Attachment J.1 - Statement of Objectives (SOO) FINAL REVISED Amendment 1.pdf

RFP No.: 7200AA24R00015

ATTACHMENT J.1: STATEMENT OF OBJECTIVES

Advancing Commerce, Connectivity, and Exports Leading to Economic Readiness for Accession to the EU “ACCELERATE”

1. PURPOSE

The purpose of the ACCELERATE Activity is to support the advancement of European Union (EU) market integration and accession for focus countries in the E&E region.

2. BACKGROUND

The Copenhagen economic criteria for EU accession states that countries must have a functioning market economy and the capability to cope with competitive pressures within the EU. As such, the ACCELERATE activity will seek to address common economic constraints on a regional basis (i.e., involving at least two countries from the E&E region) to advance these criteria while contributing to regional economic growth across the Western Balkans, Caucasus and Ukraine and Moldova.1

This activity will have a ceiling of $80 million. It is anticipated that core funding for regional interventions will be $30 million over five years. The additional $50 million ceiling is to ensure a mechanism is available to respond to new opportunities with additional resources that may be generated by bilateral or regional buy-ins. Within this $80 million ceiling, a $10 million Grants Under Contract (GUC) fund will leverage resources from partners, including the private sector, to build local capacity. This $10 million GUC component may be funded through the core and/or buy-in component.

a. General Context and Background

Economic Growth in the Western Balkans, Caucasus, Ukraine, and Moldova faces many challenges that have been exacerbated due to the impact of COVID-19 and Russia’s full-scale invasion of Ukraine. Notably, Russia’s invasion has brought renewed energy to the EU accession process for a number of countries in the region. Bosnia and Herzegovina, Ukraine, and Moldova all have formal candidate status. Albania and North Macedonia have opened chapters for negotiations. Serbia has expressed interest in pursuing its EU trajectory, though this will require progress on the Kosovo issue. In the Caucasus, Georgia was given a European perspective. While Armenia and Azerbaijan are not seeking EU candidacy, other opportunities exist to support their transition away from the Russian market.

The regional ACCELERATE activity will capitalize on this increased momentum for EU accession and integration by implementing regional activities that address the key priorities for meeting the Copenhagen economic criteria.

b. Theory of Change

1 Should the situation in Belarus dramatically change, activities could include partners from that country.

IF countries in the E&E region increase trade within the region and with EU and Western markets, introduce new alternative financial services and products, improve the regulatory environment and compliance with EU directives and acquis requirements, increase investment transparency and reduce opportunities for corruption, and leverage digitization and use of technology for innovation in these areas, THEN their regional economic integration with each other, the EU, and Western markets will be enhanced.

3. PERFORMANCE OBJECTIVES

a. Objectives Summary

Objective 1: Improved trade facilitation both within the E&E region and with the EU.

Objective 2: Increased access to finance by way of introducing regional alternative financial products and services.

Objective 3: Increased support to the public and private sectors to comply with EU requirements and standards.

Objective 4: Increased support to stakeholders to improve investment transparency so that investments have a greater development impact.

Objective 1: Improved trade facilitation both within the E&E region and with the EU.

The inherently regional nature of trade facilitation, wherein two or more countries are involved, elevates its importance in a regional program. The E&E region exhibits unnecessary barriers to free trade, increasing the costs and time of trade across borders and with the EU, and hindering market access throughout the region.

In the Western Balkans, a 2023 World Bank study found that intra-regional Balkan integration could realize 8% in welfare gains if countries adopt a coordinated approach to trade facilitation reforms. In the Caucasus, the geopolitical considerations present opportunities to diversify countries in the region away from the Russian market by increasing trade via the Middle Corridor. The E&E Bureau and Missions will continue to enhance collaboration with the Asia Bureau and Central Asian Missions. Technology and digital solutions should be leveraged to achieve trade objectives.

Performance Outcomes:

1. Increased trade within the sub-region and between the region and the EU.

2. Increased customs harmonization between countries within the sub-region.

3. Increased adoption of digital practices that support more efficient trade practices.

Objective 1: Indicators

● OBJ 1.1 — Decrease in average time to move goods across borders.

● OBJ 1.2 — Decrease in average cost to move goods across borders.

Required Minimum Results:

● Average time to move goods across four selected sub regional or between the region and the EU border crossings reduced by at least 30%

● Average cost to move goods across four selected sub regional or between the region and the EU border crossings reduced by at least 30%

Objective 2: Increased access to finance by way of introducing regional alternative financial products and services.

Throughout the region, there is significant demand for debt financing from Small and Medium Enterprises (SME), but there are not sufficient products that appropriately serve their needs.

The loan ranges may be too small, the interest rates too high, and the collateral requirements excessive. Overall, the perceived risk from the financial institutions (largely commercial banks) to provide financing to the SMEs is too high.

In addition, the countries in the region remain largely bank centric, although progress is being made in introducing alternative forms of financing in the region, including Venture Capital (VC), Angel investment, leasing and factoring, microfinance, and equity. This includes a significant need for financing in the start-up space through mechanisms such as incubators, accelerators, and access to global start-up competitions.

Digitization and the use of technology should be leveraged to introduce new financial products and services in the region.

Performance Outcomes:

1. New financial products and services, including alternative forms of financing, are introduced on a regional basis

2. Debt, venture capital, equity financing, and angel investing are increased in the region for SMEs and start-ups

3. Digital tools and technology are leveraged to increase access to new financial products and services

Objective 2: Indicators

● OBJ 2.1 — Value of private capital mobilized for SMEs as a result of USG assistance

● OBJ 2.2 — Increase in SMEs who have received financing as a result of USG assistance.

● OBJ 2.3 — Increase in the number of new financial products or services for SMEs.

Required Minimum Results:

● Value of private capital mobilized for SMEs should reach $150M over the life of the Activity.

● Increase in SMEs who have received financing should reach 1,500 SMEs over the life of the Activity.

● Increase in the number of new financial products and services for SMEs should reach a minimum of 10 over the life of the Activity.

Objective 3: Increased support to the public and private sectors to comply with EU requirements and standards.

Supporting the adoption and implementation of Policies, Laws and Regulations (PLRs) have been implemented, for the most part, by USAID for each country separately. This is due to the fact that introduction of new laws and regulations are country-specific and often require extensive engagement with host-country governments.

However, renewed momentum towards EU accession creates opportunities for legislative and regulatory reforms to be addressed on a region-wide basis to advance compliance with EU acquis chapters as well as Directives. With Ukraine, Moldova and Bosnia and Herzegovina (BiH) having secured candidate status, and the first Intergovernmental Conferences having been held in North Macedonia and Albania, there is a greater opportunity to address common regulatory and policy requirements on a region-wide basis, especially as they pertain to EU requirements.

EU Progress Reports demonstrate that there is significant overlap in the policy priorities in the region that may allow for efficiencies in addressing these issues from a region wide platform.

Furthermore, there is clear alignment to several areas where ACCELERATE will operate, such as Business Enabling Environment reforms, Digitization and eGov platforms, increased transparency in economic activities, and trade facilitation. In identifying areas where ACCELERATE can advance EU compliance on a regional basis, EU institutions should be partners in this effort. This includes entities that are focused on the E&E region, such as the Regional Cooperation Council (RCC), its Regional School of Public Administration (ReSPA) that works with government officials in the Western Balkans 6 (WB6), as well as initiatives through the Berlin Process. USAID bilateral programs are also essential partners in this work as regulations must be adopted and implemented in individual countries.

Implementation of each nation’s laws and regulations also remains problematic overall. This will also be an issue in adopting any legislation or directives related to the acquis in order to ensure this is not a “box-checking” exercise but leads to fundamental change. The countries’ administrative structures are also inadequate, both in terms of procedural standards and the capacity of staff handling implementation.

As with the other objectives, adoption of technology and digital tools should be leveraged to support this objective.

1. Countries in the region draft, adopt and implement Policies, Laws and Regulations

(PLRs) that align to EU requirements and advance EU accession in the economic criteria.

2. Government and private sector capacity is increased to meet the requirements of EU accession in the economic space and to respond to the priorities put forth in the EU Status Reports.

3. Digital tools and technology are leveraged to facilitate public awareness of and stakeholder engagement in the requirements and benefits of EU integration and accession.

Objective 3: Indicators

● OBJ 3.1 — Number of countries that have improved their Progress Status (Very Good Progress, Good Progress, Some Progress, Limited Progress, No Progress, Backsliding) for relevant EU acquis chapters for candidate and potential candidate countries.

● OBJ 3.2 — Number of regulations collaboratively drafted with E&E countries that align with EU requirements.

● OBJ 3.3 - Increase compliance of the private sector with EU requirements and standards.

Minimum Required Results:

● Three countries improve their Progress Status (Very Good Progress, Good Progress, Some Progress, Limited Progress, No Progress, Backsliding) in at least two EU Acquis Chapters.

● At least four regulations collaboratively drafted with E&E countries that align with EU requirements.

● Work through business associations to reach at least 500 firms to increase private sector compliance with EU regulations and standards.

Objective 4: Increased support to stakeholders to improve investment transparency so that investments have a greater development impact.

In recent years, countries in Europe and Eurasia have experienced a dramatic increase in foreign investments. While investments can play a positive role in a country’s economic development, investments by malign actors can exploit weaknesses in government and financial oversight and transparency laws to gain control of companies, launder money, and undermine a country’s sovereignty. Non-transparent investment regimes inhibit foreign investment from American and multinational companies from considering opportunities due to the risk environment, inadequate investor protections, and concerns with corruption. This deprives countries from securing investments in manufacturing, technology, and services that can contribute to economic growth, and the creation of jobs.

The purpose of this objective is to promote the adoption and implementation of policies, laws and regulations (PLRs) that increase transparency for foreign and domestic investments in targeted E&E countries. Digital tools should be used to facilitate this objective. Although the activity should not include the procurement of hardware, the development of software and applications can be supported directly.

1. Countries in the region draft, adopt and implement Policies, Laws and Regulations (PLRs) that increase Investment Transparency

2. Private sector partners, think tanks, and universities engage in research, development and advocacy that supports improvements in Investment Transparency

3. The real and perceived risks of investing in the region is reduced, resulting in greater investor interest in the region

4. Digital tools and technology are leveraged to increase Investment Transparency, including eGov and eProcurement platforms and tools that increase public awareness of investment opportunities and investments made

Objective 4: Indicators

● OBJ 4.1 - Increase in the number of laws, regulations, or policies that comply with EU standards in procurement particularly in Chapter 5

● OBJ 4.2 - Number of improvements in eProcurement platforms

● OBJ 4.3 - Number of improvements in the establishment or reporting of Ultimate

Beneficial Ownership practices

Minimum Required Results:

● Ten new laws, regulations or policies adopted that comply with EU standards in public procurement, particularly aligned to Chapter 5 of the acquis

● At least five improvements in eProcurement platforms

● At least five improvements in the establishment of or reporting functionalities in Ultimate

Beneficial Ownership practices

4. GRANTS UNDER CONTRACT (GUCs)

This mechanism will include a $10 million (Grants under Contract) fund, within the $80 million ceiling, to provide grants to local partners for activities that advance the objectives in this SOO and build local capacity. The implementer is expected to develop and manage solicitations that are relevant to the common priorities in the region but respond to country-specific conditions as applicable. While grants could be issued to partner/s in only one country, grants that build linkages and partnerships across countries and/or sub-regions will have a greater impact and would be more desirable. All grants must have a lead partner coordinate with the contractor on reporting to USAID on the financial and programmatic results

5. ADDITIONAL CONSIDERATIONS

a. Relationship to USG Strategies and CDCSs

Russia’s unprovoked and illegal invasion of Ukraine highlights the importance of numerous national and agency strategies. Geographically, Ukraine’s location and importance to Western nations provides an opportunity to exert larger and more deliberate programs throughout the region. The increased momentum for EU accession and Western integration for Ukraine and the overall region provides unique opportunities for lasting impact. Addressing the negative impact of China’s influence in the region is also a key policy priority to be addressed through this program.

Recently, the E&E Bureau has developed a new strategic framework, Strengthening the Foundations of Freedom (SFF), that will guide regional programming in the new environment and respond to the new opportunities and challenges that have resulted from Russia’s invasion of Ukraine. The SFF highlights the impact of long-standing economic dependency on Russia and the opportunistic approach of the PRC’s investments. The EG program responds directly to this strategic framework in that its overriding objective is to advance EU integration and accession in the region. Specifically, this aligns to:

● Objective 4: “Accelerate the Euro-Atlantic integration of E&E partner economies”

The ACCELERATE Program aligns to E&E Bureau’s Objectives and Key Results (February 2023) and specifically:

● OKR 1.1, Sub-Key Result 3: “TSO/EG and PO engage missions to discuss the top regional challenges in the EG space and identify priorities for flagship regional programming. This will include the solicitation of mission participation on the design team.”

The ACCELERATE Program will nest technical areas, interventions, and key results with the EUR-E&E Joint Regional Strategy (November 2022). Within this framework, there are two primary objectives that will be demonstrably supported through this program.

● JRS Bureau Objective 3.1: “Enhance economic cooperation with Europe and Eurasia to promote trade and investment in pre-accession countries with both the EU and the United States; to develop stronger, more resilient supply chains; and to build back better from the global pandemic and the damage caused by Russia’s war in Ukraine.”

● JRS Bureau Objective 3.2: “Strengthen tools to increase U.S. and European and Eurasian economic security and develop coalitions to counter non-market and coercive economic practices, particularly by the PRC and Russia, including through strengthened investment screening and transparency and actions to reduce economic vulnerabilities and dependencies of partner countries.”

The ACCELERATE Program is consistent with and supportive of Mission Country Development Cooperation Strategies (CDCS). Throughout the region, Missions consistently place Economic Growth as a key priority. Levering the private sector as a critical partner in Economic Growth is also a consistent theme. The ACCELERATE Program aligns to additional priorities such as: Access to Finance, Strengthened Economies, Economic Governance, and reduced corruption. The table below articulates how ACCELERATE is nested to a number of Mission CDCS’.

Armenia:

DO2: Economic Security Enhanced IR 2.1: Economic governance strengthened

ACCELERATE emphasizes investment transparency initiatives that enable private sector growth. ACCELERATE emphasizes private sector support and EU Access requirements.

Serbia:

DO2: Equitable Prosperity Increased IR 2.1: SME Economic Growth Accelerated

ACCELERATE mobilizes capital and provides alternative forms of finance to SMEs. ACCELERATE assesses European market integration and works to align regional sectors with developed markets.

Bosnia & Herzegovina (BiH):

DO1: Accountability of Government to Citizens Strengthened IR 1.2: Governance effectiveness in targeted areas strengthened DO2: Socio-Economic Conditions Improved IR 2.2: Private Sector Growth Increased

ACCELERATE leverages benchmark data to include EU Accession Criteria to build trust and capacity within governance frameworks that support EU Accession. ACCELERATE mobilates private sector capital to provide alternative forms of finance.

Ukraine:

DO4: Inclusive, Sustainable Market-Driven Economic Growth IR 4.4: Inclusive, innovative finance expanded

ACCELERATE includes significant priorities to counter malign influence. Additionally, ACCELERATE mobilizes capital and supports private sector growth in support of SMEs.

b. GEOGRAPHIC COVERAGE

The geographic coverage of this activity is in the Europe and Eurasia (E&E) region, and activities can include partners from and implement activities in the following countries2:

1. Albania

2. Serbia

3. North Macedonia

4. Bosnia and Herzegovina

5. Kosovo

6. Georgia

7. Ukraine

8. Armenia

2 Depending on programming needs during implementation of the “ACCELERATE” activity, USAID may remove or include additional countries.

9. Azerbaijan

10. Moldova

11. Montenegro

12. Belarus3

Activities, including training, workshops, and conferences, as well as partner engagement can include third countries and non-USAID presence countries.

For the Western Balkans, a number of countries with no USAID mission presence may also be relevant and necessary to engage – such as Greece and Bulgaria. USAID also has legacy foundations in non-presence countries such as Romania, Poland, and the Baltics. Finally, there is increased collaboration taking place with the Caucasus and Central Asia Missions on the Middle Corridor trade and transport route and this program will address this in the trade facilitation work. As such, travel to and events in Central Asian countries may be required.

7. GENERAL CROSS-CUTTING REQUIREMENTS AND IMPLEMENTATION

APPROACH

a. Progress Beyond Programs and a new Approach to Stakeholder and Donor Engagement

The activity will utilize USAID’S new Policy Framework4,which embraces “Progress Beyond Programs.” As an overarching objective, the new policy emphasizes addressing the Great Power competition. This activity will seek to contribute to this objective in the E&E region. For example, Trade Facilitation and EU Accession and Integration will diversify economies in the region away from reliance on Russian markets and promote the values of the Western model of development. The work in Investment Transparency and Access to Finance will seek to increase opportunities for U.S. and Western companies in infrastructure development and create environments that are attractive for Western capital, thus countering the PRC Belt and Road initiative.

In the specific area of Economic Growth, ACCELERATE aligns to several priorities of the new framework, including improving the business environment to create more transparency and rules-based economic systems, supporting effective private- and public- sector management and countering corruption, as well as increasing digitization, and trade and investment. All four objectives of ACCELERATE have clear linkages to the new policy.

At its core, this approach will embrace Development Diplomacy. This will involve USAID EG staff throughout the region in bringing their thought leadership, expertise, and relationships to bear so we collectively build partners’ capacity and create environments where partnerships will endure after the end of the activity. This model will leverage ACCELERATE to support a range of convening activities, and shifting relationships from a donor model to one of partnership

3 With regard to Belarus, the activity is not expected to implement any activities in-country but could include partners from the country.

4 https://www.usaid.gov/policy/policy-framework https://www.usaid.gov/policy/policy-framework where results are achieved without direct resources.

USAID Missions in the region currently implement more than 50 country-specific projects in the economic growth area, including competitiveness, economic governance and business enabling environment, innovation, workforce development, and trade and investment promotion, among others. The ACCELERATE activity must ensure it does not duplicate bilateral programming.

The ACCELERATE activity will have a focus on EU accession and EU acquis and directives.

This will require a more concerted engagement effort with EU counterparts, not only in Brussels but also with EU representatives throughout the region. Thus, ACCELERATE should have sustained dialogue with the EU at the policy, strategic, technical, and operational levels.

b. Private Sector Engagement

The private sector for countries in the E&E region plays increasingly important roles in sustaining inclusive growth, driving reforms, meeting standards, and attracting investment. The private sector is also playing an important role in assistance efforts to Ukraine and strengthening its economic resilience. Leading companies, firms, and businesses that operate globally and regionally can play an important role in approaches to advancing economic growth and Euro- Atlantic integration for the region as a whole.

To maximize the impact and achievement of the Activity's stated objectives, the Contractor’s approach will ensure the realities of the local context are accounted for, instill greater private sector ownership and investment, and strengthen replicability and scalability.

c. Adaptive Management and Collaborating Learning and Adapting (CLA)

USAID expects the contractor will have a robust understanding of economic conditions in the region, to include historic progress. This activity includes a wide range of technical areas, impacting multiple layers of economic development.

As such, analysis and management strategies need to be in place to understand and appropriately respond to these dynamics, including a plan for Continuous Learning and Adaptation with host government, local organizations, and networks. Work must be grounded by an understanding of political will and incentives needed to ensure successful engagement on priority issues. The contractor will leverage adaptive management approaches in order to identify opportunities, support local ownership and implementation, and shift the activity as needed when bottlenecks occur so as to ensure that the activity’s main results and objectives are met. USAID expects that each annual report will detail how adaptive management and CLA has been used and what lessons have been learned throughout the life of the activity.

In addition, the contractor will engage USAID in the CLA approach, including organizing workshops to advance learning generated through this activity in a range of areas. This can include work planning retreats to review progress and adjust activities based on lessons learned but can also find opportunities to introduce new and innovative concepts to USAID that can support country-specific program implementation.

d. Gender Integration and Social Inclusion

Women are underrepresented in government and private sector leadership roles throughout the E&E region, leading to less policy influence and less participation in economic opportunities. A gender analysis will be produced that identifies the key constraints faced by women in each of the technical areas proposed. This activity will integrate the voices of women in business and government in the design and implementation of activities.

e. Environmental Compliance

The Foreign Assistance Act of 1961, as amended, Section 117 requires that the impact of USAID’s activities on the environment should be considered, and that USAID include environmental sustainability as a central consideration in designing and carrying out its development programs. This mandate is codified in the Code of Federal Regulations (22 CFR

216) and in ADS Part 201.5.10(g) and in ADS 204 (http://www.usaid.gov/policy/ads/204/), which, in part, require that the potential environmental impacts of USAID-financed activities are identified prior to a final decision to proceed and that appropriate environmental safeguards are adopted for all activities. In addition, the recipient must comply with host country environmental regulations unless otherwise directed in writing by USAID.

No interventions funded under this activity will be implemented unless an environmental threshold determination, as defined by 22 CFR 216, has been reached for that intervention, as documented in a Request for Categorical Exclusion, Initial Environmental Examination (IEE), or Environmental Assessment duly signed by the Bureau Environmental Officer (BEO).

At the time of this solicitation, the Initial Environmental Examination (IEE) has been deferred pending assessment of proposed interventions.

f. Climate Change Integration

At the time of this solicitation, the Climate Risk assessment has been deferred pending assessment of proposed interventions. Based on the threshold determinations and the climate risk assessment, at the implementation stage, the Implementing Partner (IP) must prepare an Environmental Mitigation and Management Plan (EMMP) and a Climate Risk Mitigation (CRM) plan. Environmental responsibilities of the IP will be encapsulated through the new IEE, which the AOR, DMEO and MEO will explain to the IP at the post award meeting.

g. Monitoring, Evaluation, And Learning

The Contractor will develop an Activity Monitoring, Evaluation and Learning Plan (AMELP) as part of the Work Plan with defined input, output and outcome indicators aligned to each objective. The AMELP should likewise identify indicators aligned to any sub-objectives produced in the PWS. The AMELP should include a clear plan for monitoring, data collection, and data validity and ensure consistency in data collection and reporting methods across countries.

Contractors may propose innovative and measurable indicators that measure progress towards the outcomes and successes of the activity. Capturing baseline data at project inception and AMELP development will be the responsibility of the contractor and will be essential to measure program goal achievements.

The Collaborating, Learning, and Adapting (CLA) approach noted above also has a strong relationship to the AMELP, as the CLA will be reviewing progress towards the selected indicators. Each objective outlined in Section 3 includes a number of indicators that will serve as initial measures of progress along with baseline data. A final list of indicators will be confirmed in collaboration with USAID after the award. USAID will work with the contractor to select final indicators, targets, and establish baseline data for any new indicators selected. Collectively, the indicators, targets, and baseline data will be used to measure subsequent performance.

[END OF ATTACHMENT J.1 - STATEMENT OF OBJECTIVES]