Enterprise Funds: Evolving Models for Private Sector Development in Central and Eastern Europe

U.S. Government Accountability Office

Enterprise Funds:

Evolving Models for Private Sector Development in Central and Eastern Europe

NSIAD-94-77: Published: Mar 9, 1994. Publicly Released: Apr 11, 1994.

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Pursuant to a congressional request, GAO reviewed the enterprise funds established to aid development in selected central and eastern European countries, focusing on the funds': (1) investment and program strategies and plans for sustainability; (2) overall performance; (3) management practices; and (4) oversight by U.S. government agencies.

GAO found that: (1) the four funds use a variety of investment approaches tailored to the economic condition of and business opportunities in each country; (2) the Polish and Hungarian funds can invest in businesses with some experience, while the Hungarian and Czech and Slovak funds mostly invest in start-up businesses; (3) all of the funds have or are developing small business loan programs in affiliation with local banks, and most of the funds grant larger loans directly; (4) the funds are seeking to become self-sustaining by attracting other investors and increasing their earnings, asset sales, and management fees; (5) the funds' investments have created jobs, increased nationals' business experience, and become an information resource for other investors; (6) the funds' strategies for asset disposal include sale to current owners and outside investors and sale to the general public through a stock exchange; (7) the funds' disbursement of technical assistance grants has varied, but most are planning to concentrate technical assistance on projects in which they have invested; (8) because of the countries' evolving economies, the funds have had such problems as inaccurate investee financial statements, inadequate investment agreements and audits, unethical business practices, and management and organizational problems; (9) the funds are exempt from most U.S. assistance oversight regulations; and (10) the funds and U.S. agencies are working to improve the funds' financial controls and oversight.