Up-dated OSI-Croatia Strategy for 2000 and 2001

Changes in the government as a result of January 2000 elections (parliamentarian and presidential) opened the possibilities of developing an open society in Croatia on premises of individual sovereignty, subsidiarity and parliamentarian democracy. The Open Society Institute - Croatia is taking it as a challenge to partner its activities with the government, whenever there is a chance to build on already developed expertise (like in NGO sector, education, culture, small business development).

Strategy discussions on Board meetings from October 1999 to March 2000, were finalized during George Soros's visit to Croatia (March 6-8, 2000), which can be summarized as:

Environment in which OSI Croatia operates (opportunities and threats):

• political euphoria following election results is giving place to everyday problems caused by the Tudjman's decade of distorting the society through dictatorship, corruption and lack of democratic institutions:
• enormous economic problems (unemployment rate exceeded 20 % in 1999; rising illiquidity: from 2 billion USD in 1998 to 3.8 billion USD in 1999 - biggest debtors being Ministry of Health, Ministry of Reconstruction, Ministry of Defense; exports cover only 55 % of commodity imports)
• pressure to make fast cleaning of the remedies of war (crimes, cooperation with the Hague Court) and corrupted former government (debts: 9 billion $, enormous obligations made through government's guaranties)
• disturbingly low level of promptness in court activities weakens the trust in the rule of law
• centralization of many administrative activities is an obstacle for the efficient operations of local self-government bodies
• regional development imbalances are increasing - resulting in increasing gap between Zagreb (saturated with functions) vs. other cities (deficient in functions)
• social activities (education, science and culture in particular) have to cope with the consequences of long standing inadequate financing and dysfunctional policies of Tudjman's regime based on social narrow-mindedness

• public awareness of the vulnerability of government based on fragile coalition of 6 parties and on inefficiency of the government structure
• lack of democratic institutional infrastructure in developing the market of public services (e.g. taxpayers are not aware of its power in profiling demand driven public services; NGO sector does not recognize its potential of developing supply side of public services' market, neither to use its power in partnering with local government in doing this)
• lack of benchmarking of public services

General message is that success will hinge on the government's ability to intervene simultaneously in the political and economic field and in helping change the mentality of the public. This will involve mobilization of human resources, institutions and political will on the broadest possible level. OSI-Croatia is re-focusing its strategy in order to mobilize its resources (expertise and financial support) for partnering with the government in order to strengthen the chances to reach needed democratic changes and to develop entrepreneurial optimism in all segments of the society.

OSI-Croatia always had a double role of being both a grant-giver and initiator of activities directed towards democratization through programs that introduced changes and which in many cases became benchmarks in different segments:

• civil society - years long support in developing NGO sector resulted in the success of Glas 99 - project which contributed to raising awareness of the importance of parliamentarian and presidential 1999/2000 election and brought out people to vote and to understand what they vote for;
• Croatian Law Center - legal advocacy and advising the necessary changes of regulatory infrastructure ended in proposals to Constitutional Court for changes of some laws (proposal to change the Law on Higher Education, since it allows government to intervene in the university autonomy, has been accepted by the Constitutional Court in January 2000);
• education - Private gymnasium Zagreb, Step by Step and several other independent institutions which developed various alternative/parallel education models, accompanied by a respectable think tank, being recognized in the public as a group of individuals with a strong say;
• culture - Center for Drama Arts, Imaginary Academy in Groznjan, net.culture project and respectable think tank, recognized in the public as a group of individuals with strong say;
• media - supporting independent media (Feral Tribune, alternative media);
• economic development - network of centers for entrepreneurship throughout Croatia (technical assistance), with micro lending support;
• public health - harm reduction; needle exchange project in Split.

Through its programs OSI - Croatia contributed in developing infrastructure in some very needed segments (like civil society, development of small and medium sized enterprises) and in developing institutions that filled the gap caused by the government policy (like in culture and education).

The broadest framework for up-dating OSI - Croatia strategy for 2000 and 2001 is defined by:

• (fulfilled) expectations of political changes, happened through parliamentary and presidential elections, which opened the door for partnership with the government in different projects. In spite of the welcoming possibilities of partnering with the Government OSI Croatia should retain its critical approach (watchdog) roll) to the democratization process in Croatia.
• Stability Pact opportunities, especially through Working Tables I and II on democracy and economic development
• European Union - through programs on accession process and other programs which will be hopefully opened to Croatia, not so much in 2000, but more in 2001

Policy became a natural activity for OSI - Croatia, because through years which were labeled by retrograde government policy, the OSI - Croatia attracted best intellectuals of the country, and developed think tanks in many sectors (education, science, culture, legal expertise) which contributed with critical evaluation of the reality and policy projects proposing changes.

Development component was used to get empirical insight in specific problems and to offer show case solutions, which than can be replicated and used to develop appropriate policy (e.g. Imaginary Academy and Private gymnasium as test case for changes in educational and cultural policies, the network of Centers for Entrepreneurship as test case for developing a stimulating economic policy through removing obstacles for development of the SMEs sector).

Policy approach and development approach are combined as complementary processes in order to respond to the need for systemic change and the lack of available resources, both financial and human. The role of the OSI-Croatia is to act as a catalyst in order to put existing initiatives and resources together, but also to initiate the processes that are not very likely to be initiated by the other agents in the society.

Criteria

• policy activities with a potential for country-wide and/or regional impact (being funded through partnering with the government, through Stability Pact programs, EE/South East program, EU programs, or some other foreign aid programs)
• activities that are experiments, in order to open new frontiers, and to challenge existing policies (with co-sponsoring from industry, NGO sector, and other donors)

In re-focusing its strategy, the Board decided to focus on:

• developing four policy projects based on already developed expertise by the OSI - Croatia:

• for education (through joint task force with the government, involving Ministry of Education, and Ministry of Science and Technology),
• for culture (through joint task force with the government, involving Ministry of Culture, and Ministry of Education)
• for decentralization of public administration (using the Croatian Law Center as a coordinator of experts' teams jointly established by the CLC and Ministry of Justice, Administration and Local Government)
• for economic development of the SMEs (through joint task force with the government, involving Ministry of SMEs, Ministry of Economy, Ministry for European Integration)

• maintaining and upgrading operational capability of the OSI-Croatia for providing logistic support for policy tasks as well as for providing a homeplace for incubating experimental projects (like net.culture), for exiting programs and scholarship programs.

Strategic accents for up-dated strategy 2000-2001 are on partnership with the government in policy projects.

Croatian educational system suffers from the shortage of expert institution being involved in looking for improvements and/or changes of educational system on policy level. Based on expressed need for such policy center (in the government strategy document) as well as on expertise already developed in OSI-Croatia, it is planned to establish an independent Institute for Education (IFE), which role will be to develop expertise in educational policy and models needed for its implementation, as leverages for transformation and further development of educational system.

IFE should be profiled less institutional, more project oriented, with very lean staff (3 to 4) which should provide organisational and logistic support for flexible experts' teams working on specific policy problems. OSI-Croatia will financially support (on declining basis) this project in three years period (Y2000 - 75 %, Y2001 - 50 % and Y2002 - 25 %), as well as cooperation with the Institute for Education Policy in Budapest.

High level of centralization of public administration in last decade atrophied many functions of local government to the level where subsidiary principle was suppressed and even proclaimed as anti-government behavior. The expected reforms will be based on the creation and implementation of public policy which will be developed through policy analysis, public discussions and selection of acceptable models, adopted by a consensus of all relevant actors (government, parliament, public sector). Social and legal dimension of the project will be developed through teams of experts having needed expertise in law, political sciences and public finances. Concrete legislative proposals will be developed by an expert group organized by Croatian Law Center and the Ministry of Justice, Administration and Local Self-Government, and Law Schools. For conducting this mega-project, a close cooperation with the expertise already existing in Soros Foundation network (LGI, COLPI) is very important. An outside consultant would be needed.

The strategy of decentralization of public administration should result in decreased governing costs and increased efficiency of the system of public administration. Therefore, the project's outcomes are expected to enable building an infrastructure so much needed for freeing entrepreneurial potential of public in designing the political, social and economic framework and content of living.

The project will be accompanied with the possibility of using Soros government fellowship program, as offered by Mr. Soros to the Prime Minister during March 2000 visit.

In last decade, culture policy in Croatia has been defined as so-called "state culture policy". The main principle of this policy was "national interest" which was used as criteria for distribution of money resources to institutions and projects in Croatia. After elections, an immediate need to formulate a modern cultural policy based on contemporary European policies. Accumulated expertise through developing several NGOs, which benchmarked cultural scene in Croatia, outside of "state culture policy", enabled OSI-Croatia to be proactive in developing alternative project on culture policy. Therefore, Center for Drama Arts, as one of the major OSI-Croatia project was prepared for such momentum and presented to other cultural institutions as well as to independent NGOs in the field of culture a very broad project of a new cultural policy in Croatia. Such proactive move was welcomed by the Ministry of Culture, which offered to Center for Drama Arts a project of developing alternative cultural policies, especially in the field of alternative arts. In developing its strategy, Ministry of Culture openly uses experiences of NGOs in the field of the culture, supported by OSI-Croatia. Some NGOs (like Center for Drama Art, SCCA) already established financial relationships with the Ministry of Culture.

Because of open needs for formulating new cultural policy and already developed contacts with the Ministry of Culture, the Center for Drama Arts decided to broaden and enrich its strategy with a project of culture policy functions. Beside this cooperation with Croatian government, Center for Drama Arts participates in an in-house project of developing cultural policies in SEE countries (Red House).

Based on gained experience through supporting the development a network of centers of entrepreneurship in Croatia, and already expressed interest by the Ministry of SMEs sector to work jointly with the OSI-Croatia on developing the policy for this sector, present strategy should be re-focused, taking a wider approach to the business development services (BDS) development in Croatia. In particular, we should adopt a different role, moving away from supporting direct provision of BDS through centers for entrepreneurship towards facilitating a framework that will not only support the network of existing (and new) CFEs, but will also stimulate the development of a local market for business services in general. Such an approach will allow us to better use limited resources and at the same time place ourselves at the forefront of a new development strategy for BDS

(market development and deepening), advocated by all major donors worldwide. Keeping the concept of a network of CFEs as a strategic direction, but redefining it and making it to become a facilitator of a BDS market development will be based on defining the main functions of the facilitator as:

(a) capacity building of BDS providers,

(b) development of new products and services,

(c) commercialization of BDS to new target groups,

(d) expanding outreach to disadvantaged groups (like developing a program for re-socialization of young people, recovering from drug problems, through opening job possibilities, through the CFE in Split),

(e) monitor the development of markets (in particular observe unserved or underserved demand)

(f) networking and building linkages,

(g) awareness raising related to the importance of SMEs sector and self-employment potential

(h) advocacy for creation of an enabling environment.

There is a need for a transition between existing and new approach. Year 2000 should be characterized with the continuation of development the network of CFEs and developing the policy jointly with the Ministry of SMEs. Year 2001 should be the transition period when OSI-Croatia will continue to support (on a limited scale) CFEs, and will start focusing on the development of the local facilitator for BDS market deepening, by which implementation of the policy developed in the year 2000 will be supported.

Several programs developed for years under OSI-Croatia and OSI-network financial and experts' support are ready to be spun-off into regular educational system. All of these programs promote new educational contents, models and methods, and will be proposed to the Ministry of Education to be involved in regular school program from year 2001:

• Debate (project coordinator: Croatian Debate Association, implementation in 30 high school students clubs and university students clubs)
• Critical Thinking (project coordinator: Forum for Freedom in Education)
• Street Law (project coordinator: Forum for Freedom in Education)
• E-School (project coordinator: Croatian Natural Science Society)
• English Language
• Step by Step (project coordinator: NGO Step by Step)

OSI-Croatia plans to support financially these programs in year 2000 (60 %) and in year 2001 (40 %). OSI-Croatia, jointly with NGOs responsible for those programs, will provide expert help in the process of implementing the programs into regular educational curricula.

All other programs were scrutinized through two criteria: identifying priority focuses and insisting on matching formula.

Priority focuses were:

• OSI-Croatia mission
• contingency analysis
• possibility of partnership with the Government
• programs to which OSI-Croatia support in 2000 and/or in 2001 is critical for making such programs operationally sustainable, or interesting to other grantors,
• programs which are featured as experiments and with a potential of making a difference in some fields of society, and interesting for us from the standpoint of our basic mission.

Matching formula is a result of structuring OSI-Croatia budget for the year 2000 of 3.5 million USD as a core 1 (2.0 million USD) and as a core 2 (1.5 million USD) which is planned to be released only if matching is provided. Efforts will be done to provide 1: 2 matching formula in average. Changes expressed in budget structure through allocating programs in core 1 or core 2 budget show strategic decisions involving priority focuses and estimates of potential matching. Expressed changes are listed in the matrix in attachment.

Detailed info about strategic decisions on programs and budgets CORE I and CORE II can be seen in a detailed budget sheet available at Ms.Beka Vuco.

The Board was very strong on the point of not "selling" its image of respectable and independent institution, which benchmarked itself from the very beginning as a pioneer in opening Croatian society, in order to get matching funds. Possibility of getting co-funding must not damage the quality criteria in allocating the priorities to projects.

In order to make up-dated strategy operational, the OSI-Croatia will implement different approaches in order to upgrade the reliability of expected outcomes:

• in policy projects the OSI-Croatia insists on a concept of networking capabilities of a strong think-tank group (strategy), lean staff (efficiency), and flexible project organization (operational innovation and vitality),

• in other projects funded by the OSI-Croatia, OSI-Croatia will take care of upgrading its own internal capability in order to provide services for the new portfolio of activities (short-term experimental projects, logistic support for inception and developing phase of policy projects), as well as to provide fund-raising capability and leverage services for projects financed by the OSI-Croatia.
• There are several specific measures to be undertaken:

After many hours of discussing, there are still some questions related to strategy:

• decision made by Mr. Soros during his March 2000 visit on forcing entrepreneurial behavior of OSI-Croatia through reserving a part of the budget to be released only on matching basis, is welcomed (with pain), but there are some risks in fulfilling this expectation in year 2000, because of two major issues:

• the government budget has been already adopted for year 2000, what will make difficult for the Government to match its funds in 2000 on the level of expressed interest to cooperate
• EU programs are still closed to Croatia,
• SP activities are moving too slow,
• some European countries suspended its individual programs, usually open for some projects in which OSI-Croatia also have interest, planning to participate through SP

• to be prepared to surrender some autonomy of projects in cases of multiple grantors (having in mind that the part of success of the OSI-Croatia is the uniqueness of the basic concept of the OSIs, being run by local people with full autonomy in designing the strategy). It should be open a possibility to be the sole grantor in some specific case, when other grantors' participation would endanger some very, very important projects.

• straightforward approach in defining matching structure of financing particular projects is not realistic - it should be differentiated according to specificity of the program.
• small methodological remark: The indicator of Admin cost expressed as a percentage of a total budget is not the best way to indicate organizational and operational efficiency level, having matching possibilities with network programs and especially in the case of implementing matching formula on the part of the budget. The basis for calculating this indicator in the case of OSI Croatia can be 2,0 mil or several times more. (Our very optimistic estimate is 6,5 mil $, more realistic is 5,0 mil $).

It is of the utmost importance not to lose the momentum of potential widening and broadening impact of accumulated expertise in the OSI-Croatia and projects supported by the OSI-Croatia for years.

The Board and the Staff are committed to implement this re-focused strategy and to upgrade its potential to do it, through bringing more strategic capability on the side of the Board and more operational capability (entrepreneurial, fund-raising, organizational) on the side of the Staff. The Board and the Staff should teamwork on implementation of the strategy, in the best manner and tradition of the OSI-Croatia.

Prepared by Slavica Singer

Chairwoman of the Board

(Based on the Board's strategy discussions, jointly with the ED and the staff)