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SEED Act, FS Act

In 1989, President George H.W. Bush introduced a bold, new concept in development assistance during speeches given in Poland and Hungary, two former Soviet satellite states that were about to begin the bumpy transition from centrally managed economies to free market economies. President Bush envisioned nonprofit corporations directed by highly-skilled investment professionals who invested government grants into small and medium-sized enterprises and technical assistance. This public-private partnership would facilitate well-functioning markets through a combination of investment and development activities, a dual approach that has proved very successful.


The United States Congress authorized $300 million in the Support for Eastern European Democracy (SEED) Act to form the first two Enterprise Funds in Poland and Hungary. Subsequently, SEED Act funding was expanded to include five additional funds.
In 1992, Congress passed the FREEDOM Support Act (FSA), bringing the total funding authorized to nearly $1.2 billion to finance 10 Enterprise Funds in the region.


The primary goal of the Support for East European Democracy (SEED) Act of 1989 is to promote democratic and free market transitions in the former communist countries of Central and Eastern Europe, enabling them to overcome their past and become reliable, productive members of the Euro-Atlantic community of Western democracies.


Support for East European Democracy (SEED) Act of 1989 (Enrolled Bill (Sent to President))

One Hundred First Congress of the United States of America


Begun and held at the City of Washington on Tuesday, the third day of January, one thousand nine hundred and eighty-nine


An Act


To promote political democracy and economic pluralism in Poland and Hungary by assisting those nations during a critical period of transition and abetting the development in those nations of private business sectors, labor market reforms, and democratic institutions; to establish, through these steps, the framework for a composite program of support for East European Democracy (SEED).

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,



  1. SHORT TITLE- This Act may be cited as the `Support for East European Democracy (SEED) Act of 1989'.
  2. TABLE OF CONTENTS- The table of contents for this Act is as follows:
    Sec. 1. Short title and table of contents.
    Sec. 2. Support for East European Democracy (SEED) Program.

    Sec. 101. Multilateral support for structural adjustment in Poland and Hungary.
    Sec. 102. Stabilization assistance for Poland.
    Sec. 103. Agricultural assistance.
    Sec. 104. Debt-for-equity swaps and other special techniques.
    Sec. 201. Enterprise Funds for Poland and Hungary.
    Sec. 202. Labor market transition in Poland and Hungary.
    Sec. 203. Technical training for private sector development in Poland and Hungary.
    Sec. 204. Peace Corps programs in Poland and Hungary.
    Sec. 205. Use of Polish currency generated by agricultural assistance.
    Sec. 206. United States policy of private financial support for Polish and Hungarian credit unions.
    Sec. 301. Eligibility of Poland for Generalized System of Preferences.
    Sec. 302. Overseas Private Investment Corporation programs for Poland and Hungary.
    Sec. 303. Export-Import Bank programs for Poland and Hungary.
    Sec. 304. Trade Credit Insurance Program for Poland.
    Sec. 305. Trade and Development Program activities for Poland and Hungary.
    Sec. 306. Bilateral investment treaties with Poland and Hungary.
    Sec. 307. Certain Polish bonds not subject to Internal Revenue Code rules relating to below-market loans.
    Sec. 401. Educational and cultural exchanges and sister institutions programs with Poland and Hungary.
    Sec. 402. Poland-Hungary scholarship partnership.
    Sec. 403. Science and technology exchange with Poland and Hungary.
    Sec. 501. Assistance in support of democratic institutions in Poland and Hungary.
    Sec. 502. Environmental initiatives for Poland and Hungary.
    Sec. 503. Medical supplies, hospital equipment, and medical training for Poland.
    Sec. 601. Policy coordination of SEED Program.
    Sec. 602. SEED Information Center System.
    Sec. 603. Encouraging voluntary assistance for Poland and Hungary.
    Sec. 604. Economic and commercial officers at United States Embassies and missions in Poland and Hungary.
    Sec. 701. Report on initial steps taken by United States and on Poland's requirement for agricultural assistance.
    Sec. 702. Report on confidence building measures by Poland and Hungary.
    Sec. 703. Report on environmental problems in Poland and Hungary.
    Sec. 704. Annual SEED Program report.
    Sec. 705. Reports on certain activities.
    Sec. 706. Notifications to Congress regarding assistance.
    Sec. 801. Suspension of SEED assistance.
    Sec. 802. Declaration of the Republic of Hungary.
    Sec. 803. Administrative expenses of the Agency for International Development.
    Sec. 804. Relation of provisions of this Act to certain provisions of appropriations Acts.
    Sec. 805. Certain uses of excess foreign currencies.

2. Support for East European Democracy (SEED) Program

  1. SEED Program

    The United States shall implement, beginning in fiscal year 1990, a concerted Program of Support for East European Democracy (which may also be referred to as the ''SEED Program''). The SEED Program shall be comprised of diverse undertakings designed to provide cost-effective assistance to those countries of Eastern Europe that have taken substantive steps toward institutionalizing political democracy and economic pluralism.
  2. Objectives of SEED assistance

    The President should ensure that the assistance provided to East European countries pursuant to this chapter is designed -
    1. to contribute to the development of democratic institutions and political pluralism characterized by -
      1. the establishment of fully democratic and representative political systems based on free and fair elections,
      2. effective recognition of fundamental liberties and individual freedoms, including freedom of speech, religion, and association,
      3. termination of all laws and regulations which impede the operation of a free press and the formation of political parties,
      4. creation of an independent judiciary, and
      5. establishment of non-partisan military, security, and police forces;
    2. to promote the development of a free market economic system characterized by -
      1. privatization of economic entities,
      2. establishment of full rights to acquire and hold private property, including land and the benefits of contractual relations,
      3. simplification of regulatory controls regarding the establishment and operation of businesses,
      4. dismantlement of all wage and price controls,
      5. removal of trade restrictions, including on both imports and exports,
      6. liberalization of investment and capital, including the repatriation of profits by foreign investors;
      7. tax policies which provide incentives for economic activity and investment,
      8. establishment of rights to own and operate private banks and other financial service firms, as well as unrestricted access to private sources of credit, and
      9. access to a market for stocks, bonds, and other instruments through which individuals may invest in the private sector; and
    3. not to contribute any substantial benefit -
      1. to Communist or other political parties or organizations which are not committed to respect for the democratic process, or
      2. to the defense or security forces of any member country of the Warsaw Pact.

3. SEED Actions

Assistance and other activities under the SEED Program (which may be referred to as ''SEED Actions'') shall include activities such as the following:

  1. Leadership in the World Bank and International Monetary Fund United States leadership in supporting -
    1. loans by the International Bank for Reconstruction and Development and its affiliated institutions in the World Bank group that are designed to modernize industry, agriculture, and infrastructure, and
    2. International Monetary Fund programs designed to stimulate sound economic growth.
  2. Currency stabilization loans United States leadership in supporting multilateral agreement to provide government-to-government loans for currency stabilization where such loans can reduce inflation and thereby foster conditions necessary for the effective implementation of economic reforms.
  3. Debt reduction and rescheduling Participation in multilateral activities aimed at reducing and rescheduling a country's international debt, when reduction and deferral of debt payments can assist the process of political and economic transition.
  4. Agricultural assistance Assistance through the grant and concessional sale of food and other agricultural commodities and products when such assistance can ease critical shortages but not inhibit agricultural production and marketing in the recipient country.
  5. Enterprise Funds Grants to support private, nonprofit ''Enterprise Funds'', designated by the President pursuant to law and governed by a Board of Directors, which undertake loans, grants, equity investments, feasibility studies, technical assistance, training, and other forms of assistance to private enterprise activities in the Eastern European country for which the Enterprise Fund so is designated.
  6. Labor market-oriented technical assistance Technical assistance programs directed at promoting labor market reforms and facilitating economic adjustment.
  7. Technical training Programs to provide technical skills to assist in the development of a market economy.
  8. Peace Corps Establishment of Peace Corps programs.
  9. Support for indigenous credit unions Support for the establishment of indigenous credit unions.
  10. Generalized System of Preferences Eligibility for trade benefits under the Generalized System of Preferences.
  11. Normal trade relations The granting of temporary or permanent nondiscriminatory treatment to the products of an East European country through the application of the criteria and procedures established by section 2432 of title 19 (commonly referred to as the ''Jackson-Vanik amendment'').
  12. Overseas Private Investment Corporation Programs of the Overseas Private Investment Corporation.
  13. Export-Import Bank programs Programs of the Export-Import Bank of the United States.
  14. Trade and Development Program activities Trade and Development Agency activities under the Foreign Assistance Act of 1961 (22 U.S.C. 2151 et seq.).
  15. Investment treaties Negotiation of bilateral investment treaties.
  16. Special tax treatment of below-market loans Exempting bonds from Internal Revenue Code (title 26) rules relating to below-market loans.
  17. Exchange activities Expanded exchange activities under the Fulbright, International Visitors, and other programs conducted by the United States Information Agency.
  18. Cultural centers Contributions toward the establishment of reciprocal cultural centers that can facilitate educational and cultural exchange and expanded understanding of Western social democracy.
  19. Sister institutions Establishment of sister institution programs between American and East European schools and universities, towns and cities, and other organizations in such fields as medicine and health care, business management, environmental protection, and agriculture.
  20. Scholarships Scholarships to enable students to study in the United States.
  21. Science and technology exchanges Grants for the implementation of bilateral agreements providing for cooperation in science and technology exchange.
  22. Assistance for democratic institutions Assistance designed to support the development of legal, legislative, electoral, journalistic, and other institutions of free, pluralist societies.
  23. Environmental assistance Environmental assistance directed at overcoming crucial deficiencies in air and water quality and other determinants of a healthful society.
  24. Medical assistance Medical assistance specifically targeted to overcome severe deficiencies in pharmaceuticals and other basic health supplies.
  25. Encouragement for private investment and voluntary assistance



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