FY 1996 Economic Support Fund Request: $15,000,000

Cyprus continues to suffer from the strains of past inter-ethnic conflict and current distrust and misunderstanding. The divided island of Greek and Turkish Cypriots could be a flashpoint for regional problems, with potential spillover consequences for the countries of Greece and Turkey. This could affect the stability of the southern tier of Europe, which would further aggravate disputes in the Balkans and the New Independent States of the former Soviet Union.

The Development Challenge.

Both the Greek Cypriot and Turkish Cypriot communities confront varying economic problems; however, this is not the principal reason for USAID funding. In fact, gross domestic product (GDP) per capita on the Greek Cypriot side has risen to nearly $13,000; on the other hand, the Turkish Cypriot side has stagnated at around $3,000. USAID assistance can help to address some economic constraints, but the main focus is facilitating a political solution on the island, while tangentially benefiting social and economic areas.

Strategic Objective (SOs).

SO 1: To take measures aimed at reunification of the island and designed to reduce tensions, and to promote peace and cooperation between the two communities on Cyprus ($5,000,000).

Working through the United Nations High Commission on Refugees (UNHCR) and the U.S. Information Agency (USIA), USAID funding promotes activities which require and encourage participation by representatives of both communities. This bi-communal approach is intended to demonstrate the positive, substantive results of cooperation. Further, the linkages established between individuals and groups from a variety of society's sectors will contribute to: (1) the long- shot possibility of pressuring each side's leadership to compromise on an equitable solution, or (2) at least, providing acquaintances and stakeholders in seeing that a solution succeeds.

Activities. The bicommunal development program implemented through UNHCR and the Cyprus Red Cross includes agricultural activities such as forestry and pest control, environmental programs improving air and water quality, health components building infrastructure to support prevention and treatment of illnesses, sewerage treatment and rehabilitation of areas near the green line. The scholarship project implemented through USIA and the Cyprus Fulbright Commission offers U.S. scholarships for undergraduate and graduate degrees, and short-term bicommunal training in conflict resolution and business management.

Indicators. UNHCR and USIA have not established a thorough monitoring and evaluation system. These entities are assessing the situation, and will formalize a basic system in FY 1995.

Progress in 1993-1994. The political situation has not changed markedly. The number of contacts between individuals and groups increased overall as a result of USAID project activities. A variety of external events with direct and indirect impacts on Cyprus worsened the political environment. All activities moved forward over the period; however, impacts have been marginal at best.

Other Donors. No other donors work significantly in undertaking bicommunal development and training activities. The United States is the last donor financing the UNHCR program.

Constraints. Activities requiring bicommunal participation are beholden to the political environment. Movements from side-to-side are rare, even to neutral territory. Implementation of each activity falls prey to the political agendas of either side.

Other Donor Resource Flows.

According to statistics from the Development Assistance Committee of the Organization for Economic Cooperation and Development, the United States provided about 42% of all official development assistance to Cyprus. Other major donors are the United Nations High Commission for Refugees, the Economic Development Fund of the Europe Union, France and the United Kingdom.

USAID Strategic Objectives

Promoting Peace :$ 15,000,000

Total :$ 15,000,000

Director, Office of European Country Affairs: Peter Orr

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