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SEAL, January 2003, Publication of the European Foundation Center, Brussels
Trust in Eurasia: Strengthening Philanthropy in the Former Soviet Union
by Charles William Maynes
Charles William Maynes is President of the Eurasia Foundation in Washington DC.
Tel: (1 202) 234-7370
Fax: (1 202) 234-7377
Web: www.eurasia.org

The Rebirth of Russian Philanthropy

In the future, we will look back at 2002 as the year that Russian community philanthropy was reborn. There is no such watershed year for Russian philanthropy during the pre-revolutionary period. Yet in the 19th century, remarkable families like the Morozovs, the Tretyakovs, the Zimins, and the Mamentovs sustained museums, supported the arts, founded hospitals and financed public works. Many of us have walked around the Tretyakov Gallery in Moscow and absorbed painted images from Rubljev to Repin. In addition to the well-known philanthropic names, there were other donors, from all walks of life, who tried to give back to the community as well.

After the wild 1990s, when riches in Russia were acquired in ways not too much different from those of the Rockefellers or Carnegies, Russians have made their way back to the community and community giving. The progress toward that goal was particularly striking to me last May as I was signing an agreement with Mikhail Borisovich Khodorkovsky, the President of the YUKOS Oil Company. In the glow of warming relations between Russia and the West post-September 11, many countries realized they faced a new common threat. Perhaps this was part of the incentive for the Russian oil giant, YUKOS, under the leadership of Khodorkovsky, to contribute $1 million to the Eurasia Foundation to promote community and private sector development in rural Russia.

Swallows on the Horizon

The Eurasia Foundation would like to contribute in its modest way to the acceleration of philanthropic activity in Russia and elsewhere in the former Soviet Union. For the last decade outside donors have played an outsized role in the support of civil society and community development in this region. While we hope these interests will not flag, President Putin was surely right when he suggested recently that Russians themselves must begin to assume most of this burden.

And they are beginning to do just that. The major questions are: how fast this will happen, who will participate, and how can we, as foreign donors, help? Preliminary signs indicate that the pace could be rapid. Among the key actors, Khodorkovsky might be the first swallow, but others (such as Zimin's Dynasty Foundation) are already on the horizon. And at the pace at which they are evolving, they are covering in months the amount of ground that U.S. foundations used to cover in years - if not decades. (Of course, to console ourselves, we can say that they have the latecomers' advantage).

Supporting Russian Philanthropy

But let us address this question about how foreign donors can help. We at the Eurasia Foundation believe that it is vital to mobilize a large effort, which is both international in scope and a public/private partnership in nature. Wealthy and visionary contributors are needed, but we are also setting out to change thinking and mobilize societies. The members of the European Foundation Centre (EFC) have significant expertise in that area and could contribute to the change that is already taking place at the grassroots level.

The nations of Europe have already provided generous technical assistance and historic levels of funding to promote the development of democratic societies and market economies in the former Soviet Union. Much of this funding has come from government programs - but private funding has also been substantial and strategically targeted to specific needs.

The EFC is playing a pivotal role in encouraging this trend. During the recent "EFC Mission to Moscow," in which I was pleased to participate, I saw fresh evidence that Russian, European, and American foundations want to collaborate. As a result of this visit, Valentina Matvienko, Deputy Prime Minister of Russia, has promised to look into ways to amend the tax regulations that impose unfair tax burdens on grantees and discourage outside donors. And, the Van Leer Group Foundation in Amsterdam has agreed to host a special meeting to explore creative ways to boost funding for Russian culture and education, learning from the successes and failures of Western European and Russian organizations.

These are very important steps towards the inclusion of Russians in the worldwide philanthropic community. But how can we build upon this? How could we work together to ensure a lasting philanthropic tradition in Eurasia?

The Endowment Approach

The most intriguing organizational solution is an endowment or trust, which operates in other parts of the world. A trust, or sustainability fund as it is alternatively called, is a sum of money set aside for a specific purpose and invested to generate a stream of income over time. The funds are usually granted as a gift from one organization or entity, such as a philanthropist or a donor, to another organization, for example a university, a non-profit organization or a social service provider. The endowment may be designed to exist in perpetuity (evergreen) or take the form of a sinking fund, which allows the drawing down of the principal, thereby gradually reducing the amount and eventually spending the fund completely.

Since the 1970s, the United States Agency for International Development (USAID) has initiated such endowments, providing long-term support for institutions and activities overseas. In the 1990s, changes in accounting procedures and increased autonomy in the agency's field offices contributed to more flexible initiatives. The size of the funds established in those years ranges from $400,000 to almost $200 million. There are 29 USAID-funded endowments, and today all but two of them still exist. On the whole, they appear to be a successful and cost-effective way of ensuring the enduring and independent presence of philanthropic initiatives overseas.

The geographic distribution of these trusts seems to be disproportionately concentrated in certain regions of the world, however. Traditionally more have been created in Latin America, including the Arias Foundation in Costa Rica, the Mexico Fund for the Conservation of Nature, and the Fund for Family Planning in Colombia. In Asia, there are fewer endowments, and this discrepancy is even more striking if we compare population sizes. Even the Asian endowments (such as the Bangladesh International Center for Diarrheal Disease Research or the Indonesian Biodiversity Foundation) have existed longer than those of Africa, where the Ghana Heritage Conservation Trust was created in 1998 and the South African Amy Biehl Foundation is nearly up and running.

In Eastern Europe, there are currently four trusts: from the Baltic nations (The Baltic-American Partnership Fund) to Armenia (American University of Armenia) and from Bulgaria (the American University) to Poland (the Polish-American Freedom Foundation). Considering these achievements, it is remarkable that no trust is active in the big countries and regions of Eurasia, such as Russia and Central Asia.

No doubt, change is in the making. The Eurasia Foundation has drafted its own proposal for a dedicated trust. Based on its ten-year experience and its own experimental history as a privately managed, publicly funded institution, the Eurasia Foundation hopes to lead the way in bringing together a coalition of funders who can help establish indigenous, Western-style philanthropic institutions in Eurasia.

A Ten-Year Trust

Since 1993, the Eurasia Foundation has made over 6,500 grants totaling $130 million to support democratic and economic reform in the former Soviet Union. As part of its own plans for the future, it now proposes the creation of a public-private partnership to finance a dedicated ten-year trust of $100 million - approximately half from private sources and half from public sources. Funds from the trust would be used to establish from one to four indigenously based philanthropic institutions to work in the twelve countries that once made up the former Soviet Union. These domestic foundations would serve as a continuing source of support for civil society in the region - sustaining initiatives by private citizens at the local level to protect individual liberties, promote the interests of entrepreneurs and introduce competitive markets, and make local administrations accountable for citizen welfare.

There is already much local capacity for the above in place. And, there is both human and financial capital that can be moved towards these ends. The situation is mature enough; local groups have acquired the experience and credibility to undertake serious reform efforts. However, to accelerate this development, the grassroots movements would need outside support for at least ten years. Support from an indigenous, professionally managed, private foundation is much more likely to be acceptable politically in carrying out this sensitive work than are foreign government aid agencies.

The trust would operate autonomously with a private board of directors and locally recruited advisory committees on the ground. The staff would consist primarily of citizens from the states in question who are both knowledgeable about their communities and committed to reform. The US/Europe based trust would propose to go out of business at an appropriate juncture, as the local institutions develop the capacity, experience and reputation to continue the reform efforts on their own. Residual funds from the trust would devolve on a phased basis to the new independent institutions to serve as core endowments. The trust is supposed to create trusts in the end.

There are many questions to be asked. The creation of the boards might be relatively easy, but who approves the new members and how? Selection, voting, financial management, allocation of support, and advisory committees could be points of contention in their own right. But all these issues and the selection of the executive director have to be consensus decisions once all partners contributing to the trust are at the table. At the moment the most important step is to secure the donors to the trust and convene a meeting to try to reach a consensus on a myriad of issues.

Reinventing Foreign Aid

There is no doubt that the governments of the region face a daunting set of challenges, from stimulating domestic production, to improving the business climate, to raising living standards and increasing the effectiveness of governments. The expansion of opportunities for citizen participation in political and economic decision-making is central to this project. Private philanthropy can play a role in solving this dilemma. Governments in the region prefer assistance that builds local capacity to assess and implement policy options, and some have even been hostile to the intervention of Western-led project teams.

It goes without saying that it remains in Western interests to continue effective engagement, especially if this can be based on bilateral or hopefully multilateral donors' participation. Depoliticized and increasingly local institutions supported by a trust can look to similar organizations in Poland and the Baltic States.

Countries on the receiving end continue to claim that foreign aid does not get the entire job done in the world of transitions - whether the donations come from Europe, Japan or the United States. The delivery mechanism for foreign aid has to be reinvented or it will run the risk of becoming ineffective as countries move further and further toward reform. A good way to reinvent foreign aid could take place in a region of the size and importance of Eurasia, where new indigenous philanthropic interests coincide with local talent and initiative. Grassroots organizations and foreign foundations can create the environment that can take this initiative to its fruition.

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