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U.S. Assistance for Russia

October 15, 1994

David J. Kramer's column (Commentary, Sept. 26) misstates the Clinton Administration's current aid policy toward Russia and displays a serious lack of understanding of the program of the Trade and Development Agency (TDA). It also ignores the view that President Yeltsin clearly expressed during the Washington summit: that what Russia now desires from the West, primarily from America, is increased trade and investment, not foreign aid.

First of all, contrary to what Kramer states, the Administration has not abandoned support for technical assistance aimed at improving the investment climate in Russia. Indeed, a substantial portion of the U.S. Agency for International Development (AID) funding now in the pipeline is focused on establishing macroeconomic reforms as well as a legal and regulatory environment that will stimulate private sector investment. But such changes do not occur overnight, and there is a need to show some real progress during the transition to encourage the forces of reform in Russia.

More fundamentally the reality is that Russia remains a risky place to do business, let alone make a major investment. It is not surprising that even the largest U.S. companies are reluctant to commit the extensive corporate financial and human resources that are needed to pursue a commercial opportunity that may or may not actually exist, and if it does, may require years of nurturing before any profit is turned.

Several U.S. government trade and investment assistance programs are now available in Russia to address the issues facing both countries. TDA provides assistance to Russian organizations by funding feasibility studies carried out in conjunction with their U.S. partners, the Export-Import Bank provides financing and guarantees for U.S. exports to Russia, and the Overseas Private Investment Corp. provides insurance and financing for U.S. investments in Russia.

TDA's feasibility study program is modest in comparison with the much larger amounts of funding needed at the project implementation stage. In fact, the political message sent by TDA involvement at the initial stage of a project is often as important as the financial assistance provided. In these instances TDA provides only a small portion of the funding required for the study; the lion's share of the cost is borne by the U.S. company involved and sometimes by its Russian partner.

Contrary to Kramer's assertions, TDA's program does help the Russians help themselves and does strengthen commercial ties between the two countries. A good example is the Ilyushin 96M project, which TDA is supporting. The end result will be a cooperative venture to manufacture a wide-body aircraft with a Russian airframe and U.S. engines and avionics. This project will create jobs in Russia and jobs in the United States. And from a policy standpoint, the preparatory work on the project has already had a positive result: the privatization of both Ilyushin Design Bureau, the aircraft's designer, and the Voronezh plant that manufactures the airframe.

The Clinton Administration's trade and investment assistance strategy for Russia is two-pronged: 1) to create a business environment that attracts foreign (primarily U.S.) capital, and 2) to directly support trade and investment ventures that produce tangible benefits for the U.S. and Russia. We recognize that the success or failure of Russia's economic modernization program rests mainly on the policies of the Russian government and the determination of the Russian people. But we also believe that the U.S. government and, more importantly, the U.S. private sector, can play a supportive role.

DANIEL D. STEIN

Regional Director for the New

Independent States

TDA, Washington

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