to a potential re-evaluation of the Government of Ukraine (GoU)’s priorities to focus on supporting trade routes with NGCAs, a different approach might have to be considered in these communities due to the potential liberalization of trade with NGCAs. This initiative might encourage ERA to be more ambitious and consider renovating logistics centers that would store and organize shipment of goods to NGCAs.
Honey As part of ERA value chain interventions, the team realized that the eastern Ukrainian honey value chain needs immediate support and resuscitation. In February 2019, ERA conducted two beekeeping roundtables—one in Sievierodonetsk, Luhansk Oblast, and the other in Pokrovsk, Donetsk Oblast—to share results of the rapid assessment of farmer coordination and development of the honey sector. The roundtables generated a high level of interest, attracting twice the number of participants expected. To provide immediate support to eastern Ukrainian beekeepers, two training sessions on pesticide-induced mortality and diseases affecting the bee population and their treatment were offered in Pokrovsk and Sievierodonetsk to veterinarians from eastern Ukraine. The majority of these veterinarians had not
20 | USAID ECONOMIC RESILIENCE ACTIVITY ANNUAL REPORT – YEAR ONE USAID.GOV previously received this training and had been unable to assist regional beekeepers who experienced large-scale bee mortality in the past several years. In May 2019, ERA specialists organized roundtables and informational meetings for beekeepers and farmers to increase their collaboration and reduce bee mortality. The results of these discussions revealed that beekeepers are frustrated at not being able to engage local politicians in addressing their concerns. As a response to this concern, ERA organized advocacy trainings to teach beekeepers how to engage with their representatives and formalize their complaints through the civic process. More advocacy trainings are planned for the following year of implementation. Throughout the course of engaging with beekeepers, the team learned that eastern Ukraine has no certified apiaries to provide purebred bee colonies of the popular Ukrainian steppe or Carpathian bee varieties. Many stakeholders raised the issue that for beekeepers to access these specific varieties, they must travel to western Ukraine or order bee colonies by mail, both expensive and unreliable options. ERA experts studied the science and regulation of purebred bee breeding and teamed up with the Hadyach Agricultural School in Poltava Oblast, the leading vocational institution for beekeepers, to assist in conducting study tours. To continue disseminating knowledge to beekeepers and encourage technology transfer, ERA conducted study tours to Poltava and Sumy Oblasts to study queen purebred bee breeding. These tours included lectures and visits to two certified breeding apiaries to inform concept notes about introducing certified bee breeding in eastern Ukraine. Following roundtables in Starobilsk and Lyman with beekeepers to more precisely determine their needs for continuing education and skills training, ERA built upon the existing partnership with the Hadyach Agricultural School to develop a 10-day course on beekeeping as a business. As part of ongoing support to the Luhansk National Agrarian University (LNAU), ERA will ground this training at the university and potentially expand it to beekeeping schools in Bakhmut and Svatove. The ERA team also took initial steps to develop private partnerships with honey value chain actors to increase investment in the supply chain by engaging in discussions with two manufacturers of beehives, Bez Opilok and Ximekselen, and the region’s biggest producer of metal barrels for export, Agrinol. Planned interventions under this activity lie in helping beekeepers acquire more hives and more export- barrels. ERA’s next steps include collaborating with these businesses to find ways to increase access and affordability of these materials. IT To build off rapid assessment findings that more workforce development is critical to increasing the competitiveness of the IT sector, ERA created an inventory of all IT-related training institutions, which was later used to guide further partnering conversations about their training offerings. The team engaged with employers and regional NGOs to understand the needs around career centers and incubators and has identified several interesting models while continuing to study specific areas. The team also began engaging with international universities that offer IT specialization and are interested in partnering with local technical universities. As part of ERA’s plan to adapt and develop curricula at universities and private training programs, the IT specialist organized a meeting with Dahl University in Sievierodonetsk to discuss the successful Kyiv “Unit.City” model to develop their very own curriculum and continuing education center at the university. ERA and Dahl University also discussed the city’s need for an IT learning and business incubation platform to further develop the capacity of the university in
21 | USAID ECONOMIC RESILIENCE ACTIVITY ANNUAL REPORT – YEAR ONE USAID.GOV supporting the IT sector and the technology needs of the business community in Sievierodonetsk. As a result of these discussions, a study tour is being planned for faculty members of the Kharkiv Polytechnic University to study the successful implementation of the “Unit.City” model and a request for proposals (RFP) is being prepared for a feasibility study assessment of an IT learning and incubation platform in Sievierodonetsk. In February 2019, ERA held its first IT sector roundtable to understand the skills and training needs of the IT community in Mariupol—the hub of the sector in the region—and the capacity of universities and private training companies to meet these needs. The major outcome of this roundtable was the decision to create a formal association to increase the sector’s visibility and address weaknesses in the business- enabling environment for IT firms in eastern Ukraine. In order to assist the IT companies and entrepreneurs in the Donetsk Oblast, ERA supported the organization of the ITConnect 2019 Conference organized by Quartsoft. Held at the Donbas State Engineering Academy in April 2019, the conference connected over 400 IT professionals, businesses, and students to share and exchange ideas and business knowledge. The attendees discussed the development of an innovative multidisciplinary curriculum for IT students, mobile applications, optical character recognition (OCR), enterprise resource planning (ERP) systems, among other topics. ERA took this opportunity to present on the Activity’s ongoing interventions and the grants application process. More information about the conference and its agenda (in Ukrainian) can be found here: http://itconnect.quartsoft.com.ua./ In May 2019, the team supported three major IT-related events: A Traction Camp in Kramatorsk followed by children’s robotics festival “RoboCXID,” organized in collaboration with the REG Project. The Traction Camp, attended by six local IT companies, offered creative local start-ups in the IT and innovative manufacturing (IM) spheres an opportunity to exchange ideas with leading experts who have successfully launched similar products. Over 210 people attended these two events. A two-day “MRPL-2019 IT Conference” ERA -supported Traction Camp in Kramatorsk in Mariupol. This was the first conference of its kind in the city with more than 200 attendees 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. During the conference, seven companies signed an association memorandum of understanding (MoU) formally establishing the “Mariupol IT Cluster” that was later registered officially as an NGO. The signing ceremony was attended by USAID Senior Deputy Assistant Administrator 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
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them the opportunity to accelerate development, attract new specialists to the industry, and expand their skills and qualifications. Going forward, ERA will provide capacity building support to this nascent organization for the future economic diversification of the region. In September 2019, ERA submitted to USAID for approval a grant request for Social Boost, a civic tech NGO aimed at using technology to create positive social change in Ukraine. This grant, approved shortly after the end of the reporting period, will go toward creating an IT hub in the city of Mariupol. This hub will support young IT specialists from the city by developing IT skills and entrepreneurship programs and facilitating mentorship and fellowship opportunities. Through the hub’s partnerships with the Mariupol City Administration and large local enterprises, young people will be able to test their IT-related ideas and solutions with existing businesses. The IT hub will also serve as a coworking space, offering event space for up to 200 attendees, as well as education and incubation programs to the entire population. This is a groundbreaking project that will stimulate economic growth, innovation, and show young Ukrainian entrepreneurs that there are exciting IT opportunities in eastern Ukraine. The year culminated with ERA supporting the “IT Arena Conference and ENABLER Camp” in September 2019, which was organized by ERA in cooperation with the USAID REG and CEP Activities. ERA supported five IT companies from Mariupol and Kramatorsk—Solution Mentor, UkertechInfo, Foridev, Sitycities, MakeBeCool—to participate in this event for productive networking and business matchmaking. Additionally, ERA expects that a strong, successful Lviv IT Cluster can serve as an example and important driver for IT companies in Mariupol and Kramatorsk to establish functional clusters and associations in their respective cities and further the cooperation among not only local companies, but also those outside the region, e.g. the Dnipro, Kyiv, Kharkiv, and Lviv clusters. ERA held daily follow-up sessions with the Mariupol and Kramatorsk participants as well as a final feedback session on the last day of the conference to glean insight into designing future interventions. All participants concurred that the conference offered great exposure and was a successful learning experience with informative panels. The business and product sessions on how to think about products, market fit, and strategies were useful for companies as some of them pursue switching from services and outsourcing companies to product-based companies. Many participants reported networking and exchanging contact information with a number of prospects that they believe will develop into sales. During the ENABLER Camp, the companies networked with leading Ukrainian “enablers,” such as managers of incubators, innovation centers, trainings, and clusters; successful startup leaders; and angel investors. This event presented best practices from leading global startup hubs and aimed at engaging startup ecosystems from all over Ukraine. As a result, many participants reported networking and getting connected to entrepreneurs and companies in western Ukraine, Europe, and the United States that can potentially become partners in business or future advisers. Innovative Manufacturing (IM) As part of ERA’s goal to provide technical support for business development and innovation in manufacturing companies, the team kicked off its IM intervention by interviewing 22 local manufacturing companies to develop detailed company profiles. These profiles provide insight into local manufacturing in the region and helped shape ERA’s IM strategy, which was shared with USAID in May 2019. Part of the strategy has called for developing private partnerships with firms looking to invest in upgraded and
23 | USAID ECONOMIC RESILIENCE ACTIVITY ANNUAL REPORT – YEAR ONE USAID.GOV innovative manufacturing. Based on this, the IM team lead began providing three companies 1 with regular export advisory support, including: redesigning of their websites for English-speaking users and establishing LinkedIn accounts for expanding networks and communication channels with potential overseas clients. As a result of ERA’s ongoing coaching and support, one of these companies, SVOD Waterfilters, successfully started engaging with prospective clients in the Balkans, Kazakhstan, and Macedonia and dispatched a shipment of filters and replacement sets to Groppali, an Italian brand of heating and air-conditioning systems, for initial evaluation. The parties intend to start commercial transactions once this evaluation is finished. Following a series of meetings with IM lead, the Activity signed an MoU with the Danish-Ukrainian engineering firm BIIR. The company has committed to opening an engineering office in Rubizhne in 2020, which could help create at least 150 jobs. By establishing a presence in the region, BIIR Ukraine will set an example for other firms considering investing in the region, which will in turn contribute to building of confidence in the future of the eastern Ukrainian economy. Simultaneously, ERA and BIIR Ukraine have been cooperating with Dahl University to better Dahl University facul ty members participate in the ERA - prepare engineering students for these types of sponsored training course on software engineering products jobs—based on qualifications that companies such as BIIR look for—and to spread best practices and standards in the field of engineering in the region. To do this, ERA and BIIR Ukraine organized a training course on two modern engineering software products: Creo and Ansys, for 15 professors and instructors from the engineering faculty of Dahl University. BIIR requires their engineers be proficient in this software and the new skills gained by those trained will also be applicable for use in the industrial engineering sector of Sievierodonetsk, which serves chemical, oil, and gas companies throughout the Commonwealth of Independent States (CIS). In addition to signing an MoU, BIIR procured the computers and software for the training of the 15 professors, a sign of their commitment. As a next step, the trained faculty members will incorporate Creo into the curriculum for engineering students. The specialized education for students is expected to start in spring 2020. BIIR Ukraine has identified a building in Rubizhne that will renovate according to Danish standards, to establish a permanent presence in the region, to invite students for on-the-job training, and to hire those who perform well. BIIR is planning strategically ahead and, in collaboration with ERA, began educational preparation to have skilled students by the time of BIIR’s new office opening. ERA and BIIR have high expectations for this fruitful collaboration throughout the Activity’s implementation. Both professors and students say they are enthusiastic and motivated about this opportunity. ERA is working closely with the dean of the engineering department on co-creation of an application for an in-kind grant, which will supply the university with necessary equipment for computer laboratories.
1 SVOD (Severodonetsk, anti-scale water filters), Chemproject (Severodonetsk, BIM-modelling and construction management services), and Kontakt (Druzhkivka, gas pressure equipment)
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Biofuels The Biofuels growth sector kicked off with the value chain assessment and the completion of the inventory of current energy-related donor projects. Both documents were shared with USAID in August 2019. Following the completion, ERA began collaborating with DGE on apartment building management organization upgrade in Mariupol. ERA will support upskilling of construction workers to install insulation to the European standards required by international donors for energy efficiency projects. This would allow Mariupol to activate significant resources offered by other donors while bringing down energy expenditures. Following the approval of the Ovochi Stanychnykiv grant in April 2019, ERA started training farmers on the use of biofuel stoves as means of assessing new heat sources to replace natural gas and coal as well as firewood. This grant is serving as a pilot to help test the financial and household labor saving benefits for intensive vegetable producers by switching to the use of locally sourced bio pellets. Previously farmers had to get up every two-three hours in the night to go re-load their stoves with firewood, which is becoming increasingly scarce. The learning on how the new stoves work will come as the weather gets colder. ERA’s Biofuels Expert coordinated extensively with USAID’s Energy Security Program to discuss the focus of ERA’s interventions in this sector. Based on this coordination, it was decided that ERA will work on production of biofuels with farmer support. As part ERA’s energy efficiency cross-sectoral intervention design, the Biofuels Expert held numerous meetings with farmers to establish a baseline for synergy, and the team is poised to engage more on corresponding interventions in the following year. An alternative solid fuel greenhouse field trial is being planned for next season. Objective 3: Build Confidence in the Future of the Eastern Ukrainian Economy During the first year of implementation, the team began helping communities develop a new positive vision for the future of the region by proactively engaging local and regional authorities, NGOs, and stakeholders from marginalized and vulnerable populations. By the end of Year 1, the team rebranded itself from being “Objective 3” to the “Transformation” team and shifted its strategy of initially tackling strategic development plans to a plan that focuses on coalition building to drive “vision” from which transformational plans will be born. This strategy and rebranding more accurately reflects the inclusive co-creative approach to push forward the idea that eastern Ukraine is changing and offering its citizens more opportunities to live successful lives. Build Local Visions and Plans for Economic Transformation In the beginning of Year 1, the Objective 3 team participated in the rapid assessments and took the lead on conducting internal political economy analysis. Members of the team conducted preliminary research on the local consolidation of communities and the number and quality of strategic plans in the region. The information gathered provided evidence on which to build the Objective 3 interventions. Realizing that the cities, towns, and CCs in the east span a wide range of interest and capacity, the team launched interventions by identifying “bright spots”—localities that showed promise as potential early adopters of planning and vision activities. To spur inclusion of smaller towns and CCs that had little wherewithal to participate in ERA proactively, the team sent out a brief local government survey to 48
25 | USAID ECONOMIC RESILIENCE ACTIVITY ANNUAL REPORT – YEAR ONE USAID.GOV local government bodies.2 This survey, conducted with DGE, intended to help the team obtain basic economic data about the newly formed CCs in the Luhansk and Donetsk Oblasts as well as identify whether they had financial and operational ability to plan and implement economic development projects. Of the 48 entities, 37 completed the survey expressing interest in ERA’s interventions, exceeding team’s expectations. The team assessed all 37 responses on completeness of answers and accuracy of information provided and whether the local government understood its role as an engine for local economic development. The team looked at: 1) Local government economic development plans, for local governments with plans in place, and implementation measures taken to date. 2) Existing cooperation with other international donors working with local governments to avoid duplication of effort and to build synergies. 3) Alignment of local government priorities with those of ERA and presence of vulnerable populations such as IDPs.
Following the selection of 16 shortlisted cities and CCs, the team conducted site visits to meet with mayors, entrepreneurs, community leaders, and representatives of local NGOs to review in greater detail and discuss their interest in cooperating with the Activity. Based on the results of the survey and site visits, the team was able to assess internal strengths, weaknesses, external opportunities, political will, and level of risk of the selected cities and CCs and further narrowed down the list to eight partners for the first round of community coalition-building and work on economic development strategic planning and implementation. The team selected the cities of Bakhmut, Dobropillia and Pokrovsk in the Donetsk Oblast and the city of Starobilsk in the Luhansk Oblast to help them develop broad-based visions for their futures—how to best serve the local population and support private sector growth— and then draft the plans to realize those visions. The cities of Mariupol and Kramatorsk in the Donetsk Oblast and the CCs of Novopskovsk and Bilovodsk in the Luhansk Oblast were selected to receive assistance in implementing their existing strategic plans for economic development and to receive technical and financial assistance to realize investment projects that are a part of these plans. Later, the team added the cities of Berdiansk and Melitopol to the list of partners with previously established economic development strategic plans. Following the selection of first-wave partner cities and CCs, the team engaged a planning expert who conducted a series of training events for strategy development consultants and working group representatives—local policy makers, private sector and civic actors, representatives of educational institutions and MSMEs—from Bakhmut, Dobropillia, Pokrovsk, and Starobilsk to begin developing their strategic plans. The expert and the Objective 3 team worked with the community members to help them identify their values, articulate their hopes for economic change, clarify the resources the community already has at its disposal, and build coalitions. These values, hopes, and resources were used as a foundation to form community visions and action plans. The strategy development consultants were trained in the methodology of conducting a business attitude survey—community-based research to obtain in-depth information on the features and needs of the community and to establish opportunities for the future—and a regional business analysis.
2 Cities of oblast significance or legally formed consolidated communities.
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In June 2019, ERA held its first “Conference for Partner-Cities and Consolidated Communities” in Kramatorsk. The conference served as a platform for the ERA team to present planned activities, opportunities, and resources for the economic development. In turn, representatives of partner cities and CCs shared their expectations from cooperation with ERA. The conference culminated with seven MoUs signed with partner cities of Bakhmut, Dobropillia, Kramatorsk, Pokrovsk, and Starobilsk and CCs of Bilovodsk and Novopskovsk. Later, MoUs with the cities of Berdiansk, Mariupol, and Melitopol were signed in May, April, and September, respectively. With MoUs in place and strategy development working groups formed, ERA created data-driven profiles of communities based off the survey results of business attitudes toward the local economic environment in Bakhmut, Dobropillia, Pokrovsk, and Starobilsk. Moving forward, ERA supported working groups to choose focus areas to develop strength, weakness, opportunity, and threat (SWOT) analyses to establish strategic economic priorities for development and create action plans with goals, objectives, and tasks to address priorities that can be realistically implemented. The brainstorming format of the working groups’ discussions allowed all types of citizens to play active roles in understanding and shaping new visions for the economic transformation of their communities. ERA paid special attention toward engaging youth groups in these discussions as part of a wider strategy of empowering and engaging them in community change efforts. Youth groups presented their ideas for establishing visions of communities where they would be able to thrive and have successful futures. These ideas were included in formulating the community visions and will shape critical areas of the community development and transformation plans. The meetings of the working groups and sub-groups are ongoing and will continue into the next year of implementation. Implementation Support and Issuing Grants for Transformative SME Infrastructure Starting in June 2019, the Objective 3 team conducted several meetings with partner cities and CCs with well-established strategic plans to identify economic development projects for implementation. Additionally, the team discussed results of implementation of existing strategies, and the need to transform the visions for future economic development. In Kramatorsk, the team worked on the design of a partnership for long-term SME strategy that the city will create with ERA’s assistance. In Berdiansk, the City Council and ERA team jointly assessed the idea of creating a tourist-recreational cluster and a tourist information and cultural heritage interpretation center. The cooperation between ERA and the city of Melitopol has focused on several ideas: developing local capacity and attracting private investments in the IT sphere; improving hospitality and tourism development industries in the region; working with educational institutions in Melitopol and regionally to help these institutions establish partnerships with other universities in Ukraine, Europe, and the United States; and building partnerships with business support centers and universities seeking to improve SME and industry operations. In Novopskovsk, the ERA team evaluated and planned with local stakeholders helping the city establish permanent open-air premises to host large-scale events and discussed regional tourism promotion with Bilovodsk authorities as the city is famous for its stud farm and horse-breeding industry. Cooperation with the city of Mariupol was also positive and productive, leading to concrete economic development opportunities. Events such as the MRPL-2019 IT Conference in Mariupol, the formation of the Mariupol IT Cluster, described under Objective 2, have already created a buzz. These initiatives played a key role in creating a vision of the east as a forward-leaning, diversified economy that is more
27 | USAID ECONOMIC RESILIENCE ACTIVITY ANNUAL REPORT – YEAR ONE USAID.GOV reliant on the service sector. In addition to IT sector support, ERA continued advancing the “Mariupol vision” through the following interventions: A grant to assist the Ukrainian Leadership Academy (ULA) to launch a branch in Mariupol seeking to offer the city and region’s young people an opportunity to learn new skills that will equip them with the tools to become successful leaders and to encourage young people from other parts of Ukraine to come to the east. It is also envisioned that these young people will collaborate with ERA, DGE, and city authorities on creating the next strategy of Mariupol in a way that responds to the needs of young people. ERA technical and grants team worked with ULA representatives to co-create their grant application that was submitted to USAID in September 2019. If approved, this grant will assist ULA with operational activities costs during the first year of the branch launching. Improving Pryazovskyi 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. The university submitted two grant applications, and the team is currently reviewing them and conducting coordination meetings with university representatives. SME Support Service Center , anticipated to open its doors in 2020, will provide necessary administrative services, consultations, expert support, and training for business representatives. In coordination with Mariupol government authorities, ERA developed an RFP to be released in October 2019 to procure consulting services to build the capacity of local experts to provide high-quality services to local businesses. The team recruited a consultant who will also engage in October 2019 to develop legal documentation and select employees for the center. As the communities began developing local coalitions and visions for the future, the Objective 3 team analyzed commonalities across these visions and started building networks across the east to use them as the foundation for a regional, shared vision for the future (something that was projected for Year 2). Based on discussions with partner cities and CCs as well as the result of the Sea of Azov assessment, the following themes emerged and will inform the vision for the region: Diversified economic structure (SMEs as an engine of growth) Quality of life, especially for young people (parks, public spaces, cleanliness, business friendliness, public utilities, and infrastructure) Strong service sector (tourism and IT especially) World standards and innovation Building on existing pride (historical industrial powerhouse) Revamping traditional industries for the modern era.
Ahead of Year 2 planned activities, ERA began working with Luhansk Oblast authorities on creating a shared regional vision. In September 2019, Deputy Chief of Party (DCOP) Tim Madigan attended the first meeting of the Luhansk Oblast working group on the new Luhansk Regional Development Strategy of 2027 that included representatives of the Luhansk Oblast State Administration, local self-government bodies, universities, business, international organizations, and other international projects (UNDP, DGE). ERA independent experts presented the legal and methodological approaches to the strategy development, the problems of socio-economic development of the Luhansk region, and the roadmap for
28 | USAID ECONOMIC RESILIENCE ACTIVITY ANNUAL REPORT – YEAR ONE USAID.GOV the development of the strategy. The work on creating the Luhansk shared regional vision in a coordinated effort will continue throughout the second year of implementation.
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V. PROGRESS AGAINST TARGETS Below is a table of the first-year achievements towards the performance indicators. For details, including disaggregation of each performance indicator, see Annexes 1.1 through 1.4
PERFORMACE FY1 TOTAL FY1 TARGETS VARIANCE NOTES INDICATOR 1.1 Number of direct and 0 0 No beneficiaries planned for Year 1 in targets. indirect beneficiaries receiving improved infrastructure services as a result of USAID assistance 1.2 Number of individual 93 5 1,200 We expected ERA will reach that significant number of beneficiaries from vulnerable beneficiaries from vulnerable and hard-to-reach populations and hard-to-reach through the grant activities under respective Objective 1. populations in the target However, due to unforeseen circumstances, grant regions development and approval took longer than anticipated. We expect that grants awarded in September and interventions planned for Year 2 will allow us to catch variance of Year 1 and reach the planned number in Year 2 . Sub -Indicator GNDR -2 60.90% 25% The sub -indicator GNDR -2 was introduced in one of revised Percentage of female AMELP version, which happen in mid-spring 2019. Therefore, participants in USG-assisted we were not sure if remaining time is enough to reach a programs designed to higher target, taking into account that such target value chains increase access to as small farming and honey are presented mostly by male productive economic entrepreneurs. However, thanks to internal discussion and resources (assets, credit, the introduction of a gender strategy, we reached a income, or employment). substantial number of female b eneficiari es . 2.1 Total amount of new $29 ,361 $100,000 This was a relatively short period of active ERA interventions' investments secured by implementation and a larger number of MSMEs beneficiaries MSMEs supported by USAID joined ERA at the end of Year 1, therefore their results we will report in next reporting period. 2.2 Number of individuals 55 375 The team expected the large number of beneficiaries with with new or better new or better employment would come from early grant and employment as a result of training activities. USAID assistance Given the time it took to roll out and publicize the APS among potential grantees, the complexity of grants (an average size of an approved grant is $100,000) and multiple internal revisions necessary to appropriately present applications to USAID, the process was delayed and the number of awarded grants during Year 1 was lower than the team had estimated . 2.3 EG.5 -1 Sales of firms $2,2 26 ,186 $5,566,900 This standard indicator replaces “ average percent change in receiving USG-funded sales of MSMEs receiving Activity assistance” assistance (cumulative sales) (AMELP revision of September 30, 2019) The reason of such variance is that it’s almost impossible to predict the number of MSME beneficiaries with whom ERA will work as well as their average sales. Target estimation was made on previous-year sales of very limited sample of MSME beneficiaries. A second issue is that firms are reticent to report sales revenues until trust is built: and most beneficiaries are still new to the project. 3.1 Number of contacts 122,103 20,000 The ERA communication s team has been very active and has made through informational added several staff members (social media, graphics, event and communications events planner) compared to the originally envisioned team size. This allowed them to exceed the target for number of contacts made. Both the ERA Facebook page and communications via local, regional and national media contributed to the wide outreach.
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3.2 Percentage of Activity 25% 40% The reason of such variance between target and actual direct beneficiaries who say percentage of beneficiaries who think their economic their economic situation has situation has improved substantially or somewhat improved improved substantially or over the past 12 months is that the majority of beneficiaries somewhat over the past 12 surveyed joined ERA initiatives during the last half of the third months quarter and the duration of their engagement in such initiatives is shorter than 12 months. Therefore, they may have reported this perception regarding the last 12 months which is longer than ERA actively operates in the target regions and is impacted by other causal factors. 3.3 Percent of population in TBD TBD ERA has not set any targets for this performance indicator target communities who yet. Currently, the sub-contractor is launching the field part think that in five years there of the survey. We expect to get preliminary results by mid- will be more or better December 2019 to have a wider discussion with the technical economic opportunities in team and set annual targets for subsequent years. the region which allow residents to stay in the region CC.1 Number of people 877 1,300 The team expected that a large number of people trained trained during the Activity would come from our partner NGOs. Given the time it took to roll out and publicize the APS among potential grantees, the complexity of grants (an average size of an approved grant is $100,000) and multiple internal revisions necessary to appropriately present applications to USAID, the process was delayed and the number of awarded grants during Year 1 was lower than the team had estimated.
CC.2 Number of 158 550 As the majority of beneficiaries received training in th e final beneficiaries utilizing new three months of year 1, and CC.2 is a trailing indicator to practices, techniques, or training, it is too early to report on resulting skills adopted. business management skills We will track results over the next few quarters and report as a result of USAID accordingly in subsequent reporting periods. assistance
CC.3 Achievements made 19 (see 11 This indicator replaces the previous “a mount of GoU and toward leveraging GoU and disaggregation other donor funds leveraged by the Activity.” We are other donor funds and associated proposing an approach similar to what we have used on other funding in USAID-funded programs that are tasked with tracking policy Annex 1.4) reform initiatives (which tend to have very long incubation periods). As we have gotten further into the work with the oblasts on large infrastructure, we see this area as analogous. Thus, we are proposing to monitor Achievements made toward leveraging GoU and other donor funds as a context indicator, for which we have also set targets. (AMELP revision of September 30, 2019) CC.4 Economic share of - TBD ERA found it more complicated to find and hire the nece ssary value chains and crosscutting consultants that the team anticipated. The originally identified sectors in eastern oblasts economists expressed reluctance to travel to eastern Ukraine assisted by USAID to help collect the data necessary for this baseline study. We have now identified two economists who are willing to travel.
The team fell short on the ‘number of people trained’ indicator, having trained 877 people out of 1,300 planned. The team expected that a large number of people trained would come from our partner NGOs. Given the time it took to roll out and publicize the APS among potential grantees, the complexity of grants (an average size of an approved grant is $100,000) and multiple internal revisions necessary to appropriately present applications to USAID, the process was delayed and the number of awarded grants during Year 1 was lower than the team had estimated. Likewise, the optimization
31 | USAID ECONOMIC RESILIENCE ACTIVITY ANNUAL REPORT – YEAR ONE USAID.GOV strategy planned by the two oblasts delayed the process of selecting the winning lyceums/technical schools that would subsequently train students. Nevertheless, the team expects to catch up with the training target during Year 2, given the number of grants in the pipeline and the establishment of an efficient grants review system as well as the addition of grant team staff members. ERA also plans to hire a training coordinator who will track the quality and quantity of trainings and ensure this target is met in the following years of the Activity’s implementation. Meanwhile, the ERA team rapidly accelerated the training program in the last months of Y1. Many of the other results such as beneficiaries utilizing new practices, techniques, or business management skills, sales, and investments will result from ERA training and consultations, and will take some time to show results, but are also expected by the team to catch up in the new Activity year.
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VI. PERFORMANCE MONITORING, EVALUATION, AND LEARNING Activity Monitoring, Evaluation, and Learning Plan (AMELP) The development of the AMELP has involved several steps: 1) designing appropriate indicators and measurements for different stages of the Activity; 2) setting baselines and targets for ongoing monitoring of progress towards expected results by the Activity and performance evaluations; 3) defining roles and responsibilities of Activity team members; 4) developing quality control mechanisms and data collection processes; 5) establishing reporting schedules and processes; 6) identifying and managing risks; and 7) collaboration, learning, and adapting (CLA). Furthermore, the Activity team submitted the AMELP on December 11, 2018, to USAID and then received feedback from both USAID and third-party evaluator Resonance that was used as input to make revisions and resubmit the AMELP on February 8. The team was also able to successfully draw expected results from the Activity team at the all-staff workplan pause-and-reflect session January 16–18, 2019. These results are very useful when adjusting the AMELP targets. The AMELP was subsequently approved in writing by the Contracting Officer’s representative (COR) on May 3, 2019. Based upon learning from the monitoring and evaluation (M&E) launch and implementation following AMELP approval, the monitoring, evaluation, and learning (MEL) team revised the AMELP in September 2019. This first revision was resubmitted for USAID consideration October 1, 2019. Causal Model The Activity team has revisited the ERA causal model in light of the August 2019 technical reorganization. The revised causal model is presented below (Figure 1) and contains some minor changes to the interventions column to better reflect the focus of activities as spelled out in the reorganization. For example, infrastructure renovation is now shown in yellow as part of work led by the Transformation team in the bottom box on the left. Furthermore, the work in support of business service providers has been folded into the other green and light blue boxes: under work on market linkages, upgrades to meet end market requirement, facilitated skills training that promotes entrepreneurial activities, and accelerating access to finance. However, by and large, the causal model did not substantively change much as the results metrics throughout the causal chain still apply as envisioned in the AMEL approved in May 2019. The causal model below shows the outputs, outcomes, and impacts that are expected to result from the Activity’s interventions. It also shows most of the indicators being tracked by the Activity (indicator numbers are in parentheses) and how the entire process (interventions, outputs, outcomes) feeds into improving standards of living and confidence in the future—both critical to reintegration of the NGCA and to creating the conditions to motivate NGCA residents to join a united Ukraine. By and large, the changes are cosmetic in nature.
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Figure 1: Updated Causal Model
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Learning and Adaptive Management The team introduced and started using two tools from the spring through the summer that exemplify ERA’s efforts to track innovation and pilot testing and monitor the identification of, and response to, unanticipated opportunities, respectively. They are The Learning Harvesting Log and The Adaptive Management Log. The Learning Harvesting Log tracks initiatives to test and learn from pilot initiatives and innovative ideas. The process of entering the hypothesis, pilot method, and learning strategies on a monthly basis integrates a learning mindset into ERA teams’ routines. Additionally, the log offers home office staff a reference for connecting value chain teams and fosters internal learning. The Adaptive Management Log houses ERA’s response to unanticipated opportunities and risks in each value chain and overarching work area (e.g., gender integration, grants management). The tool tracks strategies that teams have taken to overcome unexpected challenges or capitalize on new opportunities. Representatives from each value chain team and each crosscutting thematic team update the both logs monthly. Data Collection The MEL team continued collecting baseline data on new beneficiaries, adjusting data collection tools (questionnaires and Fulcrum forms) according to lessons learned during previous and current reporting periods, and developing indicator visualizations in Microsoft Power BI. Considering the steadily increasing number of beneficiaries engaged in Activity interventions and, as result, increasing workload of data collection, ERA management has decided to involve DRC staff in assisting the ERA MEL team with data collection. For this purpose, on September 10, 2019, Anton Aloshyn, ERA MEL Officer, conducted the introductory session on baseline data collection for newly hired DRC staff. In early October 2019, the MEL team will organize and conduct extended training on the ERA M&E system with a special focus on baseline and progress data collection as well as on Fulcrum database for all new ERA staff including the DRC and FHI360 teams. Currently, the MEL team is testing the whole system to ensure that all visuals present actual results correctly. Special Studies ERA planned to conduct baseline studies for two performance indicators, namely: 3.3. Percent of population in target communities who believe that in five years there will be more or better economic opportunities in the region which allow residents to stay in the region. CC.4 Economic share of value chains and crosscutting sectors in eastern oblasts assisted by USAID. Due to unpredicted circumstances the team had to postpone these studies. One of them required revisions to the ERA procurement plan, which allows vendors a VAT exemption, and needs further approval by the Ministry of Economy. We now expect to get preliminary results by mid-December and the final results by the end of the year. Also, the ERA team found it more complicated than expected to find and hire the necessary economist consultant. Originally identified economists expressed reluctance to travel to eastern Ukraine to help
35 | USAID ECONOMIC RESILIENCE ACTIVITY ANNUAL REPORT – YEAR ONE USAID.GOV collect the data necessary for baseline study for the performance indicator: CC.4 Economic share of value chains and crosscutting sectors in eastern oblasts assisted by USAID. We have now identified a few economists who are willing to travel. ERA has undertaken a pilot of the market system resilience assessment (MSRA) framework. Based on a conceptual paper that states that markets are a means of allocating resources to solving system problems, the framework posits that the resilience of a system is based on its capacity to adapt and transform over time in the face of stresses and shocks. The framework defines resilience capacities along a continuum of characteristics (domains) with their own indicators. The ERA team is currently adapting the framework to measure the resilience of the market systems with which the Activity works. After an initial review of the tool in the spring, the team has taken concrete steps to implement it. At the pause-and-reflect session in July 2019, the core MSRA team introduced the tool to the Objective 2 staff, who will provide support in gathering data for the scores for each domain. The technical team leader, who has supported MSRA planning for ERA since August, finalized indicators for each domain for which the team is developing data collection tools. The research team—currently, a technical team lead, research coordinator, and Kyiv office staff—is also onboarding a Ukrainian economist to assist in the analysis. Between November 2019 and February 2020, the team will collect baseline data for the vegetable and honey sectors. The baseline score will be compared to the final and/or post-shock scores to estimate changes in the resilience of the value chain markets. As a pilot of the market system resilience metric tool, the assessment in the Activity’s target regions will provide insights on market resilience assessments for future projects and research. Pause-and-Reflect Sessions The ERA team carried out a series of pause-and-reflect sessions throughout the year, including: 1) The first one included a stocktaking with the core staff of what was in the proposal and contract, as well as what DAI has found to be best practices in market-based engagement in other countries. 2) The above session was followed by a pause-and-reflect session on the rapid assessment findings. 3) In the second quarter, the January 2019 “Second Six-Month Implementation Plan” pause-and- reflect session was held, where the team was able to project results based on planned interventions and increase the originally submitted AMELP targets. 4) On April 9, 2019, 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: “Percentage of population in targeted communities who believe industries and sectors other than the most traditional for the region will be important to the local economy in five years.” The revised version is: “Percent of population in target communities who believe that in five years there will be more or better economic opportunities in the region which allow residents to stay in the region.” 5) On May 14, 2019, 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 implementing a gender assessment. 6) The Sea of Azov assessment findings were presented to USAID in a pause-and-reflect session
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7) The ERA technical team held a market systems resilience pause-and-reflect session to work through market systems hypotheses by value chain and flag the most meaningful MSRA indicators. 8) In summer 2019, ERA held the Year Two Workplanning Retreat pause-and-reflect session and used the learning and collaborative discussions to inform workplanning. 9) Following the completion of field work, on May 17, 2019, 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 session, the team compiled a synthesis report, which was submitted to USAID on May 31, 2019. 10) "Economic Transformation and Visioning” session in late September 2019 that assisted the team with operationalizing the Year 2 Transformation result stream strategy, namely the driving vision component by looking at elements of successful vision implementation using the city of Pittsburgh as a model.
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VII. LESSONS LEARNED
With ERA’s implementation fully underway, several critical lessons have emerged. As part of DAI’s adaptive management approach, the Activity has proactively engaged in adapting to challenging geopolitical nuances and circumstances to accommodate rapid priority shifts and ensure the success of technical interventions. The following are ERA’s most impactful lessons for the year: Management: It is important to analyze labor market supply conditions in eastern Ukraine, considering the lack of certain technical experience and the unwillingness of staff to relocate to the region. These considerations have led the Activity to draw upon its expanding networks and write clear and concise terms of reference to attract the most qualified candidates. Taking the time to search and vet candidates properly has thus far resulted in the Activity having formed a strong team despite this challenge. However, the program continues to face challenges in fielding highly technical staff (ICT, tourism, and investment) that have access to higher pay and opportunities of more attractive work locations in other parts of the country. Grants: The APS is not an ideal tool for targeted support to specific groups of people, such as the LGBTQI and Roma communities and female entrepreneurs. Moving forward, the Activity plans to use targeted outreach to these communities to ensure their inclusion. A gender inclusion pause-and-reflect session was held in May 2019 where the team decided to conduct focus group discussions, desk research, and survey potential female applicants through NGOs to better understand how to integrate women into the labor market and project activities and to evaluate the instruments needed to engage women and vulnerable groups into the project. Technical: The methodology of using periodic pause-and-reflect sessions has been extremely helpful. These sessions have resulted in more synergies between the objectives and crosscutting sections and have also led to adjustments to planned interventions to ensure better results. The 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. Going forward, the pre-feasibility assessment will include a thorough examination of the project’s constructability and engineering issues; economic, environmental, social, and development impact; legal issues; and sustainability. Additionally, ERA has moved the responsibility for infrastructure from the former “Objective 1” to the newly branded Transformation team to ensure that future selection of construction sites is aligned with emerging local and regional visions. Many of the targeted communities and coalitions formed throughout the Donetsk and Luhansk Oblasts lack the capability to think bigger about envisioning regional transformation. Participants of the strategy development working groups often remark that the government should be responsible for transformation, not realizing that they themselves can take charge. As a result, the Activity team plans to emphasize engagement with young people, who tend to be more
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proactive when it comes to envisioning transformation of the region. The team will also use examples of cities that have experienced and overcome similar challenges to demonstrate to that transformation from within is possible. Coordination: The influx of donor-supported technical assistance programs coming to eastern Ukraine requires frequent coordination to prevent the duplication of efforts in this relatively small geographic area. The problem of overlap is most salient in working with the limited number of local government units, i.e cities and CCs, that are being approached by multiple technical assistance programs. ERA has made a concerted effort to identify and collaborate with these initiatives to ensure the most impact.
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VIII. ENVIRONMENTAL MONITORING Throughout the year, the ERA team established a well-coordinated process to ensure the environmental compliance of supported interventions. Using USAID ERA’s Initial Environmental Evaluation (IEE) as a foundation, the environmental compliance specialist established an environmental management system that mapped out the overarching procedures for environmental management and compliance as well as monitoring and reporting requirements. The specialist developed and put procedures in place for environmental screening of grant interventions. Every grant submitted to USAID for review and approval was subjected to a screening for determination of “Categorical Exclusion” or “Negative Determination with Conditions.” The specialist worked closely with the grants team from the early stages of concept note selection to address possible business- related environmental issues early in the process and to ensure that grant applicants met environmental legislation requirements. A list of such requirements was prepared for the grants staff to refer to during the pre-evaluation process. EMMPs in both English and Ukrainian were included in grant agreements to ensure compliance with developed environmental mitigation measures. Relevant environmental reviews were prepared and submitted to USAID for approval for the following grant interventions that ERA will monitor and complete all relevant reports for in due course: Two ERC/EMMPs for Luhansk National Agrarian University (Starobilsk and Vesele campuses) ERC/EMMP for NGO Social Boost (“1991 Mariupol” coworking space) ERC/EMMP for PE Vynohradov I.V. (Moko Pizza) ERC/EMMP for PE Sviatchenko V.Y. (internet provider) In addition to grants, the environmental compliance specialist also supported infrastructure interventions subject to ERC/EMMPs and accompanied the technical team and CDM staff on visits to potential infrastructure project sites, collecting necessary information, and participating in meetings with relevant stakeholders (infrastructure owner, local authorities, etc.). In September 2019, ERA received its first environmental review approval under the construction component—ERC/EMMP for the state phyto- sanitary lab in Rubizhne. During the ERC preparation period, the specialist worked closely with the CDM team to obtain detailed information on how the designed activity would handle environmental issues such as eliminating hazards measures or damage remediation. Moving forward, every construction intervention will be conducted in close collaboration with the environmental compliance specialist at the beginning of planned construction interventions to ensure full compliance. The process of pre-feasibility studies of pre-selected construction projects was also established, allowing time to assess potential issues for each selected object and address them properly. Based on the Year 1 interventions that required environmental assessments, the ERA team noted that very few MSMEs in the Donetsk and Luhansk Oblasts fully complied with Ukrainian environmental regulations. The irregularities ranged from easily fixed oversights to violations or unintentional negligence that could lead to administrative fines. To mitigate this factor, ERA will continue advising applicants on the Ukrainian law to lead them to full compliance.
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IX. PROGRESS ON LINKS TO OTHER ACTIVITIES, DONOR- FUNDED PROGRAMS, AND HOST GOVERNMENT
ERA held more than 100 meetings and events in coordination with other donor-funded programs, NGOs, local administrations, and the GoU to leverage other resources, avoid duplication, and create the greatest possible impact. USAID programs DGE, CEP, and REG as well as UNDP and FAO became ERA’s most closely aligned partners at the management level and through various activities. Key meetings, links, or initiatives resulting from coordinated efforts in Year 1 include: Partners: The launch and handover conference in November 2018 that brought together USAID/Ukraine staff, OTI/Ukraine staff, and staffers from the UCBI, DGE, and ERA projects to coordinate and share partnership opportunities. This meeting resulted in ERA and DGE establishing a promotional communications campaign called “CXID,” which is used by both to promote eastern Ukraine. The Traction Camp that was attended by six local IT companies, followed by children’s robotics festival “RoboCXID,” organized with the REG Project. The Traction Camp offered creative local startups in the IT and IM spheres an opportunity to exchange ideas with leading experts who successfully launched similar products. Both events were advertised on social media to more than 1,000 people. The IT conference “MRPL IT 2019,” the biggest IT event in eastern Ukraine, that was attended by more than 200 participants. The team developed promotional materials for the event, including banners and flyers, and provided PR and SMM support with DGE, using the CXID branding. The video announcement about the conference published on the ERA Facebook page reached 5,399 people. A series of events organized during USAID Senior Deputy Assistant Administrator Margot Ellis’ visit to Mariupol and Berdiansk at the end of May 2019. To showcase USAID contributions through ERA and DGE to the local economic development of the Sea of Azov region, the ERA and DGE teams organized a meeting for Ms. Ellis with the mayor of Mariupol, assisted with site visits, and hosted press briefings with local media. The teams also facilitated Ms. Ellis’ participation in the DGE Community Development Forum, taking advantage of convening around the Mariupol IT conference and MoU signing ceremonies of the IT cluster. The All-Ukrainian Equestrian and Folklore Ethnographic Festival, “ZOLOTA PIDKOVA,” scheduled for October 2019, that ERA is coordinating with DGE. The festival includes a strategic session on the development of a new vision of the Bilovodsk community that seeks to promote the “Bilovodsk—Capital of Stud Farms of Ukraine” campaign.
Government The Mariupol Investment Forum scheduled for the end of October 2019. ERA is collaborating with representatives of the Office of the President of Ukraine, Ukraine Invest, EBRD, the EU, and Horizon Capital on the planning and organization of the Mariupol Investment Forum. Specifically, ERA is responsible for the format for SME investment pitches, IFI presentations and discussions, and guest speakers. Additionally, the ERA team is working closely with the Luhansk
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Oblast State Administration (LOSA) and the Donetsk Oblast State Administration (DOSA) representatives to prepare them for the forum: o ERA is providing technical support to LOSA on its infrastructure presentation by reviewing the documentation for 11 priority infrastructure projects for potential funding by the Ministry of Regional Development or IFIs present at the forum and helping Oblast officials organize a team of application writers and training them in the proper formats in time for the forum. o With the GIZ U-LEAD team, ERA conducted a training for representatives of the Luhansk Regional State Administration and representatives of CCs of the Luhansk Oblast on how to prepare and implement large-scale projects, seeking to prepare beneficiaries to implement and engage accordingly, given that many large-scale projects will be announced at the forum. During the training, heads of rayons, CCs, and project development specialists learned how to prepare applications according to EU and EIB standards. o ERA has worked with UNICEF and water company Voda Donbasu on the concept note that DOSA will prepare on key water infrastructure investment needs for the forum. ERA has also worked with a list of manufacturing, food processing, and energy firms from the Oblast to prepare them for the forum.
Registration of LNAU for the Ministry of Education and Science pilot project for Dual Education—the incorporation of apprenticeships and practical job skills in educational curricula. ERA helped seven partner businesses and displaced universities register for the pilot and participate in its implementation. This will significantly ease the bureaucratic process of developing on-the-job training and facilitate ERA grant partnerships with the universities to support dual education. In partnership with UNDP and DGE, assisting the Luhansk Oblast in its “Strategy 2027” planning. Initial steps included ERA presenting legal and methodological approaches to strategy development, the problems of socio-economic development of the Luhansk region, and the roadmap for the development of the strategy. LOSA officials also requested ERA’s support with conducting a rigorous analysis of the potential economic impacts of lifting the “produce blockade” on the NGCA and with the Oblast’s infrastructure priorities, including the reconstruction of the broken bridge at the Stanitsya Luhanska crossing to the NGCA, reconnecting the rail line that serves the central and western parts of the oblast to the national rail grid. These interventions will be further assessed in Year 2. A series of MoU signing ceremonies with partner-cities and CCs held in April through September 2019, including:
TABLE 1: ERA’s COOPERATION WITH LOCAL AUTHORITIES
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City/CC Description of Partnership MoU Date
Integrating “Pittsburgh Development Model” in the city strategy; supporting in-city grantees Social Boost, ULA, and Mariupol Priazovsky State Technical University; working with the city April 17, 2019 government on SME Support Service Center creation and development; and supporting IT interventions
Lyman Supporting infrastructure priorities May 20, 2019
Modernizing infrastructure and providing business support Rubizhne and Siversk May 21, 2019 and advisory services
Supporting tourism initiatives—including tourism-recreation Berdiansk May 30, 2019 cluster “AzovSeaSteppe”
Bakhmut, Dobropillia, Providing support for the development of community Kramatorsk, strategies and supporting implementation of existing June 6, 2019 Pokrovsk, Starobilsk, and CCs of strategies Bilovodsk and Novopskovsk Attracting IT investment; improving hospitality and tourism September 17, Melitopol industries; assisting regional universities with building 2019 international partnerships
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X. PROGRESS ON INCLUSIVE DEVELOPMENT
Following the recruitment and onboarding of a Kramatorsk-based gender and vulnerable populations inclusion specialist, ERA hosted its first gender integration pause-and-reflect session in Kramatorsk. The team reviewed Activity’s gender targets, gender data from the Luhansk and Donetsk Oblasts, and gender tendencies noted by the Resonance baseline survey. As part of this session, DRC presented its historical gender inclusion data on a previous, relevant livelihoods project. Attendees looked at successful examples from similar projects and discussed primary barriers to participation that Ukrainian women face, including lack of time, greater childcare and domestic duties, and expectations that men are better leaders, which leads to less promotion and therefore a disadvantage in leadership experience and confidence. The session culminated with the creation of a gender integration action plan. The gender integration specialist benefitted greatly from working with the team, bringing the Ukrainian Women’s Fund past experiences and lessons learned to the discussion. This pause-and-reflect session set the stage for establishing inclusion as a crosscutting component of ERA interventions. ERA initial approach to engagement and inclusion of vulnerable populations heavily relied on the APS and resulting grant applications. However, early in the process, the ERA team noticed that some vulnerable communities—such as Roma and LGBTQI—were not adequately represented in submitted concept notes. Based on this finding, the team began proactively engaging with these communities by reaching out to national Roma and LGBTQI NGOs to ensure the inclusion of these groups in ERA interventions. The inclusion specialist also hosted a small focus group with East Equality, a Mariupol- based NGO that provides support to Men Who Have Sex With Men (MSM). By the end of Year 1, discussions were ongoing to establish the next steps of ERA and East Equality partnership. Additionally, the inclusion specialist engaged with Chirikli, a Roma advocacy organization to learn how to engage with this community. It was established early in the process that one of the critical elements for developing a successful vision for the region is the engagement of constituents from a broad base of population, including marginalized and vulnerable groups so that they could feel and see that their voice has a value. To this end, the inclusion specialist worked with the Objective 3 team to ensure that active young people and vulnerable women were well-represented in strategic development and coalition meetings and engaged in transformative discussions. In late August 2019, the Activity collaborated with DGE in hosting the Talant.Kolyska festival in the Novopskovsk CC. As part of the festival, ERA held a strategic session that involved more than 60 young people from the northeastern regions of the Luhansk Oblast. Through brainstorming, young people participated in creating a new vision for the future of their region, sought new opportunities for economic development, identified problematic issues and ways to solve them (see video here ). The team also conducted meetings with the Donbas Institute of Technology and Management (DITM) students and hosted a session called “New opportunities for the youth of Eastern Ukraine (within ERA Project).” As part of the event, DITM students were informed about the development of a new vision for economic development in the region as well as opportunities to participate in the ERA grant program. Such outreach meetings help ERA ensure that young people are actively involved in the process of developing a new, positive vision for the economic future of the region.
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XI. SUB-AWARD DETAILS
On February 28, 2019, the Activity released its first APS to share information about the Activity, its objectives, and the process of selecting funding partners as well as launched the DAI Grants Portal for applicants to submit concept notes to apply for grants with ERA. Initially covering the Donetsk and Luhansk Oblasts, ERA amended the APS in June opening it to the applicants from the southern Zaporizhzhya Oblast as the Activity expanded interventions to the Sea of Azov region. The first roadshow to share detailed information on the APS grants application process with potential applicants took place in less than a month since the APS release, on March 21, 2019, in Pokrovsk, Donetsk Oblast, and was attended by 34 participants—19 women and 15 men, among them 25 business owners. To continue reaching a greater, more diverse pool of potential applicants, including grantees in hard-to-reach places, the grants team went on several other roadshows in Bakhmut, Kramatorsk, Manhush, Mariupol, Sloviansk, and Vuhledar in the Donetsk Oblast and Lysychansk and Sievierodonetsk in the Luhansk Oblast. This outreach campaign proved to be very successful: By the end of the reporting period, there were 1,520 users registered on the platform. Out of 782 concept notes submitted, ERA’s technical and grants teams evaluated 300 and selected 77 with a total value exceeding $5 million for further development into full grants applications. The following eight grants were approved by USAID during the first year of Activity’s implementation:
Approval Grant Organization and Grant Description Date Amount USD Objective
Agricultural service cooperative “Ovochi Stanychnykiv” grant to support smallholder April 5 $8,099 II greenhouse farmers in assessing new heat sources (locally sourced bio pellets) to replace natural gas, coal, and firewood NGO Ukrainian Center for Civic Initiatives “Svitlo” grant to promote MSMEs from the Donetsk July 2 $65,388 I and Luhansk Oblasts through the development of e- commerce and an online trading platform
West Ukrainian Regional Non-profit Public Organization Volyn Resource Centre grant to assist the Donetsk and Luhansk Oblasts in developing their July 30 $35,696 II 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
PE Izuita Oleksandra Oleksandrivna grant to open a August 14 $25,258.00 I children’s entertainment and development center and youth hub in Kreminna
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International Charitable Foundation “Ukrainian Women’s Fund” grant to set up three women’s business support centers to empower and support August 7 $299,874.00 I women in starting micro-businesses by providing long- term entrepreneurship training, legal counsel, public awareness raising, and fund raising
PE Tsyhankov Oleksandr Viktorovych grant to August 30 $115,999.00 I assist his sewing company in expanding by increasing the quality and quantity of goods produced
PE Vinohradov Ihor Volodymyrovych grant to September $75,912.00 I establish a new Moko Pizza delivery food point in 26 Mariupol PE Sviatchenko Vladyslav Yuriiovych grant to provide Internet service in rural areas of the Donetsk September $23,285.00 I Oblast and increase the number of new subscribers to 27 the service among vulnerable frontline communities of Dolyna, Lozovo, Sidorovo, and Krasnopillya villages
By the end of Year 1, several other grants applications (in addition to the ones described under Objective 1 and Objective 2 interventions) were under development or pending USAID approval, including: NGO Social Boost grant, submitted to USAID for review/approval on September 16, 2019, to contribute to the growth of the IT sector in Mariupol through the creation of an incubator for IT startups as well as an internship program and a career center for young people interested in careers in the sector ($452,366) Ukrainian Leadership Academy grant, submitted to USAID for review/approval on September 19, 2019, to launch a branch in Mariupol thus offering the city and region’s young people an opportunity to learn new skills that will equip them with the tools to become successful leaders ($383,996) NGO Grand Expert grant to modernize, upgrade and maintain the system for monitoring chemical treatment of crops in order to better coordinate with beekeepers ($37,237) Luhansk National Agrarian University grant to expand opportunities in eastern Ukraine through improved infrastructure and employees’ competencies ($268,794) Global Compact Network Ukraine grant to assist in creating an online IT educational program for vulnerable population and students (approx. $211,700) Ukrainian United Credit Union grant to provide affordable loans to small farmers (approx. $170,000) All Ukrainian Association of Credit Unions grant to strengthen capacity of local credit unions of eastern Ukraine through trainings, webinars, and development of credit unions’ websites and Facebook pages (approx. $11,000) In addition to the APS, the Activity released its first RFA for strengthening technical capacity of vocational educational institutions in the Donetsk and Luhansk Oblasts. Published in May 2019, the RFA
46 | USAID ECONOMIC RESILIENCE ACTIVITY ANNUAL REPORT – YEAR ONE USAID.GOV targeted educational institutions that could institute system wide changes in the oblasts’ vocational education system to improve students’ skills. The detailed information regarding the RFA is provided above under the Objective 1 interventions.
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XII. ACTIVITY ADMINISTRATION To carry out comprehensive and effective programming aligned with the Activity’s workplan, it was important to build a strong operational foundation. During Year 1, ERA made progress toward several key operational milestones set for its first year. Efforts were focused on necessary startup registrations and system installations; identifying, renting, and equipping four permanent offices and a guesthouse; recruiting technical and administrative personnel; finalizing subcontract agreements with the Activity approved subcontractors; and completing necessary equipment procurements. START UP TASKS. On the August 30, 2018, four days following the initiation of the Activity, the project startup team traveled to Ukraine. DAI leveraged its local network, including implementing partners, staff recruited during the proposal stage, as well as its local presence through the Financial Sector Transformation (FST) Activity to ensure rapid mobilization and effective startup. ERA received its legal registration card and updated accreditation from the Ministry of Economic Development, Trade and Agriculture of Ukraine in November 2018 and opened project bank accounts shortly thereafter. The registration card has since been amended to include new beneficiaries and will be updated as needed based on future additions. Over the course of the year, ERA identified, rented, and equipped four permanent offices in Kramatorsk, Kyiv, Sievierodonetsk and Mariupol, establishing operations in the last two cities significantly ahead of schedule. Additionally, the Activity rented its first guesthouse for travelling short-term technical assistants, staff from other offices, and subcontractors as a cost-saving measure. Important administrative systems such as DAI’s Technical and Administrative Management Information System (TAMIS) and Field Operations Manual (FOM) were customized and in-depth trainings provided by home office specialists were held with staff. These achievements allowed ERA to have a smooth start, facilitating this way the technical interventions. RECRUITMENT AND HIRING OF STAFF . To carry out the volume of complex interventions, it was imperative that the Activity armed a team of technical and administrative experts. Per the award fee criteria, the Activity onboarded all five key personnel named in the proposal within 30 days of the contract signing. By the end of Year 1, the Activity had 63 long-term staff members: 47 ERA staff members (10 in Kyiv, 29 in Kramatorsk, six in Sievierodonetsk, and two in Mariupol), 12 DRC, three FHI, and one CDM. Additionally, employment agreements were signed with a value chain coordinator, graphic designer, and additional M&E officer, and all due to start in October 2019. As initially detailed in DAI’s proposal, all current technical staff is based in the field (non-Kyiv offices) to ensure proximity to perspective beneficiaries and close monitoring of interventions. For a list of current full-time long-term staff, refer to the ERA organizational chart.
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TABLE 4: CUMMULATIVE STAFF BY MONTH Cummulative staff (August 2018 - September 2019)
70 63 58 60 49 49 50 46 41 42 40 36
30 25
20 16 11 13 NUMBER OF ERA STAFF ERAOF NUMBER 10 5 1 0 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 MONTH
Staff turnover during the first year was minimal and included only the replacement of the DCOP. In August, DAI brought on a new DCOP whose experience positions him well to lead the most challenging components of ERA, including transformation, investment acceleration, infrastructure investment as well as coordination with other activities, donors, and host government. Additionally, DAI strengthened its infrastructure team staffing structure by mobilizing a senior infrastructure manager. His experience implementing construction projects for USAID will be key to conducting a more deliberate and comprehensive pre-feasibility assessment to identify projects that are aligned with ERA objectives. The team also identified a highly qualified Ops DCOP who will be joining the team in December 2019. SUBCONTRACT AGREEMENTS WITH CONSORTIUM MEMBERS. By the end of 2018, the Activity initiated four subcontracts with strategic partners: FHI360, DRC, CDM, and Resource Assistance Development (RAD). Once ERA’s interventions scaled up, the team realized that management and technical skills of RAD’s director would be put to far better use as the leader of the Objective 2 team. ERA subsequently terminated its subcontract with RAD and absorbed its long-term staff. The Activity submitted RAD’s termination notice to USAID in September 2019 to have them formally excluded from the ERA registration card as a sub-implementing partner.
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