Nation Aga Can Produce Either 3 Units Of Good X Or 1 Unit Of Good Y With One Hour Of Labor, While Nation Kaza Can Produce Either 4 Units Of Good X Or 2 Units Of Good Y With One Hour Of Labor. Assuming That Labor Is The Only Input, Mutually Beneficial Exch (2023)

1. AP Macro 2018 FRQ #3 - Unit 2 - YouTube

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  • This video goes over how to answer question #3 from the 2018 Macroeconomics Exam. This questions aligns best with Unit 2 from the AP Macro Course Exam Descri...

AP Macro 2018 FRQ #3 - Unit 2 - YouTube

2. [PDF] Comparative Advantage Practice _KEY - Leon County Schools

  • ... produce 80 units of X by using all of its resources to produce X or. 60 ... d) Propose an acceptable price for good X in terms of Y for the nation's to agree to.

3. Comparative Advantage and the Gains from Trade | Macroeconomics

  • This numerical example illustrates the remarkable insight of comparative advantage: even when one country has an absolute advantage in all goods and another ...

  • Consider the example of trade in two goods, shoes and refrigerators, between the United States and Mexico. These goods are homogeneous, meaning that consumers and producers cannot differentiate between shoes from Mexico and shoes from the U.S.; nor can they differentiate between Mexican or American refrigerators.

4. AP Micro – 1.4 Comparative Advantage and Trade | Fiveable

  • Dec 17, 2022 · ... to produce one unit of a particular good or service. This is like ... 1 unit of coal for 3 units of steel. 1 unit of steel for 1/3 units of coal ...

  • 🤑 Unit 1 study guides written by former AP Micro students to review Basic Economic Concepts with detailed explanations and practice questions.

AP Micro – 1.4 Comparative Advantage and Trade | Fiveable

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6. Aga Produce

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7. English Text (927.98 KB) - World Bank Open Knowledge Repository

  • Economies in transition : an OED evaluation of World Bank assistance / Alice C. Galenson. p. cm. -- (Operations evaluation studies) Includes bibliographical ...

  • THE WORLD BANK W O R L D B A N K O P E R A T I O N S E V A L U A T I O N D E P A R T M E N T Economies in Transition An OED Evaluation of World Bank Assistance OPERATIONS EVALUATION DEPARTMENT ENHANCING DEVELOPMENT EFFECTIVENESS THROUGH EXCELLENCE AND INDEPENDENCE IN EVALUATION The Operations Evaluation Department (OED) is an independent unit within the World Bank; it reports directly to the Bank's Board of Executive Directors. OED assesses what works, and what does not; how a borrower plans to run and maintain a project; and the lasting contribution of the Bank to a country's overall development. The goals of evaluation are to learn from experience, to provide an objective basis for assessing the results of the Bank's work, and to provide accountability in the achievement of its objectives. It also improves Bank work by identifying and disseminating the lessons learned from experience and by framing recommendations drawn from evaluation findings. W O R L D B A N K O P E R A T I O N S E V A L U A T I O N D E P A R T M E N T Economies in Transition An OED Evaluation of World Bank Assistance 2004 The World Bank Washington, D.C. © 2004 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, NW Washington, DC 20433 Telephone 202-473-1000 Internet E-mail All rights reserved Manufactured in the United States of America First edition September 2004 1 2 3 4 07 06 05 04 The findings, interpretations, and conclusions expressed here are those of the author(s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. The World Bank cannot guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in the work do not imply on the part of the World Bank any judgment of the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA, telephone 978-750-8400, fax 978-750-4470, All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202-522-2422, e-mail Cover photo by Yuri Kozyrev, courtesy of the World Bank Photo Library. ISBN 0-8213-5934-7 e-ISBN 0-8213-5935-5 Library of Congress Cataloging-in-Publication Data. Galenson, Alice, 1948­ Economies in transition : an OED evaluation of World Bank assistance / Alice C. Galenson. p. cm. -- (Operations evaluation studies) Includes bibliographical references. ISBN 0-8213-5934-7 1. Economic assistance--Europe. 2. Economic assistance--Asia. 3. World Bank. I. World Bank, Operations Evaluation Dept. II. Title. III. World Bank operations evaluation study. HC240.G235 2004 332.1'532­dc22 2004053252 World Bank InfoShop Operations Evaluation Department E-mail: Partnerships & Knowledge Programs (OEDPK) Telephone: 202-458-5454 E-mail: Facsimilie: 202-522-1500 Telephone: 202-458-4497 Facsimilie: 202-522-3125 Printed on Recycled Paper Contents v Preface vii Acknowledgments ix Foreword, Prólogo, Avant-Propos xv Executive Summary, Résumen, Résumé Analytique xxxix Abbreviations and Acronyms 1 1. Strategy, Implementation, and Outcome 1 Bank Strategy 2 Implementation 4 Outcome 13 2. Thematic Findings 15 Private Sector Development 20 Governance, Public Sector Management, and Institution Building 25 Financial Sector 29 Social Protection 34 Energy 39 3. Lessons and Recommendations 43 Annexes 45 A: Supplementary Tables 61 B: CAE Lessons and New CASs 65 C: People Interviewed 69 D: Management Response 79 E: Chairperson's Summary: Committee on Development Effectiveness (CODE) 83 Endnotes 89 Bibliography Boxes 9 1.1 CAE Lessons and the CAS Record 11 1.2 Borrowers' Views of Economic and Sector Work 14 2.1 Reforming Agricultural Policy in Transition Economies i i i E C O N O M I E S I N T R A N S I T I O N 14 2.2 Supporting a Healthy Transition: Evidence from Selected Countries 16 2.3 IFC's Support to Transition Economies 17 2.4 MIGA Operations in Transition Economies 21 2.5 Lessons from Transition--The First Ten Years 24 2.6 Reducing Corruption through E-Government in India 25 2.7 Ukraine--Strengthening Civil Society 31 2.8 Hungary--Promoting Public Debate on Pension Reform 40 3.1 Stakeholder Participation 41 3.2 Aid Coordination Figures 3 1.1 Lending by Subregion, FY89­03 3 1.2 Commitments by Instrument, FY89­03 4 1.3 Commitments and Projects by Sector, FY89­03 5 1.4 Capital Flows by Source, 1989­01 6 1.5 Real GDP Changes, by Group of Countries, 1990­02 6 1.6 Present Value of Debt as Percentage of GNI, CIS, 2001 7 1.7 Change in Life Expectancy at Birth, 1990­01 8 1.8 Number of Countries Achieving Substantial Progress (Rating 3 and Above), 1994­03 10 1.9 Project Ratings by Country Group and Bankwide, Approved FY89­03 15 2.1 Private Sector Share of GDP, 2002 22 2.2 Improvements in Governance Indicators, 1996­02 27 2.3 Change in Domestic Credit to Private Sector, 1993/95 to 2002 31 2.4 Poverty Headcount Index ($2.15/day), Latest Year, 1995­99 36 2.5 Change in GDP per Unit of Energy Use, 1992­00, and Energy Reform Score, 1998 i v Preface T his evaluation examines the Bank's assistance to the transition economies of the Europe and Central Asia Region since 1989. It is largely a meta- evaluation of Bank products and services in the transition countries, based on existing evaluative material--Country Assistance Evaluations (CAEs), Project Performance Assessment Reports (PPARs), Project and Implementa- tion Completion Reports (PCRs, ICRs), Quality Assurance Group (QAG) data and reports, OED sectoral and thematic studies, and Bank- executed client sur- veys--as well as on other Bank strategic and project documents, economic and sector work, interviews, and literature from outside of the Bank. IFC and MIGA contributed information on their programs in the transition countries. A series of background reports was commis- PPARs, and to learn more about Bank assistance sioned for this study; they are noted in the Bib- from the point of view of the borrowers, papers liography. A review of the literature captures the were commissioned from former government of- range of views on the Bank's role in supporting ficials and researchers in Hungary, Kazakhstan, the transition, including alternative perspectives and Poland; additional country views were found on methods of privatization. A Working Paper as- in Bank client surveys and in comments sub- sesses the policies followed by the transition mitted by borrowers on CAEs and PPARs. Finally, countries and the extent to which known alter- five papers cover selected themes in depth: each natives might have resulted in superior out- one analyzes a particular area of Bank assistance comes. Another Working Paper reviews to determine its expected contribution to the ob- privatization and enterprise reform from the jectives of transition, the instruments used, and point of view of a Bank insider, elucidating the the relative success of these instruments in states of mind that prevailed in selected coun- achieving the objectives. tries, the perceptions of the Bank at various An entry workshop was held in Washington on times, the initial conditions faced by reformers May 15, 2002. Speakers included experts from and those who assisted them, and the policy Hungary, Kazakhstan, Poland, and Russia; coun- frameworks that evolved. To complement the try and sectoral specialists from inside and out- country-level evaluative material in CAEs and side the Bank; executive directors of the Bank v E C O N O M I E S I N T R A N S I T I O N representing transition countries; and Bank and IMF staff. A transcript of the workshop is avail- able on OED's Web site. This evaluation was financed in part by a grant from the Swiss Agency for Development and Cooperation (SDC) under the Bank-SDC Part- nership Program on Development Effectiveness through Evaluation. v i Acknowledgments T he task manager for this report was Alice mist, EBRD), and Ivan Szegvari (Senior Econo- Galenson. Thematic background papers mist, EBRD)--contributed detailed and valuable were prepared by Robin Bates (energy), comments on the background papers and the Raj Desai (private sector development), Pierre final report. The study also benefited from the Landell-Mills (governance and public sector man- advice and support of Ruben Lamdany, former agement), Fred Levy (financial sector), and manager of the Country Evaluation and Regional Lawrence Thompson (social protection). Addi- Relations group of OED, and from many staff tional papers were written by Bruce Kogut and members of OED. Andrew Spicer (review of the literature), John The financial support of the Swiss Agency for Nellis (the World Bank's role in privatization and Development and Cooperation, along with their enterprise reform), and Jan Svejnar (alternative constructive comments on the background pa- policies). Views from borrowers were prepared pers, is gratefully acknowledged. by Gusztáv Báger (Hungary); Barbara Blaszczyk, OED received comments on an earlier draft of Jacek Cukrowski, and Joanna Siwiñska (Poland); the report and on the background papers from and Oraz Jandosov (Kazakhstan). the Bank's Europe and Central Asia (ECA) Re- Two internal peer reviewers--Christopher gional management and from a number of cur- Gerrard and Roberto Rocha--and four external rent and former Bank staff involved in the Bank's peer reviewers--Marek Dabrowski (Deputy assistance program to the transition countries. Chairman, Center for Social and Economic Re- Olga Vybornaia, Anar Omarova, Danuta search, Warsaw, Poland), Peter Murrell (Profes- Danilova, and Gulmira Karaguishiyeva provided sor of Economics and Chair of the Academic statistical and research assistance; and Silvana Council of the Center for Institutional Reform Valle and Janice Joshi, administrative support. and the Informal Sector, University of Maryland), Caroline McEuen edited the report for publi- Vanessa Mitchell-Thompson (Principal Econo- cation. Director-General, Operations Evaluation: Gregory K. Ingram Director, Operations Evaluation Department: Ajay Chhibber Senior Manager, Country Evaluation and Regional Relations: R. Kyle Peters Task Manager: Alice Galenson v i i F O R E W O R D FOREWORD PRÓLOGO AVANT- PROPOS ~NOL A ENGLISH ESP FRANÇAIS Much of Europe and Central Tras la división de la Unión So- Une grande partie de l'Europe Asia faced unprecedented political, viética, gran parte de Europa y Asia et de l'Asie centrale a été le théâtre de economic, and social change after central experimentó cambios políti- transformations politiques, écono- the break-up of the Soviet Union. The cos, económicos y sociales sin pre- miques et sociales sans précédent challenges to the transition were for- cedentes. Esa transición planteó après l'éclatement de l'Union sovié- midable, including deep economic dis- enormes desafíos, entre ellos profun- tique. Les obstacles à surmonter au tortions, major trade disruptions, and dos trastornos económicos, graves dis- cours de cette transition étaient consi- the absence of market-oriented insti- torsiones del comercio y la falta de dérables : graves distorsions écono- tutions. As was foreseen, GDP fell instituciones orientadas al mercado. miques, perturbations majeures au plan sharply at the beginning of the period. Como se había pronosticado, el PIB commercial et absence totale d'insti- In the Central and Eastern European sufrió una brusca caída al comienzo tutions favorisant les mécanismes du countries, the transition recession was del período. En los países de Europa marché. Comme prévu, le PIB a brus- relatively shallow, but in the CIS (Com- central y oriental, la recesión vincu- quement chuté au début de cette pé- monwealth of Independent States), GDP lada a la transición fue relativamente riode. Dans les pays d'Europe centrale fell an average of over 40 percent, and moderada, pero en la CEI (Comunidad et orientale, les effets récessifs de la poverty and inequality increased de Estados Independientes), el PIB dis- transition ont été plutôt superficiels, sharply. No CIS country has yet re- minuyó en promedio más del 40%, y mais dans le Commonwealth des États gained its pre-transition per capita GDP. se registró un marcado aumento de la indépendants (CEI), le PIB a baissé de The World Bank, in collaboration pobreza y la desigualdad. Ninguno de plus de 40 % en moyenne, et la pauvreté with the IMF, the European Union los países miembros de la CEI ha re- et les inégalités se sont nettement ac- (EU), and other donors, geared up cuperado aún su PIB per cápita ante- crues. Dans aucun pays du CEI, le PIB rapidly to support macroeconomic rior a la transición. par habitant n'a encore retrouvé le ni- stabilization and structural reform. El Banco Mundial, en colabora- veau d'avant la transition. Many transition countries quickly ción con el FMI, la Unión Europea La Banque mondiale, en collabo- accomplished price and trade liber- (UE) y otros donantes, se prepararon ration avec le Fonds monétaire inter- alization. Small-scale privatization is rápidamente para respaldar la esta- national (FMI), l'Union européenne virtually complete, and large-scale bilización macroeconómica y la re- (UE) et d'autres bailleurs de fonds, privatization is under way in most forma estructural. Muchos países en s'est rapidement préparée à contri- countries. While progress has been transición lograron liberalizar los pre- buer à la stabilisation économique et slower in financial sector reform, cios y el comercio en poco tiempo. aux réformes structurelles. De nom- public sector reform, social protec- Las privatizaciones en pequeña es- breux pays en transition ont rapide- tion, enterprise restructuring, and cala ya han prácticamente terminado, ment libéralisé les prix et le commerce. competition policy, the trend is up- y en la mayoría de los países está en La privatisation des petites entreprises ward. The private sector share of marcha un proceso de privatizaciones touche à sa fin et la plupart des pays GDP across the transition countries en gran escala. Si bien los progresos ont entrepris de privatiser leurs is nearly 70 percent, and eight Cen- en lo que respecta a la reforma del grandes entreprises. Dans d'autres tral and Eastern European and Baltic sector financiero, la reforma del sec- domaines, comme le secteur finan- countries have joined the EU. Much tor público, los sistemas de protec- cier, le secteur public, la protection so- has been achieved, but much re- ción social, la reestructuración de las ciale, la restructuration des entreprises mains to be completed, especially in empresas y la política de competen- et la politique de la concurrence, les the CIS countries. cia han sido lentos, se observa una progrès sont moins rapides, mais l'évo- i x E C O N O M I E S I N T R A N S I T I O N In assessing the effective- tendencia ascendente. En lution actuelle laisse bien pré- ness of Bank assistance, it todos los países en transición, sager de l'avenir. La part du must be recognized that the ~NOL la cuota del PIB correspon- secteur privé dans le PIB de collapse of the Soviet Union A diente al sector privado es de l'ensemble des pays en transi- and the ensuing transition casi 70%, y los ocho países de tion est de 70 %, et huit pays ENGLISH took place with little warn- ESP Europa central y oriental y del baltes et d'Europe centrale et FRANÇAIS ing and on an unparalleled Báltico están listos para in- orientale sont sur le point d'en- scale. Political pressures com- corporarse a la UE. Es mucho trer dans l'UE. Des progrès pelled the Bank to move quickly and lo que se ha logrado, pero aún queda importants ont été réalisés, mais il lend large amounts. Staff were fre- una larga lista de cuestiones pen- reste beaucoup à faire, surtout dans les quently confronted with the need dientes, sobre todo en los países de pays du CEI. to act, often under difficult circum- la CEI. Pour évaluer l'efficacité de l'aide stances, in the absence of relevant Al evaluar la eficacia de la asisten- de la Banque, il ne faut pas perdre experience or country knowledge, cia prestada por el Banco Mundial, es de vue que l'effondrement de learning along the way. preciso reconocer que el colapso de l'Union soviétique et la transition Overall, Bank assistance to the la Unión Soviética y la transición sub- qui s'en est suivie sont intervenus transition countries has been suc- siguiente se produjeron en forma sans beaucoup de préavis et ont eu cessful, but there were mistakes bastante sorpresiva y a una escala sin une ampleur sans précédent. Sous early on when the true nature of parangón. Las presiones políticas obli- la pression d'impératifs politiques, la transition was not fully understood. garon al Banco a actuar con rapidez Banque a dû agir vite et prêter des Not unexpectedly, the Bank's evolv- y prestar grandes cantidades de di- sommes importantes. Ses services ing knowledge and the rapidly nero. El personal se vio muchas veces ont fréquemment été contraints d'in- changing circumstances led to many en la necesidad de actuar, a menudo tervenir dans des conditions sou- mid-course corrections. The strat- en circunstancias difíciles, sin la de- vent difficiles, apprenant sur le tas, egy was to promote macroeconomic bida experiencia o el conocimiento sans avoir acquis l'expérience ni la stability and sound economic man- suficiente del país, por lo que debió connaissance nécessaires des pays. agement; reorient and strengthen aprender sobre la marcha. Globalement l'aide de la Banque public sector institutions; build the En términos generales, la asisten- aux pays en transition est concluante basic institutions of a market econ- cia prestada por el Banco a los países même si des erreurs ont été com- omy and an enabling environment con economías en transición ha sido mises initialement lorsque la véri- for private sector initiatives; and satisfactoria, pero se cometieron erro- table nature de la transition n'était cushion the social cost of the tran- res al principio, cuando no se tenía pas encore parfaitement connue. On sition. These objectives were rele- una comprensión cabal de la verda- ne peut donc s'étonner que les vant, but effectiveness was limited by dera índole de la transición. Como era connaissances accumulées par la an initial underestimation of the de esperar, a medida que evolucio- Banque et l'évolution rapide de la need to focus on poverty alleviation naban los conocimientos del Banco situation aient conduit à rectifier le and good governance and the use of y las circunstancias cambiaban rápi- cap à plusieurs reprises au fil du rapid privatization to promote pri- damente, fue necesario introducir temps. La stratégie a été d'encoura- vate sector development (PSD) with- muchas correcciones sobre la mar- ger la stabilité macroéconomique, out a supporting legal and in- cha. La estrategia consistió en pro- favoriser une gestion économique stitutional framework. Lending was mover la estabilidad macroeconómica solide, réorienter et renforcer les based on the expectation of a short, y una gestión económica racional; institutions du secteur public, mettre shallow transition recession; the pro- reorientar y fortalecer las institucio- en place les rouages essentiels d'une longed recession in some CIS coun- nes del sector público; crear las ins- économie de marché, créer un en- tries led to the accumulation of tituciones básicas de una economía vironnement favorable au secteur significant levels of indebtedness. de mercado y un entorno propicio privé et amortir le coût social de la The Bank internalized emerging les- para las iniciativas del sector privado, transition. Ces objectifs étaient bons, sons and shifted its emphasis ac- y amortiguar los efectos del costo mais deux facteurs ont limité l'effi- x F O R E W O R D cordingly: poverty monitor- social de la transición. Estos cacité de la stratégie : la né- ing and alleviation and good objetivos eran acertados, pero cessité de privilégier systé- governance are now promi- ~NOL la eficacia se vio limitada por matiquement la lutte contre nent objectives in both lend- A una subestimación inicial de la pauvreté et la bonne gou- ing and analytical work, and la necesidad de centrar la vernance a été sous-estimée, ENGLISH the approach to privatization ESP atención en el alivio de la po- et, en l'absence d'un cadre FRANÇAIS and PSD has evolved con- breza y una buena gestión de légal et institutionnel propice, siderably. gobierno, y por el recurso a l'effort de développement du The following recommendations las privatizaciones rápidas para fo- secteur privé par la privatisation ra- emerged from a detailed study of mentar el desarrollo del sector pri- pide des entreprises n'a pas toujours PSD, governance, public sector man- vado sin un marco jurídico e porté les fruits attendus. Le volume agement (PSM) and institution build- institucional que lo sustentara. El fi- de prêt reposait sur l'hypothèse ing, the financial sector, social nanciamiento se basó en la creencia d'une récession superficielle et protection, and energy in the tran- de que la recesión vinculada a la tran- éphémère liée à la transition. Dans sition economies: sición sería corta y moderada; la pro- certains pays du CEI, la longue ré- longada recesión en algunos países cession a conduit à un niveau d'en- · Legal and judicial reform, with an de la CEI dio lugar a la acumulación dettement élevé. La Banque a emphasis on implementation, is de altos niveles de endeudamiento. internalisé les enseignements se dé- critical for improvements in the El Banco internalizó las nuevas en- gageant de ses interventions et a re- business climate, the financial sec- señanzas recogidas y cambió su en- centré son action en conséquence. tor, social protection, and gover- foque para adecuarlo a ellas: la Le suivi et la réduction de la pau- nance in general. vigilancia y el alivio de la pobreza y la vreté, tout comme la bonne gou- · Financial sector lending should buena gestión de gobierno son ac- vernance, sont aujourd'hui au coeur be conditioned on progress in en- tualmente objetivos primordiales des opérations de prêt et du travail forcing prudential regulations and tanto de la concesión de préstamos d'analyse, et la façon d'aborder la international accounting stan- como de la labor analítica, y la forma privatisation et le développement dards, and raising the effective- de encarar las privatizaciones y el de- du secteur privé a considérablement ness of bank supervision. Training sarrollo del sector privado ha evolu- évolué. of bank supervisors, judges, audi- cionado considerablemente. Les recommandations suivantes tors, and other skilled profes- Las recomendaciones siguientes sont le fruit d'une étude détaillée sionals needed to make the system surgieron de un estudio detallado du développement du secteur privé work should be a priority. del desarrollo del sector privado, la ; de la gouvernance, de la gestion du · In the energy sector improved gestión de gobierno, la administra- secteur privé et du renforcement commercial performance and cor- ción del sector público y el fortaleci- des institutions ; du secteur financier porate governance are priorities. miento institucional, el sector ; de la protection sociale ; et de The sequencing of reforms, in- financiero, los sistemas de protec- l'énergie dans les pays en transition. cluding the feasibility of immedi- ción social y la energía en los países ate privatization, depends on con economías en transición: · La réforme du système juridique country circumstances. et judiciaire est d'une importance · Privatization of large enterprises · La reforma legal y judicial, cen- critique pour améliorer le climat should focus on encouraging a trada en el cumplimiento, son fun- des affaires, le secteur financier, carefully prepared, transparent, damentales para mejorar el clima la protection sociale et la gou- competitive process, open to for- comercial, el sector financiero, los vernance en général. L'accent doit eign participation. sistemas de protección social y la être placé sur l'application de la · A strategic approach, distin- gestión de gobierno en general. législation. guished by the capacity of the · Los préstamos al sector financiero · Dans le secteur financier, l'octroi country, is needed for pension re- deberían condicionarse a los pro- de prêts devrait être subordonné form and for better targeting of gresos en la aplicación de regla- à la réalisation de progrès dans x i E C O N O M I E S I N T R A N S I T I O N other social assistance pro- mentaciones prudentes y nor- l'application des réglemen- grams. mas internacionales de con- tations prudentielles et des ~NOL tabilidad y a una supervisión normes comptables interna- The study presents a num- A más eficaz del sistema banca- tionales ainsi qu'à une plus ber of findings that cut across rio. Debería asignarse priori- grande efficacité du contrôle ENGLISH sectors and lend themselves ESP dad a la capacitación de bancaire. La formation des FRANÇAIS to recommendations that are supervisores de los bancos, personnes chargées d'exer- broadly applicable, not only jueces, auditores y otros pro- cer un contrôle bancaire, des to the transition countries, but to fesionales idóneos necesarios para juges, des auditeurs et des autres many others as well: que el sistema funcione. professionnels nécessaires dans · En el sector de la energía es prio- ce secteur doit être une priorité. · When the Bank begins to work in ritario mejorar el desempeño co- · Dans le secteur de l'énergie, a country­­or after a long hia- mercial y el gobierno de las l'amélioration des résultats com- tus­­lending should be held to empresas. El orden en que deben merciaux et du gouvernement prudent levels until a solid knowl- introducirse las reformas, así como d'entreprise sont des priorités. edge base is established, with la factibilidad de la privatización in- L'ordre dans lequel doivent se convincing evidence of govern- mediata, dependen de las cir- faire les réformes, notamment la ment and societal ownership of cunstancias de cada país. faisabilité d'une privatisation im- the programs. · La privatización de las grandes em- médiate, dépend des conditions · The rate of progress of any reform presas debería hacer hincapié en particulières de chaque pays. is largely determined by govern- alentar un proceso de licitación · La privatisation des grandes en- ment ownership, and a well-in- cuidadosamente preparado, trans- treprises doit s'articuler sur un formed civil society can become a parente y competitivo, abierto a mécanisme soigneusement pré- major driver for change. Country la participación extranjera. paré, transparent et ouvert à la assistance strategies should pro- · Es necesario adoptar un enfoque concurrence, y compris étran- mote ownership and consensus estratégico que distinga según la gère. for reform through capacity build- capacidad de cada país, para la re- · Il faut arrêter une stratégie claire, ing for governments and civil so- forma del sistema de pensiones y adaptée aux capacités propres à ciety and through analysis of the para mejorar la orientación de otros chaque pays, pour réformer le political, social, and economic programas de asistencia social. régime des retraites et pour amé- processes that affect stakeholder liorer le ciblage des autres pro- behavior. Recent Bank initiatives El estudio expone una serie de grammes d'aide sociale. promoting stakeholder awareness conclusiones pertinentes a varios sec- and participation in several coun- tores y que permiten formular reco- La présente étude débouche sur tries bear wider replication. mendaciones aplicables en un plano plusieurs conclusions recoupant di- · A comprehensive, long-term ap- más amplio, no solamente a los paí- vers domaines d'intervention et proach is needed in developing ses en transición sino también a mu- conduisant à des recommandations strategies for institutional change chos otros: applicables de façon très générale and PSM reform. Analytical work non seulement aux pays en transi- on governance and PSM should · Cuando el Banco comienza a tra- tion mais également à bien d'autres precede large amounts of Bank bajar en un país ­­o después de pays. lending, particularly where prob- un largo período de inactividad­­, lems are likely to affect assistance el monto de los préstamos debe- · Lorsque la Banque entame pour programs. ría mantenerse dentro de límites la première fois des activités dans · Economic and sector work can prudentes, hasta que se haya es- un pays -- ou lorsqu'elle y re- serve to increase knowledge and tablecido una base de conoci- prend ses activités après une train researchers; its quality in the mientos sólidos, con pruebas longue interruption --, la plus transition countries has been high, convincentes de que el gobierno grande prudence est de rigueur x i i F O R E W O R D but its impact on the country y la sociedad se identifican dans l'octroi des prêts aussi dialogue might have been con los programas. longtemps que l'on ne dis- greater had it been more rel- ~NOL · El grado de progreso de pose pas de connaissances evant and timely. A cualquier reforma depende solides ni d'éléments per- ·Greater transparency can in- en gran parte de que el go- mettant d'établir clairement ENGLISH crease public accountability ESP bierno sienta esa reforma que les pouvoirs publics et FRANÇAIS and discourage corruption. como propia, y una sociedad la société reprennent les ac- The Bank needs to implement civil bien informada puede tions menées à leur propre fully its own disclosure policies convertirse en una importante compte. and disseminate its analytical fuerza impulsora del cambio. Las · Le rythme de progression des ré- work, and encourage govern- estrategias de asistencia a los paí- formes dépend pour beaucoup ments to report more regularly ses deberían promover el sentido de l'adhésion des pouvoirs pu- and fully to both their parliaments de identificación y el consenso en blics, et une société civile bien and the public. torno a las reformas, mediante el informé, peut devenir un puis- · The Bank can be better prepared fortalecimiento de la capacidad de sant facteur de changement. Les to identify and address rapidly los gobiernos y de la sociedad civil stratégies d'aide-pays doivent fa- growing poverty by giving high y el análisis de los procesos políti- voriser l'appropriation des ré- priority to the monitoring of cos, sociales y económicos que formes et l'émergence d'un poverty levels from the beginning afectan el comportamiento de las consensus, par le biais d'un ren- of its involvement in a country. partes interesadas. Las iniciativas forcement des capacités des pou- · Aid coordination can increase the recientes del Banco que promue- voirs publics et de la société civile effectiveness of all assistance. Re- ven la sensibilización y la partici- et d'une analyse des processus cipient governments should lead pación de las partes interesadas politiques, sociaux et écono- aid coordination, with donors help- en varios países merecen ser apli- miques ayant une incidence sur le ing them define clear development cadas en forma más generalizada. comportement des parties pre- strategies, including monitorable · La elaboración de estrategias para nantes. Les récentes initiatives de action plans for implementation. el cambio institucional y la reforma la Banque ayant pour objet de de la administración del sector susciter une prise de conscience público deben encararse con un de la part des parties prenantes et criterio amplio y a largo plazo. El d'encourager leur participation Banco debe hacer un análisis de la dans plusieurs pays devraient être gestión de gobierno y la adminis- largement reproduites. tración del sector público antes · La transformation des institutions de otorgar préstamos, en parti- et la réforme de la gestion du sec- cular cuando existe la probabilidad teur public doit s'inscrire dans de que los problemas afecten los une stratégie globale à long programas de asistencia. terme. Un travail analytique sur la · Las actividades económicas y sec- gouvernance et la gestion du sec- toriales pueden servir para am- teur public doit être effectué pliar los conocimientos y capacitar avant que la Banque ne décide investigadores; su calidad en los d'octroyer des prêts importants, países en transición ha sido alta, surtout lorsque des problèmes pero su influencia en el diálogo na- risquent de porter atteinte aux cional podría haber sido mayor si programmes d'aide. hubiera sido más pertinente y · Le travail économique et sectoriel oportuna. peut servir à renforcer les · Una mayor transparencia puede connaissances et à former des mejorar la rendición de cuentas en chercheurs. Il a été de qualité x i i i E C O N O M I E S I N T R A N S I T I O N el sector público y desalentar dans les pays en transition, la corrupción. El Banco debe mais son impact sur le dia- ~NOL aplicar plenamente sus pro- logue avec les pays aurait pu A pias políticas de libre acceso être plus important s'il avait a la información y difundir su été plus pertinent et s'il était ESP labor analítica, como así tam- venu plus à son heure. FRANÇAIS bién alentar a los gobiernos a · Une plus grande transpa- presentar informes más com- rence peut aider à responsa- pletos y periódicos a sus parla- biliser le secteur public et à mentos y al público. prévenir la corruption. La Banque · El Banco puede estar mejor pre- doit appliquer systématiquement parado para detectar rápidamente sa propre politique de diffusion un aumento de la pobreza y tomar de l'information et faire connaître medidas paliativas si asigna mayor son travail d'analyse. Elle doit prioridad al seguimiento de los aussi encourager les autorités à niveles de pobreza desde el co- faire rapport de façon plus régu- mienzo de su actuación en un país. lière et plus complète au corps · La coordinación de la ayuda puede législatif et à la population. aumentar la eficacia de toda la asis- · La Banque sera mieux à même tencia. Los gobiernos receptores d'identifier et de combattre la deberían dirigir la coordinación montée rapide de la pauvreté si de la ayuda, con la colaboración de elle s'attache davantage à en sur- los donantes en cuanto a definir veiller les niveaux dès le com- estrategias claras de desarrollo, mencement de ses activités dans incluidos planes de acción para la un pays. aplicación susceptibles de segui- · La coordination de l'aide peut miento. contribuer à renforcer l'efficacité de tout le dispositif d'aide. Les gouvernements bénéficiaires doi- vent piloter la coordination de l'aide, les bailleurs de fonds se chargeant de les aider à définir des stratégies de développement claires et notamment des plans d'action vérifiables. Gregory K. Ingram Director-General, Operations Evaluation x i v E X E C U T I V E S U M M A R Y EXECUTIVE RÉSUMEN RÉSUMÉ SUMMARY ANALYTIQUE ~NOL A ENGLISH ESP FRANÇAIS Large parts of Europe and Cen- En gran parte de Europa y Asia Depuis 1989, début de l'écla- tral Asia (ECA) have undergone un- central se han producido cambios po- tement de l'Union soviétique, une precedented political, economic, and líticos, económicos y sociales sin pre- grande partie de la région Europe et social change since 1989, when the cedentes desde 1989, cuando comenzó Asie centrale (ECA), est le théâtre de Soviet Union began to break up--a a dividirse la Unión Soviética, cambio transformations politiques, écono- change often referred to as the tran- que con frecuencia se denomina la miques et sociales sans précédent, sition. The challenges to this transition transición. Esa transición planteó enor- souvent regroupées sous le vocable were formidable, including deep eco- mes desafíos, entre ellos profundos transition. Les obstacles à surmonter nomic distortions, major trade disrup- trastornos económicos, graves distor- étaient considérables : graves distor- tions, and a total lack of market- siones del comercio y la falta de ins- sions économiques, perturbations ma- oriented institutions. As was foreseen, tituciones orientadas al mercado. jeures au plan commercial et absence gross domestic product (GDP) fell Como se había pronosticado, el pro- totale d'institutions favorisant les mé- sharply at the beginning of the period. ducto interno bruto (PIB) sufrió una canismes du marché. Comme prévu, In the Central and Eastern European brusca caída al comienzo del período. le produit intérieur brut (PIB) a brus- countries, the transition recession was En los países de Europa central y orien- quement chuté au début de cette pé- relatively shallow and short-lived; GDP tal, la recesión vinculada a la transi- riode. Dans les pays d'Europe centrale fell on average by less than 15 per- ción fue relativamente moderada y de et orientale (PECO), les effets récessifs cent, and per capita incomes recov- corta duración; el PIB disminuyó de la transition ont été plutôt superfi- ered in many countries before the end menos del 15% como promedio, y el in- ciels et éphémères. En moyenne, le of the decade. However, in the former greso per cápita se recuperó en mu- PIB a reculé de moins de 15 % et, dans Soviet Union (hereafter referred to as chos países antes del final del decenio. de nombreux pays, le revenu par ha- the Commonwealth of Independent Sin embargo, en la ex Unión Soviética bitant s'était redressé à la fin de la dé- States, CIS), the decline was far more (en lo sucesivo denominada Comuni- cennie. En revanche, dans l'ex-Union severe than expected. GDP fell on av- dad de Estados Independientes (CEI)), soviétique (le Commonwealth des États erage by over 40 percent, and although la declinación fue mucho más grave de indépendants, le CEI, comme on le dé- growth has picked up strongly in re- lo que se esperaba. El PIB se redujo en signera ici), le repli a été beaucoup cent years, no CIS country has yet re- promedio más del 40%, y si bien el cre- plus marqué que prévu. Le PIB a baissé gained its pre-transition per capita cimiento ha vuelto a adquirir un fuerte de plus de 40 % en moyenne et, malgré GDP. Poverty increased well beyond impulso ascendente en los últimos la reprise de ces dernières années, expectations in many CIS countries, años, ninguno de los países miembros aucun pays de la CEI n'a encore re- and inequality rose as well. Infant mor- de la CEI ha recuperado aún su PIB trouvé le niveau d'avant la transition. tality fell in most of the transition coun- per cápita anterior a la transición. En Dans beaucoup de ces pays, la pau- tries, but life expectancy fell as well in muchos países de la CEI, la pobreza au- vreté s'est accrue nettement plus que most CIS countries. The gross enroll- mentó mucho más de lo que se preveía, prévu et les inégalités se sont creu- ment rate in basic education fell in y lo mismo ocurrió con la desigual- sées. La mortalité infantile a baissé many of the transition countries. dad. La mortalidad infantil disminuyó dans la majorité des pays en transition, The World Bank, in collaboration en la mayoría de los países en transi- mais l'espérance de vie a aussi reculé with the International Monetary ción, pero la esperanza de vida tam- dans la plupart des pays de la CEI. Le Fund (IMF), the European Union bién se redujo en la mayoría de los taux brut de scolarisation dans l'édu- (EU), and other donors, geared up países de la CEI. La tasa bruta de ma- cation de base est également tombé rapidly to support macroeconomic trícula en la enseñanza básica dismi- dans beaucoup de pays en transition. x v E C O N O M I E S I N T R A N S I T I O N stabilization and structural nuyó en muchos de los países La Banque mondiale, en reform (and later, in South- en transición. collaboration avec le Fonds eastern Europe--SEE--to ~NOL El Banco Mundial, en co- monétaire international provide post-conflict sup- A laboración con el Fondo Mo- (FMI), l'Union européenne port). In most countries, pol- netario Internacional (FMI), (UE) et d'autres bailleurs de ENGLISH icy reform has progressed ESP la Unión Europea (UE) y otros fonds, s'est rapidement pré- FRANÇAIS steadily, with few reversals. donantes, se preparó rápida- parée à contribuer à la stabi- Within the first few years, mente para respaldar la esta- lisation économique et aux many transition countries had un- bilización macroeonómica y la réformes structurelles (puis à four- dertaken comprehensive price and reforma estructural (y luego en Eu- nir une aide aux pays du Sud-Est sor- trade liberalization, and quite a few ropa sudoriental, para prestar apoyo tant d'un conflit). Dans la plupart had achieved substantial privatiza- en el período posterior al conflicto). des pays, les réformes progressent ra- tion of small enterprises. At pres- En la mayoría de los países, la re- pidement et les revirements sont ent, small-scale privatization is forma de las políticas ha avanzado a rares. Dès les premières années, virtually complete, and large-scale pasos firmes, con pocas contramar- beaucoup des pays s'étaient enga- privatization is under way in most chas. En los primeros años de la tran- gés sur la voie d'une vaste libérali- countries. While progress has been sición, muchos países liberaron sation des prix et du commerce, et slower in financial sector reform, completamente los precios y el co- un bon nombre d'entre eux avaient public sector reform, social protec- mercio, y varios países lograron pri- privatisé de multiples petites entre- tion, enterprise restructuring, and vatizar un gran número de pequeñas prises. Ce dernier aspect touche au- competition policy, the trend is still empresas. En el momento actual, las jourd'hui à sa fin et la plupart des upward, with reforms either being privatizaciones en pequeña escala ya pays sont maintenant en train de pri- planned or under implementation. han prácticamente terminado, y en la vatiser les grandes entreprises. Dans Substantial overall progress has been mayoría de los países está en marcha d'autres domaines, comme le sec- achieved: the private sector share un proceso de privatizaciones en gran teur financier, le secteur public, la of GDP across all transition coun- escala. Si bien los progresos en lo protection sociale, la restructuration tries reached nearly 70 percent in que respecta a la reforma del sector des entreprises et la politique de la 2002 from virtually nil in 1989, even financiero, la reforma del sector pú- concurrence, les progrès sont moins including the late-starting post-con- blico, los sistemas de protección so- rapides, mais les réformes prévues flict SEE countries and the most re- cial, la reestructuración de las ou en cours laissent bien présager de luctant reformers. Eight Central and empresas y la política de competen- l'avenir. Globalement, des progrès Eastern Europe and Baltic (CEB) cia han sido lentos, la tendencia sigue importants ont été réalisés, la part du countries joined the EU this year, siendo ascendente, con reformas en secteur privé dans le PIB de l'en- and two others are expected to join etapa de planificación o ejecución. En semble des pays en transition étant in the next several years. términos generales, los progresos passée de quasiment 0 % en 1989 à In assessing the effectiveness of han sido considerables: en todos los près de 70 % en 2002, même si l'on Bank assistance, it must be recog- países en transición, la participación tient compte des pays d'Europe du nized that the collapse of the Soviet del sector privado en el PIB llegó a ser Sud-Est qui, sortis d'un conflit, ont Union and the ensuing transition de casi 70% en 2002 a partir de prác- démarré plus tard, et des pays qui took place with little warning and on ticamente cero en 1989, incluso en étaient les plus réticents à entre- an unparalleled scale. Political im- los países de Europa sudoriental que prendre des réformes. Huit PECO peratives put the Bank under pres- se sumaron tardíamente a la transi- et pays baltes sont entrés dans l'UE sure to move quickly and lend large ción en la etapa posterior al conflicto cette année, et deux autres devraient amounts, and staff were frequently y en los países más renuentes a las re- le faire dans les années qui viennent. confronted with the need to act, formas. Ocho países de Europa cen- Pour évaluer l'efficacité de l'aide de often under difficult circumstances, tral y oriental y del Báltico se la Banque, il ne faut pas perdre de vue in the absence of relevant experi- incorporaron a la Unión Europea este que l'effondrement de l'Union so- ence and with virtually no country año, y se prevé la incorporación de viétique et la transition qui s'en est x v i E X E C U T I V E S U M M A R Y knowledge, learning along dos más en los próximos suivie sont intervenus sans the way. The Bank's role, años. beaucoup de préavis et ont though small relative to over- ~NOL Al evaluar la eficacia de la eu une ampleur sans précé- all financial flows--except in A asistencia prestada por el dent. Sous la pression d'im- a few small countries--was Banco, es preciso reconocer pératifs politiques, la Banque ENGLISH significant in terms of ana- ESP que el colapso de la Unión So- a dû agir vite et prêter des FRANÇAIS lytical work and policy ad- viética y la transición subsi- sommes importantes. Ses ser- vice. This report, a meta- guiente se produjeron en vices ont fréquemment été evaluation largely based on previ- forma bastante sorpresiva y a una es- contraints d'intervenir dans des ous evaluative work, and with the ac- cala sin parangón. Las urgencias po- conditions souvent difficiles, appre- knowledged benefit of 20/20 líticas presionaron al Banco a actuar nant sur le tas, sans avoir acquis l'ex- hindsight, attempts to identify the con rapidez y prestar grandes canti- périence nécessaire ou avoir une lessons to be learned from this ex- dades de dinero, y el personal se vio connaissance suffisante des pays. Par treme experience, in the hopes that muchas veces en la necesidad de ac- son travail d'analyse et ses conseils they will prove useful in countries tuar, a menudo en circunstancias di- sur les réformes, la Banque a joué undergoing similar, if less extreme, fíciles, sin la debida experiencia y con un rôle important, bien que limité changes in the future. un desconocimiento prácticamente au regard du volume total de finan- The Bank's assistance to the tran- total de los países, por lo que debió cement, sauf dans quelques pays. Mé- sition countries was on the whole aprender sobre la marcha. El papel taévaluation reposant largement successful, but clearly there were que desempeñó el Banco, aunque re- elle-même sur d'autres évaluations, mistakes early on when the true na- ducido en comparación con el volu- et établi avec tout le bénéfice du recul ture of transition was not yet fully men total de flujos financieros --salvo nécessaire, ce rapport cherche à dé- understood. Not unexpectedly, the en unos pocos países pequeños-- gager des enseignements de cette Bank's evolving knowledge and the fue muy importante en lo que res- expérience extrême dans l'espoir que rapidly changing circumstances led pecta a la labor analítica y el asesora- les acquis serviront aux autres pays to many course corrections along miento en materia de políticas. El qui seront à l'avenir confrontés à des the way. Of the nine Country Assis- presente informe, que es una meta- changements similaires, même s'ils tance Evaluations (CAEs) under- evaluación basada principalmente en sont moins radicaux. taken by OED for transition trabajos de evaluación anteriores, y Globalement l'aide de la Banque countries, six rate the outcome of cuenta con la reconocida ventaja que aux pays en transition a été the country program satisfactory, at otorga una clara visión retrospectiva, concluante même si, de toute évi- least for the most recent time period trata de identificar las enseñanzas que dence, des erreurs ont été commises (Bulgaria, Kazakhstan, Kyrgyz Re- ha dejado esta experiencia extrema, initialement lorsque la véritable na- public, Lithuania, Poland, and Rus- con la esperanza de que puedan re- ture de la transition n'était pas en- sia). CAEs rated the outcome of the sultar útiles en países que sufran cam- core parfaitement connue. On ne country programs in Albania, Azer- bios similares, aunque no tan peut donc s'étonner que les connais- baijan, and Ukraine, as well as the extremos, en el futuro. sances accumulées par la Banque et earlier periods in Bulgaria and Rus- La asistencia prestada por el Banco l'évolution rapide de la situation sia, unsatisfactory.1 a los países con economías en tran- aient conduit à rectifier le cap à plu- The Bank's strategy was to pro- sición fue satisfactoria en términos ge- sieurs reprises au fil du temps. Sur mote macroeconomic stability and nerales, pero es indudable que se les neuf évaluations de l'aide aux sound economic management, re- cometieron errores al principio, pays en transition réalisées par orient and strengthen public sector cuando no se tenía una compren- l'OED, six ont jugé « satisfaisants » les institutions, build the basic institu- sión cabal de la verdadera índole de résultats des programmes, au moins tions of a market economy and an la transición. Como era de esperar, a pour la période la plus récente (Bul- enabling environment for private medida que evolucionaban los co- garie, Kazakhstan, Lituanie, Pologne, sector initiatives, and cushion the nocimientos del Banco y las circuns- République kirghize et Russie ). En social cost of the transition. These tancias cambiaban rápidamente, fue revanche, ces programmes ont été x v i i E C O N O M I E S I N T R A N S I T I O N objectives were relevant. The necesario introducir muchas jugés « insatisfaisants » en Al- initial strategy's effectiveness, correcciones sobre la marcha. banie, en Azerbaïdjan et en however, was limited for two ~NOL De las nueve evaluaciones de Ukraine, ainsi qu'en Bulga- reasons. First, it underesti- A la asistencia prestada a los pa- rie et en Russie pendant leur mated until the late 1990s íses en transición realizadas période initiale1. ENGLISH the need to focus systemati- ESP por el Departamento de Eva- La stratégie de la Banque FRANÇAIS cally on poverty alleviation luación de Operaciones a été d'encourager la stabilité and good governance. Sec- (DEO), seis consideran que macroéconomique, favoriser ond, the use of rapid privatization to los resultados del programa para el une gestion économique solide, ré- promote private sector development país fueron satisfactorios, por lo orienter et renforcer les institutions did not always achieve its intended menos en el período más reciente. du secteur public, mettre en place effect without a supporting legal and Según esta misma evaluación, los re- les rouages essentiels d'une écono- institutional framework. Over time, sultados del programa en Albania, mie de marché, créer un environ- the Bank internalized emerging les- Azerbaiyán y Ucrania, así como en nement favorable au secteur privé et sons and shifted its emphasis ac- los períodos iniciales en Bulgaria y amortir le coût social de la transition. cordingly: poverty monitoring and Rusia, fueron insatisfactorios1. Ces objectifs étaient bons. Deux fac- alleviation and good governance are La estrategia del Banco consistió teurs ont toutefois limité initiale- now prominent objectives in both en promover la estabilidad macroe- ment l'efficacité de la stratégie. lending and analytical work, and the conómica y una gestión económica D'une part, la nécessité de privilégier approach to privatization and pri- racional; reorientar y fortalecer las systématiquement la lutte contre la vate sector development has evolved instituciones del sector público; crear pauvreté et la bonne gouvernance a considerably. las instituciones básicas de una eco- été sous-estimée. D'autre part, en A side effect of the prolonged nomía de mercado y un entorno pro- l'absence d'un cadre légal et insti- transition recession in the CIS has picio para las iniciativas del sector tutionnel propice, l'effort de déve- been the build-up of significant debt privado, y amortiguar los efectos del loppement du secteur privé par la problems in some countries that costo social de la transición. Estos privatisation rapide des entreprises started with very little debt. Official objetivos eran acertados. Sin em- n'a pas toujours porté les fruits at- lending levels were based on the ex- bargo, la eficacia de la estrategia ini- tendus. Au fil du temps, la Banque pectation that the transition reces- cial se vio limitada por dos motivos. a internalisé les enseignements se sion would be shallow and of short El primero es que, hasta fines del de- dégageant de ses interventions et a duration. In countries where the re- cenio de 1990, se subestimó la ne- recentré son action en conséquence. cession was far deeper and longer cesidad de prestar una atención Le suivi et la réduction de la pau- than foreseen, and problems of gov- sistemática al alivio de la pobreza y la vreté, tout comme la bonne gou- ernance more serious than antici- buena gestión de gobierno. En se- vernance, sont aujourd'hui au coeur pated, this has resulted in significant gundo lugar, el recurso a las privati- des opérations de prêt et du travail levels of indebtedness. The effects of zaciones rápidas para fomentar el d'analyse, et la façon d'aborder la this debt are likely to be long lasting. desarrollo del sector privado no siem- privatisation et le développement In these countries, with the benefit pre logró los efectos deseados, al no du secteur privé a considérablement of hindsight, more prudent lending existir un marco jurídico e institu- évolué. levels would have been better for cional que lo sustentara. Con el Les problèmes d'endettement the long run. tiempo, el Banco internalizó las nue- apparus dans certains pays aupara- It is increasingly evident that many vas enseñanzas recogidas y cambió su vant très peu endettés sont l'un des countries in Europe and Central Asia enfoque para adecuarlo a ellas: la vi- effets secondaires de la longue ré- no longer fit the standard transition gilancia y el alivio de la pobreza así cession liée à la transition dans le model. For the CEB countries that como la buena gestión de gobierno CEI. Le niveau des prêts de sources are integrating into Western Europe, son actualmente objetivos primor- publiques reposait sur l'hypothèse issues facing middle-income coun- diales tanto de la concesión de prés- d'une récession superficielle et tries may be most relevant. Others fit tamos como de la labor analítica, y la éphémère. Là où la récession a été x v i i i E X E C U T I V E S U M M A R Y more appropriately into cat- forma de encarar las privati- beaucoup plus marquée et egories such as highly in- zaciones y el desarrollo del longue que prévue et les pro- debted, post-conflict, or ~NOL sector privado ha evolucio- blèmes de gouvernance plus low-income countries under A nado considerablemente. graves qu'envisagés, l'endet- stress. The issues faced by Un efecto colateral de la tement atteint un niveau ENGLISH Hungary and the Czech Re- ESP prolongada recesión vincu- élevé. Cette dette risque FRANÇAIS public are quite different from lada a la transición en la CEI d'avoir des effets durables. those of Turkmenistan and ha sido la acumulación de Avec le recul, des opérations the Kyrgyz Republic. While the term graves problemas de endeudamiento de prêt plus limitées auraient été transition was used to discuss their en algunos países que iniciaron la plus judicieuses à terme pour ces transformation to market-based transición con una deuda muy pe- pays. economies, the label transition queña. El monto de los préstamos Il est de plus en plus manifeste economies no longer seems as rele- oficiales otorgados se basó en la cre- que, dans beaucoup de PECO et vant. However, the lessons from this encia de que la recesión vinculada a pays baltes, le modèle traditionnel- period--brought into sharper relief la transición sería moderada y de lement applicable aux économies by the large scale of the transition-- corta duración. En los países en que en transition n'est plus d'actualité. can be applied more generally. la recesión fue mucho más profunda Ceux qui entrent aujourd'hui dans This evaluation examines in depth y prolongada de lo previsto, el re- l'Union européenne sont peut-être five areas of Bank assistance, chosen sultado han sido altos niveles de en- davantage dans la situation des pays for their importance to the Bank's deudamiento. Es probable que los à revenu intermédiaire. Les autres lending program and their potential for efectos de esta deuda perduren por tomberaient plus dans la catégorie yielding lessons that are useful for both mucho tiempo. Si se analiza la situa- des pays très endettés, des pays sor- the remaining transition agenda and ción en retrospectiva, en el largo tant d'un conflit ou des pays à faible more broadly: private sector develop- plazo hubiera sido mejor para esos revenu en difficulté. Ainsi, les pro- ment; governance, public sector man- países que el volumen de los présta- blèmes auxquels font face la Hongrie agement and institution building; the mos se hubiera limitado a montos et la République tchèque ont peu à financial sector; social protection; and más prudentes. voir avec ceux que connaissent le energy. It does not include an in-depth Es cada vez más evidente que mu- Turkménistan et la République kir- review of all areas where the Bank was chos países de Europa y Asia central ghize. Si le terme transition était active. The Bank's experience in price ya no encuadran en el modelo co- utilisé pour parler de la transforma- and trade liberalization, where signif- rriente de "transición". En el caso de tion à l'économie de marché, le label icant achievements were realized and los países de Europa central y orien- pays en transition ne semble plus sustained, is not reviewed. Some areas tal y del Báltico que se están inte- aussi approprié pour les deux pre- have been covered in other OED eval- grando a Europa occidental, pueden miers pays. Les enseignements tirés uations, such as a review of agricul- ser más pertinentes las cuestiones de cette période, que l'ampleur de tural policy reform, which found que afectan a los países de ingreso la transition a plus particulièrement considerable advances in agricultural mediano. Otros países encuadran mis en relief, sont toutefois d'une ap- trade liberalization, land reform, and mejor en categorías como las de pa- plication plus générale. the development of rural financial íses fuertemente endeudados, en si- La présente évaluation passe au markets, with less progress in post- tuación de posguerra, o de ingreso crible l'aide de la Banque dans cinq privatization follow-up and the reform bajo en dificultades. Los problemas domaines, retenus en raison de leur of state institutions. Other areas, such que enfrentan Hungría y la República importance dans les programmes as trade, are covered by ongoing OED Checa son muy diferentes de los que de prêt de l'institution et des en- evaluations. The following sections aquejan a Turkmenistán y la Repú- seignements qu'ils pourront per- summarize the findings and recom- blica Kirguisa. Mientras que el tér- mettre de tirer tant pour le travail mendations specific to the five areas mino transición se utilizaba para restant à effectuer dans les pays en- covered by this evaluation. The final hacer referencia a su transformación core en transition que d'une façon section presents some crosscutting en economías basadas en el mer- plus générale. Il s'agit du dévelop- x i x E C O N O M I E S I N T R A N S I T I O N findings and recommenda- cado, la etiqueta de países pement du secteur privé ; de tions. con economías en transición la gouvernance, de la gestion ~NOL ya no parece ser tan aplica- du secteur public et du ren- Private Sector A ble. Sin embargo, las ense- forcement des institutions ; Development ñanzas que dejó ese período du secteur financier ; de la ENGLISH Transforming state-dominated ESP --y que han adquirido mayor protection sociale ; et de FRANÇAIS and -controlled economies relieve debido a la gran es- l'énergie. Tous les secteurs into market-driven, private- cala de la transición-- pue- d'intervention de la Banque sector-oriented economies was a den aplicarse a nivel más general. n'ont donc pas été examinés en dé- major goal of the transition. This re- Esta evaluación examina en pro- tail. Ainsi, l'action menée par la quired imposing market discipline fundidad cinco esferas de asistencia Banque pour favoriser la libéralisa- on state-owned enterprises, priva- del Banco, elegidas por su impor- tion des prix et du commerce, do- tizing state assets, and encouraging tancia para el programa de financia- maines dans lesquels les acquis sont new private enterprises. Bank assis- miento del Banco y su potencial para importants, n'a pas été évaluée. Cer- tance programs initially reflected the dejar enseñanzas útiles para lo que tains secteurs d'activité ont fait l'ob- belief that privatization must occur resta del programa de transición y, a jet d'autres évaluations de l'OED, quickly, taking advantage of limited un nivel más amplio, para el desa- comme l'examen de la réforme de la reform "windows," and that new pri- rrollo del sector privado, la gestión de politique agricole qui a fait ressortir vate owners would restructure the gobierno, la administración del sec- le long chemin parcouru au plan de enterprises and provide adequate tor público y el fortalecimiento ins- la libéralisation des échanges agri- corporate governance. This senti- titucional, el sector financiero, los coles, de la réforme foncière et du ment also reflected the views of lead- sistemas de protección social y la développement des marchés finan- ing policymakers throughout the energía. No analiza en profundidad ciers en zone rurale, et mis en évi- Region. In line with this approach, todas las esferas en las que actuó el dence le travail restant à accomplir early Bank assistance put a lower pri- Banco. No examina la experiencia au niveau du suivi après les privati- ority on reform of regulatory, anti- del Banco en la liberalización de los sations et de la réforme des institu- monopoly, commercial, capital precios y el comercio, donde se han tions publiques. L'OED réalise market, and bankruptcy regimes, the obtenido y mantenido logros im- actuellement des évaluations por- so-called "second generation" re- portantes. Algunas esferas han sido tant sur d'autres domaines, comme forms; they would be pursued once objeto de otras evaluaciones por le commerce. Les sections qui sui- a critical mass of privatized firms had parte del DEO, como un análisis de vent présentent une synthèse des appeared. Private property has be- la reforma de las políticas agrícolas, observations et des recommanda- come the dominant basis for pro- que detectó avances considerables tions dans chacun des cinq do- ductive transactions in most en la liberalización del comercio agrí- maines retenus. L'ultime section est transition economies. But a number cola, la reforma agraria y el desarro- consacrée à des observations et re- of countries, particularly in the CIS, llo de los mercados financieros commandations de portée plus gé- have yet to establish conditions con- rurales, y un menor grado de pro- nérale. ducive to private sector development greso en las actividades de segui- and growth, and ailing state-owned miento posteriores a la privatización Développement du secteur enterprises continue to drain public y la reforma de las instituciones del privé resources and bottle up valuable as- Estado. Otras esferas, como el co- La transition avait particulièrement sets. In the more advanced reform- mercio, están siendo analizadas en pour objet de transformer des éco- ers, largely in the CEB, firms have evaluaciones del DEO actualmente nomies dominées et contrôlées par made significant progress in re- en curso. En las secciones siguientes l'État en économies organisées au- structuring, but it is the entry of large se resumen las conclusiones y reco- tour du secteur privé. Pour cela, il fal- numbers of new firms that is mainly mendaciones específicamente rela- lait soumettre les entreprises responsible for the recovery and job cionadas con las cinco esferas objeto détenues par l'État à la discipline creation. de la presente evaluación. En la úl- du marché, privatiser des biens pu- x x E X E C U T I V E S U M M A R Y The Region has drawn a tima sección se exponen al- blics et encourager la créa- series of lessons from the first gunas conclusiones y reco- tion d'entreprises privées. Au ten years of transition that ~NOL mendaciones intersectoriales. début, les programmes support privatization as part A d'aide de la Banque repo- of a broad strategy of disci- Desarrollo del sector saient sur la conviction que la ENGLISH pline and encouragement, ESP privado privatisation devait interve- FRANÇAIS quick sale of small enter- Uno de los objetivos princi- nir rapidement, pour tirer prises through open and pales de la transición fue parti des rares « fenêtres » de competitive auctions, case-by-case transformar economías dominadas réforme, et que les nouveaux dé- privatization of medium-size and y controladas por el Estado en eco- tenteurs du capital restructuraient large enterprises, an enforceable nomías impulsadas por el mercado y leurs sociétés et mettraient en place legal system to protect investors, in- orientadas al sector privado. Para ello le type de gouvernement d'entre- creased competition, clarification of fue necesario imponer una disciplina prise voulu. Les dirigeants de la ré- the cash flow and property rights of de mercado a empresas estatales, pri- gion partageaient ce sentiment. enterprises with continued state vatizar bienes del Estado y estimular Aussi l'aide initiale de la Banque n'a- ownership, and great caution, along la creación de nuevas empresas pri- t-elle pas mis l'accent sur la réforme with an efficient regulatory regime, vadas. Los programas de asistencia des dispositifs régissant le cadre ré- in divesting enterprises in sectors del Banco reflejaron, al principio, la glementaire et commercial, la lutte characterized by natural monopoly creencia de que las privatizaciones contre les monopoles, les marchés or oligopoly. OED's findings are con- debían hacerse con rapidez, aprove- financiers et les faillites, des réformes sistent with these lessons. Moreover, chando las escasas oportunidades de dites de la « seconde génération ». with the benefit of hindsight, OED introducir reformas, y de que los nue- Celles-ci ne seraient entreprises considers that the Bank should have vos propietarios privados reestruc- qu'après l'émergence d'une masse pursued this agenda sooner than turarían las empresas y harían una critique d'entreprises privatisées. it did. In the earliest years of the buena gestión de gobierno empre- Dans la plupart des pays en transi- transition, many of the choices made sarial. Este sentimiento también re- tion, la propriété privée est aujour- by the Bank were probably appro- flejó las opiniones de las autoridades d'hui l'axe central des transactions priate, given what was known at the encargadas de formular las políticas productives. Mais, un certain time. However, by the mid-1990s, it en toda la región. De conformidad nombre de pays, surtout dans le CEI, is reasonable to ask whether the con este criterio, la asistencia del doivent encore créer les conditions Bank was focusing sufficiently on Banco en la etapa inicial asignó una propices au développement du sec- the climate for private sector devel- menor prioridad a la reforma de los teur privé et à la croissance, et faire opment (PSD) and the appropriate regímenes regulatorios, antimono- en sorte que les entreprises d'État en methods for disciplining and priva- pólicos, comerciales, del mercado de perte de vitesse cessent de conti- tizing medium-size and large enter- capitales y de quiebra, es decir, las lla- nuer à ponctionner les ressources prises. madas reformas "de segunda gene- publiques et à immobiliser de pré- ración", las que se aplicarían una vez cieux actifs. Dans les pays où les ré- Governance, Public Sector que hubiera surgido una masa crí- formes sont plus avancées, Management, and Institution tica de empresas privatizadas. La pro- principalement dans les PECO et les Building piedad privada se ha convertido en pays baltes, la restructuration des At the beginning of the transition, la base principal de las transacciones sociétés a beaucoup progressé, mais the Bank understood the need to productivas en la mayoría de los pa- la reprise et la création d'emplois reorient and strengthen public sec- íses con economías en transición. sont surtout dues à l'entrée sur le tor institutions, but it greatly un- Pero en algunos países, en particular marché d'un grand nombre de nou- derestimated the consequences of de la CEI, aún no han se han creado velles entreprises. still weak core institutions and pub- las condiciones favorables para el de- La Région a tiré un ensemble lic administrations managing the sarrollo del sector privado y el creci- d'enseignements des 10 premières transition process. Work in the Bank miento, y hay empresas estatales années de la transition. Ces ensei- x x i E C O N O M I E S I N T R A N S I T I O N in the early 1990s recognized cargadas de problemas que gnements militent en faveur the quality of governance as siguen drenando recursos pú- de la privatisation dans le an appropriate matter for ~NOL blicos y reteniendo activos va- cadre d'une stratégie globale Bank attention, but the Bank A liosos. En los países que más de discipline et de promo- as a whole had few specialists han avanzado en las reformas, tion des entreprises, de la ENGLISH in governance and public sec- ESP principalmente los países de vente rapide aux enchères FRANÇAIS tor management (PSM) re- Europa central y oriental y del publiques des petites entre- form at that time. Despite Báltico, las empresas han prises, de la privatisation au large transfers of resources from the hecho grandes progresos en cuanto cas par cas des moyennes et grandes Bank to the transition countries, lit- a su reestructuración, pero la entrada entreprises, de l'adoption d'un sys- tle analysis of public expenditures de un gran número de empresas nue- tème juridique applicable pour pro- was undertaken before the late vas es la principal responsable de la téger les investisseurs, du 1990s. Toward the end of the recuperación económica y la gene- renforcement de la concurrence, de decade, pioneering work by the ración de empleos. la présentation dénuée d'ambiguïté Bank's ECA Region and surveys by La región ha recogido una serie de de la trésorerie et des droits patri- the Bank, the European Bank for enseñanzas de los primeros diez moniaux des entreprises toujours Reconstruction and Development años de transición que respaldan la sous le contrôle de l'État, et d'une (EBRD), and others documented privatización como parte de una es- grande prudence, doublée d'un ré- pervasive corruption and massive trategia amplia de disciplina y estí- gime réglementaire approprié, lors diversion of public resources in the mulo, la venta rápida de pequeñas des désétatisations dans des sec- Region. This work highlighted the empresas en subastas abiertas y com- teurs caractérisés par une situation importance of confronting cor- petitivas, la privatización caso por de monopole naturel ou d'oligo- ruption, an issue that had previ- caso de las empresas grandes y me- pole. L'OED parvient aux mêmes ously been taboo for the Bank, as dianas, un sistema jurídico con ga- conclusions. En outre, avec le recul, well as the need to link public ex- rantías de cumplimiento para l'OED considère que la Banque au- penditure analysis with the broader proteger a los inversores, una mayor rait dû s'engager sur cette voie plus issues of public financial account- competencia, la aclaración del flujo tôt. Au cours des premières années ability, on which reporting is now de efectivo y los derechos de pro- de la transition, beaucoup des choix mandatory. Almost all recent transi- piedad de las empresas que siguen faits par la Banque étaient certaine- tion Country Assistance Strategies siendo total o parcialmente de pro- ment justifiés, compte tenu de l'état (CASs) place PSM reform at the cen- piedad del Estado, y mucha cautela, des connaissances à l'époque. Tou- ter of assistance strategy, and this unida a un régimen regulatorio efi- tefois, à partir du milieu des années has been reflected in projects. Trans- ciente, al privatizar empresas de sec- 90, on peut légitimement se de- parency is a key to increasing pub- tores caracterizados por monopolios mander si la Banque s'est suffisam- lic accountability and discouraging u oligopolios naturales. Las conclu- ment attachée à promouvoir corruption, and while the Bank has siones del DEO concuerdan con l'émergence d'un climat favorisant le increased its focus on promoting a estas enseñanzas. Además, en re- développement du secteur privé et culture of transparency, more em- trospectiva, el DEO considera que el l'adoption des mesures nécessaires phasis is warranted. Banco debería haber puesto en mar- pour discipliner et privatiser les Rule of law, including judicial re- cha su programa más temprana- moyennes et grandes entreprises. form, is critical to building successful mente. En los primeros años de la democratic market-based economic transición, muchas de las decisiones Gouvernance, gestion du systems. The record in this area que tomó el Banco fueron proba- secteur public et renforcement throughout the Bank has been dis- blemente apropiadas, habida cuenta des institutions appointing. Evaluations suggest that de lo que se sabía en aquel momento. Au début de la transition, la Banque while the majority of laws supported Sin embargo, para mediados del de- a compris qu'il fallait réorienter et by the Bank have been submitted or cenio de 1990, es razonable pregun- renforcer les institutions du secteur passed, projects have not yet met tarse si el Banco estaba prestando la public, mais elle a beaucoup sous-es- x x i i E X E C U T I V E S U M M A R Y their broader objective of sys- suficiente atención a la exis- timé les conséquences que temic change. PSM reform has tencia de un clima favorable pouvait avoir la situation en- often been approached in an ~NOL para el desarrollo del sector core fragile d'administrations ad hoc manner, without a A privado y a los métodos apro- publiques et d'institutions de comprehensive long-term in- piados para disciplinar y pri- base chargées de piloter le ENGLISH stitutional development and ESP vatizar empresas medianas y processus. Au début des an- FRANÇAIS reform strategy. grandes. nées 90, elle n'ignorait pas que la qualité de la gouver- Financial Sector Gestión de gobierno, nance devait s'inscrire dans le cadre At the outset, transition economies administración del sector de son action, mais l'institution possessed financial systems whose público y fortalecimiento comptait à cette époque peu de spé- basic purpose was to allocate funds institucional cialistes de cette question et de la ré- according to the plan, with a lim- Al comienzo de la transición, el Banco forme de la gestion du secteur ited capacity to intermediate finan- entendió la necesidad de reorientar public. Bien que la Banque ait trans- cial resources and no need for y fortalecer a las instituciones del sec- féré un important volume de res- prudential regulations or financial tor público, pero subestimó excesi- sources vers les pays en transition, supervision. The Bank, in close col- vamente las consecuencias de dejar aucune analyse détaillée des dé- laboration with the IMF, quickly en manos de instituciones centrales penses publiques n'a été entreprise formed a basic understanding of the y administraciones públicas aún dé- avant la fin des années 90, époque essential elements of financial sector biles la conducción del proceso de à laquelle des travaux innovants de transition, and these elements-- transición. En trabajos realizados por la Région ECA et des études de l'ins- macroeconomic stability, legal and el Banco a principios de los años no- titution, de la Banque européenne regulatory frameworks, and ac- venta se reconoció que la calidad de pour la reconstruction et le déve- counting systems, with an emphasis la gestión de gobierno era un asunto loppement (BERD) et d'autres or- on the banking sector--were re- que requería la atención del Banco, ganismes ont mis en évidence une peated in most countries with ac- pero en aquel momento el Banco en corruption généralisée et des dé- tive programs. Most transition su conjunto tenía pocos especialis- tournements massifs de ressources economies have made tangible tas en la reforma de la gestión de go- publiques dans la région. Ce travail progress toward market-based fi- bierno y la administración del sector a montré combien il était impor- nancial systems. However, some of público. A pesar de las voluminosas tant de s'attaquer à la corruption, the analyses and assistance efforts transferencias de recursos del Banco une question jusque-là taboue à la did not take into account the inter- a los países en transición, el gasto pú- Banque, et de replacer l'analyse relationships between banking sec- blico no fue objeto de mayores aná- des dépenses publiques dans le tor and enterprise reform, and lisis hasta fines del decenio de 1990. cadre plus large de la question de allowed the process to be subverted Hacia el final de la década, trabajos de l'éthique de responsabilité finan- by managers and interlocking own- vanguardia de la Oficina Regional de cière des pouvoirs publics, un aspect ers. Privately owned banks strongly Europa y Asia Central del Banco y es- qui fait aujourd'hui systématique- interlinked with major borrowing tudios realizados por el Banco Euro- ment l'objet d'un rapport. Les ré- enterprises make poor candidates peo de Reconstrucción y Fomento centes stratégies d'aide aux pays for sound and efficient intermedia- (BERF) y otras entidades, documen- (CAS) en transition s'organisent tion. Measures are needed at an taron que la corrupción y la desvia- presque toutes autour de la réforme early stage to enforce prudential ción de recursos públicos eran du secteur public, comme en té- regulations, including limits on moneda corriente en la región. Este moignent les projets mis en oeuvre. loan concentration and related- trabajo puso de relieve la importan- Le renforcement de l'éthique de res- party lending, and Bank projects cia de hacer frente a la corrupción, ponsabilité financière des pouvoirs should be conditioned on such un tema que hasta entonces había publics et les mesures dissuasives measures. While substantial privati- sido tabú para el Banco, así como la en matière de corruption passent zation has taken place, banks under necesidad de vincular el análisis del nécessairement par la transpa- x x i i i E C O N O M I E S I N T R A N S I T I O N state ownership still need gasto público a la cuestión rence. Si la Banque s'attache strengthening, through más amplia de la rendición aujourd'hui davantage à pro- stronger governance, tighter ~NOL de cuentas en el sector de las mouvoir une culture de la budget constraints, divesti- A finanzas públicas, en el que transparence, plus doit en- ture of branches, and re- la presentación de informes core être fait dans ce do- ENGLISH strictions on the scope of ESP es actualmente obligatoria. maine. FRANÇAIS banking licenses. Casi todas las Estrategias de L'état de droit, qui sup- Bank assistance programs asistencia a países en transi- pose une réforme judiciaire, have appropriately emphasized the ción elaboradas recientemente colo- est à la base de tout bon système establishment of a proper legal and can a la reforma de la administración économique démocratique fondé regulatory framework for the finan- del sector público en el centro de la sur le jeu du marché. Dans ce do- cial sector, but the time and human estrategia de asistencia, y esto se ha maine, les résultats obtenus par la resource development required to reflejado en los proyectos. La trans- Banque sont décevants. Les évalua- make the new laws and regulations parencia es un factor clave para tions réalisées tendent à montrer effective were underestimated. Train- mejorar la rendición de cuentas en que la majorité des lois appuyées ing was provided to project imple- el sector público y desalentar la co- par la Banque ont bien été présen- mentation units, to financial rrupción, y si bien el Banco está asig- tées ou adoptées, mais que les pro- intermediaries participating in Bank nando mayor prioridad a la jets n'ont pas atteint leur objectif credit lines, and to the restructuring promoción de una cultura de trans- plus large de changement systé- and privatization agencies. Few re- parencia, el tema amerita un énfasis mique. La réforme de la gestion du sources were devoted to the ex- mayor. secteur public est souvent abordée tended training needed to operate El estado de derecho, incluida la de façon décousue, alors qu'elle the financial system as a whole. High reforma judicial, es fundamental para devrait s'inscrire dans une straté- priority should be given to train- el éxito de los sistemas económicos gie globale de développement et de ing bank supervisors, lawyers and democráticos basados en el mercado. réforme des institutions à long judges, accountants and auditors, Los logros del Banco en esa esfera terme. and other skilled professionals. han sido decepcionantes. Las eva- Progress in increasing the effec- luaciones sugieren que si bien la ma- Le secteur financier tiveness of bank supervision and yoría de las leyes que han recibido el Au départ, les systèmes financiers in enforcing (not just adopting) in- apoyo del Banco han sido propues- des pays en transition avaient prin- ternational accounting standards tas o aprobadas, los proyectos no cipalement pour objet de répartir should be among the triggers for han logrado aún su objetivo más am- les financements conformément au lending. plio de cambio sistémico. La reforma plan ; leurs capacités ne leur per- Close to half of operations with fi- de la administración del sector pú- mettaient pas de jouer un rôle d'in- nancial sector components in the blico a menudo se ha encarado termédiaire susceptible d'apporter transition economies included lines según las necesidades particulares des ressources financières et ils of credit, many of them in sectors del caso, y no en el marco de una es- n'étaient soumis ni à une régle- other than finance, and their out- trategia institucional amplia y a mentation prudentielle, ni à une su- come ratings have been low: fewer largo plazo de desarrollo y reforma. pervision financière. La Banque than half the commitments in the fi- mondiale, travaillant en étroite col- nancial, rural, social protection, and Sector financiero laboration avec le FMI, est rapide- PSD sectors were rated satisfactory. Al comienzo, los países con econo- ment parvenue à isoler quels étaient Few of them treated the financial mías en transición tenían sistemas fi- les principaux éléments de la tran- sustainability of the intermediaries as nancieros cuyo objetivo básico era sition du secteur financier, et ces a key objective. Moreover, the un- asignar los fondos de acuerdo con el éléments -- stabilité macroécono- derlying assumption that credit plan, con una capacidad limitada para mique, cadres juridiques et régle- would be a binding constraint on actuar como intermediarios de re- mentaires et systèmes comptables, PSD in the early transition experi- cursos financieros y sin necesidad de appliqués tout particulièrement au x x i v E X E C U T I V E S U M M A R Y ence can be questioned in normas reglamentarias pru- secteur bancaire -- ont été hindsight, as the utilization of dentes o supervisión finan- reproduits dans la plupart credit lines was far less than ~NOL ciera. El Banco, en estrecha des pays ayant des pro- anticipated. Financial sec- A colaboración con el FMI, se grammes en activité. Dans la tor staff should be involved formó rápidamente un con- plupart des pays en transi- ENGLISH in the design of all financial ESP cepto básico de los elementos tion, on observe des progrès FRANÇAIS intermediary loans and esenciales de la transición del tangibles vers la mise en should ensure that the fac- sector financiero, y esos ele- place de systèmes financiers tors important to sustainability are mentos --estabilidad macroeconó- obéissant aux lois du marché. Tou- adequately taken into account. Mi- mica, marcos jurídicos y regulatorios tefois, certains des efforts déployés crofinance projects should give y sistemas de contabilidad, con un én- en matière d'analyse et d'aide n'ont greater attention to developing sav- fasis en el sector bancario-- se repi- pas pris en considération les liens ings services and should incorpo- tieron en la mayoría de los países d'interdépendance qui existaient rate from the start a donor exit con programas activos. La mayoría entre secteur bancaire et entreprises strategy. de los países con economías en tran- faisant l'objet de réformes, ce qui a Capital markets development was sición han hecho progresos tangi- permis aux directeurs et aux pro- sometimes overemphasized in the bles con miras a la implantación de priétaires de sociétés aux directions early years of the transition, both sistemas financieros basados en el imbriquées de détourner le proces- within and outside the Bank, and it mercado. Sin embargo, algunos de sus de son objectif. Du fait de leurs may have diverted attention from los análisis y medidas de asistencia no prises de participations non négli- more immediate concerns, and tuvieron en cuenta las interrelaciones geables dans les entreprises aux- scarce regulatory and supervisory existentes entre el sector bancario y quelles elles accordent des prêts resources from the banking system. la reforma de las empresas, y permi- importants, les banques privées sont No formal stock market could have tieron que el proceso fuera socavado mal placées pour s'acquitter avec played the role assigned to it by the por administradores y propietarios pertinence et efficacité du rôle d'in- mass privatization proponents with- con intereses superpuestos. Los ban- termédiation que l'on attend d'elles. out a properly functioning banking cos de propiedad privada vinculados Il faut que des mesures d'exécution system, adequate accounting and muy estrechamente a grandes em- des réglementations prudentielles auditing with effective disclosure re- presas prestatarias no eran buenos soient prises très rapidement, no- quirements, responsible corporate candidatos para ejercer una inter- tamment celles qui concernent les governance, and protections for mi- mediación racional y eficiente. Es ne- limites à la concentration des prêts nority shareholders. cesario adoptar medidas en una et les prêts consentis à des parties etapa temprana para aplicar nor- liées, et les projets de la Banque Social Protection mas reglamentarias prudentes, que mondiale devraient être subor- Reform of the social protection sys- entre otras cosas limiten la con- donnés à l'existence de telles me- tem in transition countries was ini- centración de préstamos y la con- sures. Il y a eu un mouvement de tially viewed as a means to cushion cesión de financiamiento a partes privatisation important mais il faut the impact of the structural reforms. vinculadas, y los proyectos del encore renforcer les banques qui Early operations concentrated on Banco deberían condicionarse a la sont placées sous le contrôle de l'É- helping employment services deal observancia de estas medidas. Si tat et dans cette optique, il y a lieu with the expected surge of displaced bien ha habido un gran número de de renforcer leur gouvernance, de workers. Job displacements proved privatizaciones, es preciso fortalecer leur imposer des contraintes bud- fewer than anticipated, however, aún más los bancos estatales, me- gétaires plus strictes, de les amener and slow growth of alternative em- diante una gestión de gobierno más à se désengager de leurs succur- ployment opportunities under- sólida, restricciones presupuesta- sales et il faut également imposer mined retraining efforts. Moreover, rias más estrictas, privatización de des restrictions au champ d'activi- insufficient attention was given to las sucursales y limitación del al- tés des institutions bancaires the longer-term problem of people cance de las licencias bancarias. agréées. x x v E C O N O M I E S I N T R A N S I T I O N too old to be retrained or to Los programas de asisten- Les programmes d'aide de find new jobs, which resulted cia del Banco han puesto el la Banque mondiale ont, à in declining revenues and ~NOL debido énfasis en la creación juste titre, mis l'accent sur la growing expenditures for A de un marco jurídico y regu- création d'un cadre juridique early retirement and disabil- latorio adecuado para el sec- et réglementaire adapté qui ENGLISH ity programs. Financial diffi- ESP tor financiero, pero se puisse être appliqué au sec- FRANÇAIS culties in pension programs subestimó el tiempo y el grado teur financier mais ils ont became major fiscal prob- de capacitación de los recur- sous-estimé le temps qu'il fal- lems in most countries, while dete- sos humanos que se requeriría para lait pour que ces nouvelles lois et riorating economies caused sharp poner en práctica las nuevas leyes y réglementations entrent en vigueur increases in poverty rates, exposing reglamentaciones. Se impartió capa- et les qualifications professionnelles the weaknesses in existing social as- citación a las unidades de ejecución requises à l'appui d'une telle dé- sistance programs. de proyectos, a los intermediarios fi- marche. Une formation a été offerte The Bank's emphasis shifted to nancieros que participaban en las lí- au personnel des unités d'exécution pensions, where it helped many neas de crédito del Banco, y a los de projets, aux intermédiaires fi- countries--through technical assis- organismos de reestructuración y pri- nanciers participant aux lignes de tance as much as lending--enact vatización. Se destinaron pocos re- crédit de la Banque, et au personnel major reforms. However, the exis- cursos a la amplia capacitación des organismes de restructuration tence of two alternative models for necesaria para hacer funcionar el sis- et de privatisation. On n'a pas consa- reform led to disagreements among tema financiero en su conjunto. De- cré de ressources suffisantes à l'offre international agencies, as well as bería asignarse alta prioridad a la d'une formation de longue durée within the Bank, and probably de- capacitación de supervisores de los pourtant nécessaire à l'exploitation layed reforms in some countries. In bancos, abogados y jueces, conta- de l'ensemble du système financier. others, it led to the premature adop- dores y auditores y otros profesio- La formation des personnes char- tion of multi-pillar systems, with too nales idóneos. Los progresos gées d'exercer une surveillance ban- little attention to the fiscal sustain- alcanzados en cuanto a aumentar caire, des avocats et des juges, des ability of the basic pension system la eficacia de la supervisión de los experts-comptables et des auditeurs, and to the capacity to meet the pre- bancos y de la aplicación (no sola- et d'autres professionnels qualifiés, conditions for a private pension sys- mente de la adopción) de normas in- doit bénéficier d'un rang élevé de tem. A clear strategic approach to ternacionales de contabilidad priorité. L'octroi de prêts devrait pension reform is needed, differ- deberían ser uno de los mecanismos être subordonné à la réalisation de entiated by the ability of the coun- activadores del financiamiento. progrès dans l'efficacité de la sur- try to administer and fund the Cerca de la mitad de las operacio- veillance bancaire et dans la mise system. nes con componentes del sector fi- en application (et non pas seule- The weakest link in the Bank's nanciero en los países con economías ment dans l'adoption) de normes social protection reform strategy en transición incluyeron líneas de cré- comptables internationales. was in developing country-level dito, muchas de ellas en sectores dis- Dans les économies en transition, agendas. This resulted in missed op- tintos del financiero, y sus resultados près de la moitié des opérations portunities, particularly in social as- han sido calificados de pobres: menos ayant une composante liée au sec- sistance benefits for the poor, to de la mitad de los compromisos asu- teur financier porte sur des lignes which the Bank did not devote the midos en los sectores financiero, rural, de crédit, dont beaucoup se rap- same kind of resources as it did to de la protección social y de desarro- portent à des secteurs autres que le pension reform. Too great a share of llo del sector privado fueron califica- secteur financier et la notation des ré- benefits--such as child allowances dos de satisfactorios. Pocos de ellos sultats obtenus de cette manière and subsidized services--are di- encararon la sostenibilidad financiera laisse à désirer : moins de la moitié rected to higher-income households. de los intermediarios como un obje- des engagements dans les secteurs Those in poorer regions of a coun- tivo clave. Además, en retrospectiva, financiers et ruraux, ainsi que dans try find it difficult to qualify for ben- la presunción subyacente de que el les domaines de la protection so- x x v i E X E C U T I V E S U M M A R Y efits, and they receive less; crédito sería una restricción ciale et du développement and benefit levels are too low forzosa para el desarrollo del du secteur privé ont été jugés to be of much use in fighting ~NOL sector privado en la primera satisfaisants. Rares sont les poverty. Lending tended to A etapa de la transición es cues- opérations qui faisaient de la neglect administrative re- tionable, ya que la utilización viabilité financière des inter- ENGLISH forms, often because the bor- ESP de las líneas de crédito fue médiaires un objectif clé. De FRANÇAIS rowers did not want to pay mucho menor de lo que se plus, rétrospectivement, il for technical assistance, and esperaba. El personal del sec- semble que l'on puisse dou- both pension and other social as- tor financiero debería participar en ter du bien fondé de l'hypothèse de sistance programs suffer from ad- el diseño de todos los préstamos de départ selon laquelle le crédit serait ministrative shortcomings. Greater intermediación financiera y asegu- une contrainte incontournable pour attention should now go to strength- rarse de que se tomen debidamente le développement du secteur privé ening the capacity of national in- en cuenta los factores importantes au début de la phase de transition, stitutions to analyze needs, develop para la sostenibilidad. Los proyectos puisque les lignes de crédit ont été a policy consensus, improve col- de microfinanciamiento deberían utilisées de façon moins systéma- lections, and administer benefits. prestar mayor atención al desarro- tique que prévu. Les services du sec- In retrospect, the Bank should llo de los servicios de ahorro y de- teur financier devraient être have addressed additional areas berían incorporar desde el comienzo impliqués davantage dans la that have proven to be barriers to una estrategia referente a la reti- conception de tous les prêts inter- social protection reform in virtually rada de los donantes. médiaires et devraient veiller à ce every transition economy--labor En los primeros años de la transi- que les facteurs qui jouent un rôle laws that encourage labor hoarding ción se puso a veces un énfasis ex- important sur le plan de la viabilité among declining firms and discour- cesivo en el desarrollo de los soient suffisamment pris en compte. age hiring among expanding firms, mercados de capitales tanto dentro Les projets de microfinancement de- strategies for sharing fiscal and pol- como fuera del Banco, lo que puede vraient accorder plus d'importance icy burdens of assistance programs haber desviado la atención de pro- à la mise en place de services among different levels of govern- blemas más inmediatos y sustraído d'épargne et incorporer dès l'ori- ment, and problems in coverage and del sistema bancario parte de los es- gine une stratégie de désengage- administration caused by the growth casos recursos de regulación y su- ment des bailleurs de fonds. of informal sectors. pervisión. Ningún mercado de Au cours des premières années valores oficial podría haber desem- de la transition, on a peut-être prêté Energy peñado el papel que le asignaron los trop d'importance, au sein de la The transition countries inherited proponentes de las privatizaciones Banque mondiale et à l'extérieur, au substantial energy infrastructure, en masa sin contar con un sistema développement des marchés finan- consisting of vertically integrated bancario que funcionara correcta- ciers et cela au détriment de préoc- public monopolies. Energy con- mente, un sistema adecuado de con- cupations plus immédiates comme sumption and production were tabilidad y auditoría regido por l'insuffisance des ressources pou- heavily subsidized, while customer normas de libre acceso a la informa- vant être affectées à la réglementa- service was inadequate, and facili- ción, un gobierno empresarial res- tion et à la supervision du secteur ties poorly maintained. Supply-side ponsable y medidas de protección bancaire. Aucun marché boursier of- problems were exacerbated by low de los accionistas minoritarios. ficiel n'aurait pu jouer le rôle qu'au- efficiency of consumption, a lack of raient voulu lui assigner les partisans metering, and unwillingness to pay. Protección social des privatisations de masse, en l'ab- None of the regulatory or institu- La reforma del sistema de protección sence d'un système bancaire fonc- tional arrangements necessary for social en los países en transición se tionnel, de systèmes comptables et commercial operations was in place, encaró inicialmente como un medio d'audit satisfaisants, de mesures ef- and there were serious environ- de amortiguar los efectos de las re- ficaces de diffusion de l'information mental problems. formas estructurales. Las medidas au grand public, d'une gouvernance x x v i i E C O N O M I E S I N T R A N S I T I O N The Bank's initial policy iniciales se centraron en ayu- responsable des entreprises on lending for electric power dar a los servicios de empleo et d'un système de protec- linked Bank support to re- ~NOL a lidiar con la oleada prevista tion des actionnaires mino- forms in commercialization, A de trabajadores desplazados. ritaires. corporatization, and arm's- Sin embargo, el desplaza- ENGLISH length regulation. By 1996, ESP miento de empleos fue Protection sociale FRANÇAIS the Bank had adopted an ap- menor al esperado, y el lento La réforme du système de proach that emphasized un- crecimiento de otras oportu- protection sociale dans les bundling and privatization to achieve nidades de empleo menoscabó los pays en transition était envisagée commercialization. Rehabilitation, esfuerzos de readiestramiento. Ade- initialement comme un moyen d'at- emergency relief, and critical im- más, no se prestó suficiente atención ténuer l'impact des réformes struc- ports projects, which accounted for al problema a más largo plazo de la turelles. Les premières opérations over one-third of energy projects, gente que ya tenía demasiada edad ont surtout visé à aider les services encountered difficulties because of como para volver a capacitarse o en- de l'emploi à faire face à l'augmen- procurement problems and conflicts contrar nuevos empleos, lo que trajo tation attendue du nombre de tra- between short- and long-run objec- aparejada una disminución de los in- vailleurs licenciés. Toutefois, les tives; such projects should be de- gresos y un aumento de los gastos de suppressions d'emplois ont été signed to minimize delays (use los programas de jubilación antici- moins importantes que prévu et la negative lists rather than trying to pada e incapacidad. Las dificultades création de postes de substitution pre-identify critical imports) and financieras de los programas de pen- n'a pas suivi le rythme attendu, ce forego project implementation units siones se convirtieron en graves pro- qui a miné les efforts déployés pour and long-term reform objectives. blemas fiscales en la mayoría de los offrir une formation de reconver- Nearly two-thirds of energy projects países, al tiempo que el deterioro de sion. En outre, il n'a pas été prêté focused on longer-term objectives, las economías provocó un fuerte au- suffisamment d'attention au pro- and satisfactory outcomes tended mento de las tasas de pobreza, de- blème que posent, à long terme, les to result from a programmatic ap- jando al descubierto las deficiencias personnes trop âgées pour bénéfi- proach, with a blend of adjustment de los programas de asistencia so- cier d'une formation de reconver- and investment operations, accom- cial existentes. sion ou pour trouver de nouveaux panied by analytical work. This was El Banco dirigió entonces su aten- emplois, ce qui s'est traduit par une also an effective way to include is- ción al sistema de pensiones, sector baisse des recettes et une augmen- sues beyond the scope of energy en el que ayudó a muchos países -- tation des dépenses au titre de re- sector lending, such as the elimina- mediante asistencia técnica y prés- traites anticipées et de programmes tion of subsidies to energy sector tamos-- a aprobar reformas d'invalidité. Les difficultés financières entities; increased discipline in me- sustanciales. Sin embargo, la exis- que posaient les programmes de re- tering, billing, and collecting pay- tencia de dos modelos de reforma traites se sont converties, dans la ments; reforming pricing policies; distintos dio lugar a desacuerdos plupart des pays, en de graves pro- and closing uneconomic energy pro- entre los organismos internaciona- blèmes budgétaires tandis que la dé- duction facilities. Stakeholder par- les, así como dentro del Banco, y gradation des économies provoquait ticipation proved effective in some probablemente retrasó las reformas une forte augmentation des taux de cases, such as the privatization of en algunos países. En otros, llevó a la pauvreté, révélant ainsi les faiblesses Russian coal mines. In other cases, adopción prematura de sistemas de des programmes existants d'assis- progress was limited. Efforts to in- pilares múltiples, que no tenían de- tance sociale. tegrate environmental concerns masiado en cuenta la sostenibilidad La Banque mondiale a fait porter were generally effective. fiscal del sistema básico de pensiones plus particulièrement ses efforts sur In retrospect, probably too much y la capacidad de cumplir las condi- les retraites et elle a aidé de nom- emphasis was given to privatization ciones previas necesarias para la cre- breux pays à mettre en oeuvre d'im- and restructuring, and too little to ación de un sistema privado de portantes réformes dans ce regulation, strengthening utility fi- pensiones. Se requiere un claro en- domaine, par le biais d'une assis- x x v i i i E X E C U T I V E S U M M A R Y nancial and managerial per- foque estratégico de la re- tance technique tout autant formance, and combating cor- forma del sistema de pensio- que par ses prêts. Cependant, ruption. As the ECA Region ~NOL nes, que varíe según la le fait que deux modèles de has noted, attempts to leap A capacidad de cada país para réformes aient été en pré- from noncommercial, state- administrar y financiar el sence s'est traduit par des ENGLISH owned entities to private com- ESP sistema. désaccords entre les orga- FRANÇAIS mercial utilities generally El eslabón más débil de la nismes internationaux et au failed, although in some cases estrategia de reforma del sis- sein de la Banque mondiale, (Kazakhstan and some CEB coun- tema de protección social del Banco et a probablement retardé la mise en tries) they brought sector improve- fue la elaboración de programas a oeuvre des réformes dans certains ments (falling subsidies, for example), nivel de los países en desarrollo. Ello pays. Dans d'autres pays, cela a and even where this approach was dio lugar a que se desaprovecharan conduit à l'adoption prématurée not fully successful, service quality oportunidades, particularmente en lo d'un régime à plusieurs piliers, et and coverage have tended to im- que respecta a otorgar beneficios de l'on a pas prêté suffisamment at- prove. EU accession is a strong mo- asistencia social a los pobres, a los tention à la viabilité budgétaire du tivating factor for some countries, cuales el Banco no destinó el mismo régime de base des retraites, pas but in many others it was unrealistic volumen de recursos que a la reforma plus que l'on ne s'est préoccupé de to expect restructuring and privati- del sistema de pensiones. Una pro- savoir s'il existait des capacités suf- zation to overcome legal, political, porción excesiva de los beneficios fisantes pour satisfaire aux condi- structural, and attitudinal obstacles. --como las prestaciones por hijos a tions préalables d'un système de The primary objectives for enter- cargo y servicios subsidiados-- está retraites privé. Il faut arrêter une prises in the energy sector should be dirigida a los hogares de ingresos stratégie claire en matière de ré- improved commercial performance más altos. Las personas que viven en forme des retraites, et prévoir de and corporate and sectoral gover- las regiones más pobres de un país a différencier cette stratégie en fonc- nance. The sequencing of reforms, menudo tienen dificultades para ac- tion de l'aptitude du pays à admi- including the feasibility of immedi- ceder a los beneficios y reciben nistrer et à financer un tel régime. ate privatization, depends on coun- menos; y la cuantía de las prestacio- Le maillon le plus faible dans la try circumstances. The Bank needs nes es demasiado baja como para ser stratégie de réforme de la protection to develop operational guidance as de gran ayuda en la lucha contra la sociale proposée par la Banque to what sequence of reforms and in- pobreza. El financiamiento tendió a mondiale, tenait à ce que les pro- terventions works best in particu- descuidar las reformas administrati- grammes n'étaient pas mis au point lar country situations. vas, con frecuencia porque los pres- au niveau de chaque pays. Il en est tatarios se negaban a pagar la résulté bien des occasions manquées Crosscutting Findings and asistencia técnica, y tanto los sistemas notamment au plan des prestations Recommendations de pensiones como otros programas d'aide sociale destinées aux pauvres, Bank teams starting work in coun- de asistencia social adolecen de de- un domaine auquel la Banque n'a tries in the ECA transition group, ficiencias administrativas. Actual- pas consacré autant de ressources with limited prior knowledge of mente debería prestarse más qu'à la réforme du système de re- these countries, were often forced to atención al fortalecimiento de la traites. Une trop grande part des engage in assistance programs with- capacidad de las instituciones na- prestations sociales -- notamment out the luxury of careful analysis. cionales para analizar las necesi- les allocations familiales et les ser- With the benefit of hindsight, OED's dades, generar un consenso en vices subventionnés -- vise des mé- findings and recommendations torno a las políticas, mejorar la re- nages à revenus plus élevés. Les based on this tumultuous period of caudación y administrar las pres- habitants des régions pauvres d'un economic, social, and political taciones. pays ont du mal à faire valoir leurs change are meant to help guide En retrospectiva, el Banco debería droits à des prestations et ils tou- many of the Bank's policy precepts haberse ocupado también de otras chent des sommes moins impor- and procedures. With this in mind, esferas que han demostrado ser ba- tantes ; le niveau de ces prestations x x i x E C O N O M I E S I N T R A N S I T I O N we present a number of find- rreras para la reforma de n'est pas suffisant pour per- ings that cut across sectors los sistemas de protección so- mettre de lutter utilement and lend themselves to rec- ~NOL cial en prácticamente todos contre la pauvreté. De façon ommendations that are A los países con economías en générale, les prêts n'étaient broadly applicable, not only transición, como leyes labo- pas octroyés au titre de ré- ENGLISH to the transition countries, ESP rales que fomentan la acu- formes administratives, parce FRANÇAIS but to many others as well: mulación de trabajadores en qu'il arrivait souvent que les empresas en decadencia y de- emprunteurs ne veuillent pas · When the Bank begins work for salientan la contratación por parte payer l'assistance technique et de the first time in a country--or after de empresas en expansión, estrate- ce fait, les programmes de retraite a long hiatus, when the country gias para distribuir la carga fiscal y aussi bien que les programmes knowledge needs updating--pru- normativa de los programas de asis- d'aide sociale ont à pâtir des lacunes dent levels of lending are advisable tencia entre distintos niveles de go- administratives. Il y a lieu mainte- until better knowledge is built up bierno, y problemas de cobertura y nant d'accorder une plus grande and greater certainty regarding administración causados por el cre- attention au renforcement des ca- ownership of programs can be cimiento de los sectores no estruc- pacités dont disposent les institu- perceived. turados de la economía. tions nationales pour analyser les · Experience in countries such as besoins, parvenir à un consensus Poland and Russia (coal restruc- Energía politique, améliorer les rentrées de turing) and Bulgaria (pension re- Los países en transición heredaron fonds et administrer les prestations. form) shows that however well una importante infraestructura ener- Rétrospectivement, la Banque au- designed a reform, its rate of gética, compuesta de monopolios rait dû s'attaquer à d'autres do- progress is largely determined by públicos integrados verticalmente. maines faisant obstacle à la the government's ownership of it El consumo y la producción de ener- réforme de la protection sociale and the degree of consensus it is gía estaban fuertemente subsidiados, dans pratiquement toutes les éco- able to mobilize in the society at mientras que los servicios brindados nomies en transition -- le droit du large. A well-informed civil society a los usuarios eran inadecuados y las travail, qui favorise la rétention de can become a major "driver" for instalaciones no estaban bien man- main d'oeuvre dans les entreprises change. Programs to generate tenidas. Los problemas relacionados en déclin et décourage le recrute- stakeholder awareness and par- con el suministro se vieron agravados ment par les entreprises en expan- ticipation should be replicated por la baja eficiencia del consumo, la sion, les stratégies de répartition, widely. falta de medición y la falta de volun- entre différents niveaux de gouver- · Country assistance strategies, par- tad de pago. No existía ninguno de nement, des charges budgétaires et ticularly where reform progress los mecanismos regulatorios o insti- politiques qu'implique ces pro- has been slow, should promote tucionales necesarios para las ope- grammes d'aide, et les problèmes government ownership and con- raciones comerciales, y había graves de couverture et d'administration sensus in favor of reform through problemas ambientales. posés par la croissance des secteurs capacity building for both gov- La política inicial del Banco en ma- informels. ernment and civil society. They teria de préstamos para el sector de should incorporate an analysis of la energía eléctrica condicionó el Énergie the underlying political and so- apoyo del Banco a las reformas de la Les pays en transition ont hérité cial, as well as economic, processes reglamentación relativa a la comer- d'une importante infrastructure that affect stakeholder behavior. cialización, la creación de socieda- énergétique constituée de mono- · An appropriate institutional and des y la regulación por órganos poles d'État intégrés verticalement. regulatory framework and a capa- independientes. Para 1996, el Banco Consommation et production ble, transparent public sector are había adoptado un criterio que hacía d'énergie étaient fortement sub- key elements of an efficient market- hincapié en la desagregación y la pri- ventionnées, mais les services aux oriented private sector. Analytical vatización para lograr la comerciali- consommateurs étaient inadaptés x x x E X E C U T I V E S U M M A R Y workongovernanceandpub- zación. La rehabilitación, el et les installations mal entre- lic sector management needs socorro de emergencia y los tenues. Les problèmes du to precede large amounts of ~NOL proyectos de importaciones côté de l'offre étaient encore Bank lending, particularly A críticas, que representaban aggravés par le manque d'ef- when obvious problems are más de la tercera parte de los ficacité au plan de la consom- ENGLISH likely to affect assistance pro- ESP proyectos energéticos, tro- mation, le fait de ne pas FRANÇAIS grams. A comprehensive, long- pezaron con dificultades de- mesurer cette consommation term approach is needed in bido a problemas de d'énergie et la réticence des developing strategies for institu- adquisiciones y conflictos entre los usagers à payer. Aucune des dispo- tional change and public sector objetivos a corto y largo plazo; esos sitions réglementaires ou institu- management reform. proyectos deberían diseñarse de ma- tionnelles nécessaires à l'exploitation · Legal and judicial reform is crit- nera de reducir al mínimo las de- commerciale n'était en place et il ical for improvements in the busi- moras (usar listas negativas en existait de graves problèmes envi- ness climate (company, security, lugar de tratar de identificar de an- ronnementaux. bankruptcy, and anti-monopoly temano las importaciones críticas) La politique initiale de la Banque en laws; respect for private property, y dejar a un lado las unidades de matière de prêts au secteur de l'éner- contractual rights), the financial ejecución de proyectos y los objeti- gie électrique consistait à subordon- sector (banking and central bank- vos de reforma a largo plazo. Casi ner le financement de la Banque à ing, collateral, failed bank resolu- dos tercios de los proyectos de ener- des réformes dans trois domaines : ex- tion), social protection (labor gía se centraron en objetivos a más ploitation du secteur sur une base laws), and governance in general. largo plazo, y los resultados satisfac- commerciale, exploitation des entre- The focus should be on imple- torios tendieron a ser el corolario de prises publiques sur un mode com- mentation as much as on the pas- un enfoque programático, con una mercial et réglementation dans des sage of laws. combinación de operaciones de conditions de pleine concurrence. · In the future, the Bank can be bet- ajuste e inversión, acompañadas de Dès 1996, la Banque adoptait une dé- ter prepared to identify and ad- una labor analítica. Esta fue también marche privilégiant le dégroupage dress rapidly growing poverty by una forma eficaz de incluir cuestiones (« unbundling ») et la privatisation giving high priority to the moni- que excedían el ámbito del financia- pour faire en sorte que ce secteur toring of poverty levels from the miento del sector energético, como fonctionne sur une base commerciale. very beginning of its involvement la eliminación de los subsidios a las Les projets de modernisation, de se- in a country. entidades del sector de la energía; cours d'urgence et d'importations de · Greater transparency can in- una mayor disciplina en cuanto a la produits essentiels, qui représentaient crease public accountability and medición, la facturación y la cobranza; plus d'un tiers des projets énergé- discourage corruption. The Bank la reforma de las políticas de fijación tiques, se sont heurtés à des difficul- should go out of its way to imple- de precios, y el cierre de las instala- tés en raison de problèmes de ment its own disclosure policies ciones antieconómicas de produc- passation des marchés et de conflits and disseminate its analytical work ción de energía. La participación de entre objectifs à court terme et à long and should encourage govern- las partes interesadas demostró ser terme ; de tels projets devraient être ments to report more regularly eficaz en algunos casos, como la pri- conçus de façon à minimiser les re- and fully to their parliaments and vatización de las minas de carbón de tards ( en utilisant des listes néga- to the public at large. The use of Rusia. En otros casos, los progresos tives plutôt qu'en cherchant à information and communica- fueron limitados. Los esfuerzos por identifier à l'avance les produits es- tions technology has tremendous incorporar las preocupaciones am- sentiels à importer) et renoncer aux potential to increase public ac- bientales fueron en general eficaces. unités d'exécution de projets et aux countability. En retrospectiva, es probable que objectifs de réforme à long terme. · Economic and sector work plays se haya puesto demasiado énfasis en Près des deux-tiers des projets éner- an important role through in- la privatización y la reestructuración, gétiques portaient sur des objectifs à creasing knowledge and training y muy poco en la reglamentación, el long terme, et les réalisations satisfai- x x x i E C O N O M I E S I N T R A N S I T I O N local researchers. Its quality in fortalecimiento del desem- santes résultaient plutôt d'une the transition countries has peño financiero y adminis- démarche programmatique, been high, but its impact on ~NOL trativo de las empresas de alliant opérations d'ajustement the country dialogue could A servicios públicos, y la lucha et d'investissement et travail have been greater if it had contra la corrupción. Como analytique. Cette démarche ENGLISH been more relevant and timely. ESP ha señalado la Oficina Regio- permettait également de trai- FRANÇAIS ·Aid coordination, which still nal de Europa y Asia Central, ter de façon efficace des ques- needs improvement in many los intentos de convertir en- tions qui dépassaient le cadre transition countries, can increase tidades estatales no comerciales en des prêts au secteur énergétique, no- the effectiveness of all assistance. empresas privadas comerciales de tamment les questions ayant trait à Recipient governments should lead servicios públicos en general fraca- l'élimination des subventions aux en- aid coordination, with donors help- saron, aunque en algunos casos tités du secteur énergétique ; au ren- ing them define clear development (como en Kazajstán y en algunos pa- forcement de la discipline en matière strategies, including monitorable íses de Europa central y oriental y de mesure de la consommation, de action plans for implementation. del Báltico) trajeron aparejadas me- facturation et de recouvrement des joras en el sector (la reducción de los sommes dues par les usagers ; à la ré- subsidios, por ejemplo), e incluso en forme des politiques de fixation des los casos en que el método no tuvo prix ; et à la fermeture des installa- pleno éxito, la calidad y el alcance tions de production énergétique non- de los servicios han mostrado una rentables. La participation des parties tendencia a mejorar. La incorpora- prenantes s'est révélée efficace dans ción a la UE es un factor de motiva- certains cas, notamment dans celui ción importante para algunos países, de la privatisation des mines de char- pero en muchos otros no era realista bon en Russie. Dans d'autres cas, les esperar que la reestructuración y la progrès sont restés modestes. Les ef- privatización permitieran superar los forts déployés pour intégrer des pré- obstáculos jurídicos, políticos, es- occupations d'ordre environnemental tructurales y de actitudes. Los obje- ont donné de bons résultats dans l'en- tivos primordiales de las empresas semble. del sector energético deberían ser Rétrospectivement, on a proba- el mejoramiento del desempeño co- blement accordé une trop grande mercial y la gestión de gobierno de importance à la privatisation et à la las empresas y del sector. El orden en restructuration, au détriment de la que deben introducirse las refor- réglementation, du renforcement mas, así como la factibilidad de la des résultats financiers et des résul- privatización inmediata, dependen tats de gestion des entreprises de de las circunstancias de cada país. services publics, et de la lutte contre El Banco debe formular directrices la corruption. Comme l'a fait ob- operacionales con respecto a qué server la Région Europe et Asie cen- secuencia de reformas y medidas trale, les tentatives de passer d'un funciona mejor en determinadas système caractérisé par des entre- situaciones nacionales. prises d'État ne fonctionnant pas sur un mode commercial, à un sys- Conclusiones y tème d'entreprises de services pu- recomendaciones blics exploitées selon les lois du intersectoriales marché n'ont généralement pas été Los equipos del Banco que comen- couronnées de succès, même si dans zaron a trabajar en países del grupo certains cas (Kazakhstan et certains x x x i i E X E C U T I V E S U M M A R Y de transición de la región de pays d'Europe centrale et Europa y Asia central, cuyo orientale ainsi que dans les ~NOL conocimiento anterior de pays baltes) cette évolution A esos países era limitado, con s'est traduite par des amé- frecuencia se vieron obliga- liorations sectorielles (déclin ESP dos a embarcarse en progra- des subventions, par FRANÇAIS mas de asistencia sin poder exemple). Toutefois, même darse el lujo de hacer un aná- lorsque cette démarche n'a lisis cuidadoso. En retrospectiva, las pas apporté tous les résultats atten- conclusiones y recomendaciones del dus, la couverture et la qualité des DEO basadas en ese tumultuoso pe- services s'est plutôt améliorée. Pour ríodo de cambios económicos, so- certains pays, l'entrée dans l'UE est ciales y políticos tienen por objeto une puissante motivation, mais dans contribuir a orientar muchos de los le cas de beaucoup d'autres il n'était preceptos de política y procedi- pas réaliste de penser que la re- mientos del Banco. Con esta idea en structuration et la privatisation per- mente, presentamos una serie de mettraient de surmonter les conclusiones pertinentes a varios sec- obstacles juridiques, politiques, tores y que permiten formular reco- structurels et de modifier les atti- mendaciones aplicables en un plazo tudes. Les entreprises relevant du más amplio no solamente a los paí- secteur énergétique devraient se ses en transición sino también a mu- fixer comme objectifs principaux chos otros: d'améliorer leurs résultats com- merciaux ainsi que la gouvernance · Cuando el Banco comienza a tra- des entreprises et du secteur. L'ordre bajar por primera vez en un país dans lequel doivent se faire les ré- ­­o después de un largo período formes dépend des conditions par- de inactividad, cuando se hace ne- ticulières de chaque pays et la cesario actualizar los conoci- faisabilité d'une privatisation im- mientos sobre ese país­­ es médiate doit également être déter- aconsejable mantener el monto minée au cas pas cas. La Banque de los préstamos dentro de lími- doit mettre au point un cadre opé- tes prudentes, hasta que se haya rationnel permettant de détermi- adquirido un mejor conocimiento ner quel est l'ordre de succession de la situación y se perciba una des réformes et des interventions le mayor certeza en cuanto a si los plus adapté aux situations parti- programas se sienten como pro- culières des pays. pios. · La experiencia en países como Po- Conclusions et lonia y Rusia (reestructuración del recommandations de portée sector del carbón) y Bulgaria (re- générale forma del sistema de pensiones) Les services de la Banque qui ont muestra que, por bien que esté commencé à travailler sur les pays en diseñada una reforma, los pro- transition du groupe Europe et Asie gresos que ésta logre depende- centrale sans avoir, au préalable, de rán en gran parte de que el connaissances particulières sur ces gobierno se identifique con ella y pays, ont souvent été amenés à en- del grado de consenso que éste treprendre des programmes d'aide x x x i i i E C O N O M I E S I N T R A N S I T I O N pueda movilizar en la socie- sans pouvoir se permettre le dad en general. Una sociedad luxe d'une analyse détaillée. ~NOL civil bien informada puede Avec le recul, les conclusions A convertirse en una impor- et les recommandations que tante fuerza impulsora del l'OED tire de cette période ESP cambio. Los programas des- agitée de changements éco- FRANÇAIS tinados a hacer tomar con- nomiques, sociaux et poli- ciencia a las partes tiques, ont pour but de interesadas y fomentar la parti- contribuer à orienter un grand cipación de éstas deberían apli- nombre des principes et procédures carse en forma más generalizada. de la Banque. En gardant cet élé- · Las estrategias de asistencia a los ment à l'esprit, nous présentons plu- países deberían promover el sen- sieurs conclusions recoupant divers tido de identificación del gobierno domaines d'intervention et condui- con las reformas y el consenso a sant à des recommandations appli- favor de éstas, mediante el forta- cables de façon très générale non lecimiento de la capacidad de los seulement aux pays en transition gobiernos y de la sociedad civil. mais également à bien d'autres pays : Estas estrategias deberían incluir un análisis de los procesos políti- · Lorsque la Banque entame pour cos, sociales y económicos sub- la première fois des activités dans yacentes que afectan el un pays -- ou lorsqu'elle y re- comportamiento de las partes in- prend ses activités après une teresadas. longue interruption et qu'une · Un marco institucional y regula- mise à jour des connaissances torio apropiado y un sector pú- dont elle dispose à propos de ce blico capaz y transparente son pays s'impose -- la plus grande elementos clave de un sector pri- prudence est de rigueur dans vado orientado al mercado que l'octroi des prêts aussi longtemps sea eficiente. El Banco debe hacer que l'on ne dispose pas de un análisis de la gestión de go- meilleures informations et que bierno y la administración del l'on n'arrive pas à déterminer sector público antes de otorgar avec plus de certitude dans préstamos por montos elevados, quelle mesure les autorités sont en particular cuando es probable prêtes à prendre en charge les que ciertos problemas evidentes programmes. afecten los programas de asisten- · D'après ce que nous avons pu cia. La elaboración de estrategias constater dans des pays comme para el cambio institucional y la re- la Pologne et la Russie (restruc- forma de la administración del turation de l'industrie charbon- sector público deben encararse nière) et en Bulgarie (réforme du con un criterio amplio y a largo régime des retraites), quel que plazo. soit le soin apporté à la concep- · La reforma legal y judicial es fun- tion d'une réforme, la réussite damental para mejorar el clima de celle-ci est largement tribu- comercial (leyes de sociedades, taire du sentiment d'adhésion valores, quiebras y antimonopóli- des pouvoirs publics et du degré cas; el respeto de la propiedad de consensus de l'ensemble de la x x x i v E X E C U T I V E S U M M A R Y privada, los derechos con- population. Lorsque la so- tractuales), el sector finan- ciété civile est bien informée, ~NOL ciero (la banca y el banco elle peut devenir un puissant A central, garantías, decisiones facteur de changement. Les relativas a bancos fallidos), los programmes ayant pour ESP sistemas de protección social objet de susciter une prise FRANÇAIS (leyes laborales) y la gestión de conscience de la part des de gobierno en general. De- parties prenantes et d'en- bería hacerse hincapié en el cum- courager leur participation de- plimiento de las leyes tanto como vraient être largement reproduits. en su aprobación. · Les stratégies d'aide-pays de- · En el futuro, el Banco puede estar vraient favoriser la prise en charge mejor preparado para detectar rá- des réformes par les autorités et pidamente un aumento de la po- la formation d'un consensus à ce breza y tomar medidas paliativas sujet, par le biais d'un renforce- si asigna alta prioridad a la vigi- ment des capacités des pouvoirs lancia de los niveles de pobreza publics et de la société civile et desde el comienzo de su actua- cela plus particulièrement dans ción en un país. les pays où les réformes n'avan- · Una mayor transparencia puede cent pas au rythme désiré. Elles mejorar la rendición de cuentas en devraient intégrer une analyse el sector público y desalentar la co- des processus politiques, sociaux rrupción. El Banco debería hacer et économiques sous-jacents todo lo posible por aplicar plena- ayant une incidence sur le com- mente sus propias políticas de portement des parties prenantes. libre acceso a la información y di- · L'existence d'un cadre institu- fundir su labor analítica, así como tionnel et réglementaire adapté et alentar a los gobiernos a presen- d'un secteur public compétent tar informes más completos y pe- et transparent sont des éléments- riódicos a sus parlamentos y al clés qui déterminent l'existence público en general. El uso de la tec- d'un secteur privé efficace fonc- nología de la información y las tionnant selon les mécanismes comunicaciones tiene un enorme du marché. Un travail analy- potencial para mejorar la rendi- tique sur la gouvernance et la ción de cuentas en el sector pú- gestion du secteur public doit blico. être effectué avant que la · La labor económica y sectorial de- Banque ne décide d'octroyer des sempeña un papel importante prêts importants, surtout lorsque como medio de aumentar los co- des problèmes évidents ont de nocimientos y capacitar a los in- fortes chances d'avoir une inci- vestigadores locales. Su calidad dence sur les programmes d'aide. en los países en transición ha sido La mise au point de stratégies vi- alta, pero su influencia en el diá- sant à introduire des change- logo nacional podría haber sido ments institutionnels et une mayor si hubiera sido más perti- réforme de la gestion du secteur nente y oportuna. public requiert l'adoption d'une · La coordinación de la ayuda, démarche exhaustive et à long que aún debe mejorar en muchos terme. x x x v E C O N O M I E S I N T R A N S I T I O N países en transición, puede · La réforme du système ju- aumentar la eficacia de toda la ridique et judiciaire est ~NOL asistencia. Los gobiernos re- d'une importance critique A ceptores deberían dirigir la pour le climat des affaires coordinación de la ayuda, con (droit des entreprises, droit ESP la colaboración de los do- des sûretés, législation rela- FRANÇAIS nantes en cuanto a definir es- tive aux faillites des entre- trategias claras de desarrollo, prises et à l'encontre des incluidos planes de acción para la monopoles ; respect de la pro- aplicación susceptibles de segui- priété privée, droits contractuels), miento. le secteur financier (opérations des établissements bancaires et de la banque centrale, nantisse- ment, faillites bancaires), la pro- tection sociale (droit du travail), et la gouvernance en général. L'accent doit être placé sur l'exé- cution de la législation autant que sur l'adoption des lois. · À l'avenir, la Banque sera plus à même d'identifier la montée ra- pide de la pauvreté et de s'y at- taquer si elle accorde davantage la priorité au suivi des niveaux de pauvreté dès le commencement de ses activités dans un pays. · Une plus grande transparence peut renforcer la responsabilisa- tion du secteur public et décou- rager la corruption. La Banque ne devrait ménager aucun effort pour mettre en oeuvre ses propres politiques de diffusion de l'information et faire connaître son travail d'analyse, et elle de- vrait encourager les autorités à faire rapport de façon plus régu- lière et plus complète à leur par- lement et au grand public. L'utilisation des technologies de l'information et des communi- cations peut jouer un rôle non négligeable dans la responsabili- sation des pouvoirs publics. · Le travail économique et secto- riel joue un rôle important puis- qu'il permet d'accroître le niveau de connaissances et de former x x x v i E X E C U T I V E S U M M A R Y les chercheurs d'un pays. Dans la mesure où il se rap- porte aux pays en transition, ce travail est de haute qualité, mais son impact sur le dia- logue avec les pays aurait pu FRANÇAIS être plus important s'il avait été plus pertinent et qu'il était venu plus à son heure. · La coordination de l'aide, qui doit encore être améliorée dans bien des pays en transition, peut contribuer à renforcer l'efficacité de tout le dispositif d'aide. Les gouvernements bénéficiaires de- vraient prendre l'initiative d'as- surer la coordination de l'aide, les bailleurs de fonds se char- geant de les aider à définir des stratégies de développement claires et notamment des plans d'action dont l'exécution puisse faire l'objet d'un suivi. x x x v i i ABBREVIATIONS AND ACRONYMS AAA Analytical and advisory services APL Adjustable Program Loans BMS Business Management System (IFC) CAE Country Assistance Evaluation CAS Country Assistance Strategy CDF Comprehensive Development Framework CEB Central and Eastern European and Baltic countries CEE Central and Eastern Europe CIS Commonwealth of Independent States (all countries of the former Soviet Union except the Baltic states) CSE Central and South East Europe DAC Development Assistance Committee of the OECD EBRD European Bank for Reconstruction and Development ECA Europe and Central Asia Region EFSAL Enterprise and Financial Sector Adjustment Loan ESMAP Joint UNDP/World Bank Energy Sector Management Assistance Program ESW Economic and sector work EU European Union FDI Foreign direct investment FIAS Foreign Investment Advisory Service FIL Financial Intermediary Loan FSU Former Soviet Union GDP Gross domestic product GNI Gross national income IBRD International Bank for Reconstruction and Development IDA International Development Association IFC International Finance Corporation IFI International Financial Institution IMF International Monetary Fund LIL Learning and Innovation Loan MIGA Multilateral Investment Guarantee Agency OECD Organisation for Economic Co-operation and Development PPAR Project Performance Assessment Report PSAPT Private Sector Advisory Services in Policy Transactions PSD Private Sector Development PSM Public Sector Management QAG Quality Assurance Group SAL Structural Adjustment Loan SDC Swiss Agency for Development and Cooperation SECAL Sectoral Adjustment Loan SEE Southeastern Europe SOE State-owned enterprise SPRITE Social Policy Reform in Transition Economies TA Technical assistance TATF Technical Assistance Trust Fund WBI World Bank Institute WDI World Development Indicators (World Bank) WDR World Development Report x x x i x 1 Strategy, Implementation, and Outcome S ince 1989 the transition countries of Europe and Central Asia (ECA) have undertaken massive reforms of their economic systems, transforming in- stitutions, processes, attitudes, and fundamental concepts of individual and organizational behavior.1 The transition is the subject of a vast literature, and this report does not attempt to summarize what happened. Rather, it has a narrower focus: to use the benefit of 20/20 hindsight to evaluate the World Bank's assistance to 26 countries in the ECA Region2 in the hopes that the les- sons that emerge will prove useful in countries undergoing similar, if less ex- treme, transitions in the future. This chapter reviews World Bank assistance to age efficient resource allocation, and improve the transition economies and some of the evalu- service delivery ative evidence on its outcome.3 Five themes were · Building the basic institutions of a market econ- chosen for fuller review, taking into account their omy and an enabling environment for private relative importance in the Bank's lending pro- sector initiatives gram, their relevance to the main goals of transi- · Cushioning the social cost of the transition, es- tion, and their potential for yielding useful lessons. pecially for the poor and vulnerable. Bank Strategy4 These objectives were relevant, and to some The Bank's broad strategic objective in the tran- extent they were included in many of the Coun- sition countries was to facilitate the transition try Assistance Strategies (CASs) produced since from a command to a market-based economy 1992. (The most common objectives--stabiliza- through: tion and growth; private sector development, or PSD; and social safety nets--each appeared in · Achieving macroeconomic stability and sound roughly half of all CASs.) However, the effec- economic management tiveness of the early strategy was limited for two · Reorienting and strengthening public sector in- reasons. First, the initial emphasis on rapid pri- stitutions to promote the rule of law, encour- vatization to promote PSD did not always achieve 1 E C O N O M I E S I N T R A N S I T I O N its intended effect because of the lack of a sup- ternational Monetary Fund (IMF) and other insti- porting legal and institutional framework. Sec- tutions, the Bank initiated intensive consultations ond, the Bank underestimated the importance with the country authorities, most of which had no of poverty alleviation and good governance. The experience in dealing with these institutions and Region acknowledges that "Poverty was not a cen- were undergoing their own internal reorganizations tral issue . . . a decade ago when [ECA] countries and priority setting. In FY89, the World Bank made started embarking on the transition from plan to three loans to transition countries. Over the next market. The general expectation was that poverty four years, it made 57 loans, mainly to the Central was limited, and . . . very shallow. The pre- and Eastern European (CEE) countries (figure 1.1). sumption was that growth would come quickly During FY94­98, lending averaged 57 projects [and that] it would reduce the incidence of yearly, and it peaked at 71 projects in FY99, with poverty rapidly. Poverty was believed to be largely the greatest number going to the Commonwealth transitory in nature, and best addressed through of Independent States (CIS) of the former Soviet the provision of adequate safety nets" (World Union (FSU). Since FY00 lending has averaged 44 Bank 2000c, p. v).5 Over time the Bank inter- projects yearly. Lending to some CEE countries nalized the emerging lessons and shifted its em- has become relatively less important with gradua- phasis. The approach to privatization and PSD tion and accession to the European Union (EU). has evolved considerably. While poverty allevia- Since FY89, the Bank has committed over US$42 tion was not an explicit CAS objective until 1997, billion for about 600 projects in the 26 countries it has become second only to PSD in frequency under review. among objectives in the last five years. Similarly, Investment projects comprised four-fifths of good governance began to appear as a main the total number of projects and over half of CAS objective in 1997. the commitments, although the shares varied sig- nificantly by country grouping (figure 1.2). Implementation Slightly under half of commitments to Russia In assessing the effectiveness of Bank assistance, and 53 percent of lending to the other CIS coun- it must be recognized that the collapse of the So- tries were for adjustment, while in the CEE and viet Union and the ensuing transition took place Baltic (CEB) countries, adjustment lending con- with little warning and on an unprecedented tributed 41 percent of the total. scale. The World Bank, like other assistance The greatest single thematic category for lend- agencies, faced an enormous challenge at the be- ing was economic policy, which received one- ginning of the 1990s: to mobilize the resources quarter of all commitments and ranked second and knowledge necessary to offer credible sup- only to the rural sector in numbers of projects port to the new member countries of the ECA (figure 1.3). Seventy percent of all projects were Region. Political imperatives put the Bank under in these two areas plus transportation, social pressure to move quickly and lend large protection, public sector management (PSM), amounts, and staff were frequently confronted electric power and energy, and finance. As dis- with the need to act, often under difficult cir- cussed below, many of the projects categorized cumstances, in the absence of relevant experi- under "economic policy" include PSM, PSD, fi- ence, learning along the way. Country knowledge nancial sector, and energy components. in the Bank was limited to Hungary, Poland, and Technical assistance (TA), both formal and Yugoslavia, which were already members.6 informal, played an important role in Bank as- The Bank geared up sistance. For example, the Bank has had a sub- The collapse of the Soviet rapidly. A new department stantial impact on pension reform policy where Union and the ensuing was organized, financial it invested administrative or grant resources; transition took place with resources mobilized, and loans have rarely been a key part of this process, technical and managerial except to provide financing for the TA. Espe- little warning and on an staff recruited. In close cially in the smaller countries, focused investment unprecedented scale. collaborationwiththeIn- projects with substantial TA often brought stake- 2 S T R AT E G Y, I M P L E M E N TAT I O N , A N D O U T C O M E F i g u r e 1 . 1 L e n d i n g b y S u b r e g i o n , F Y 8 9 ­ 0 3 Number of loans 40 35 30 25 20 15 10 5 0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 CEE Baltic States Russia Other CIS Source: Annex table A.1. (Annex table A.2 shows which countries are included in each group.) F i g u r e 1 . 2 C o m m i t m e n t s b y I n s t r u m e n t , F Y 8 9 ­ 0 3 $ Million 25,000 20,000 15,000 10,000 5,000 0 Adjustment Investment Other CIS Russian Federation Baltic States CEE Source: Annex table A.2. holders together for the first time and played an 35 percent of total administrative resources were important role in preparing for later policy-based devoted to analytical and advisory services (AAA). lending.7 Moreover, the simple exposure of local The proportion fell Technical assistance, both policymakers to staff from the Bank and other sharply, ranging from 11 formal and informal, donors played an educational role. to 20 percent during played an important role In the early years of the transition, while the FY95­01, and increased Bank was building up its assistance, as much as to 27 percent in FY02­03. in Bank assistance. 3 E C O N O M I E S I N T R A N S I T I O N C o m m i t m e n t s a n d P r o j e c t s b y S e c t o r , F i g u r e 1 . 3 F Y 8 9 ­ 0 3 Commitments by Sector Projects by Sector Transport Health, Social Transport Economic policy protection 10% nutrition and 9% population 11% 5% Economic 6% Energy and Rural sector policy Social mining 9% 26% protection 11% Public sector 9% governance Financial 6% sector Rural sector 6% Private sector 14% development Energy and 6% mining Other Other 17% Public sector 19% Financial governance 13% Private sector sector 9% development 8% 6% Source: Annex table A.3. Within the analytical work, some sectors or themes been by far the most important; EU countries pre- were covered more thoroughly than others. For dominate, though less so in the CIS than in the example, agriculture received relatively high al- CEB. Multilaterals accounted for only about 16 locations (Heath 2003, p. 7). In contrast, some percent of total net flows in the CIS (14 percent areas now recognized as critical--poverty analy- in Russia) and 9 percent in the CEB through sis, quality of governance, and public expenditure 2001. The Bank's share was 5 percent of the reviews (PERs)--came to the forefront only late total in the CEB and 11 percent in the CIS (fig- in the decade. Although living standards surveys ure 1.4). However, the Bank's role was far more were initiated quite early in a few countries, they significant in terms of analytical work and policy tended to focus on short-term labor market and advice. In collaboration with the IMF, the EU, and social protection issues; the first poverty assess- other donors, the Bank moved quickly to sup- ments were carried out only in the mid-to-late port macroeconomic stabilization and structural 1990s.8 A number of Country Assistance Evalua- reform.11 In Southeastern Europe, the Bank later tions (CAEs) identify the lack of analytical work mobilized--in conjunction with the EU, the and monitoring indicators as an impediment to United Nations, and others--to provide post- developing anti-poverty programs.9 Although bil- conflict support. The presence of multiple lions of dollars were being infused into budgets donors in multiple sectors makes coordination through quick-disbursing loans (US$5.4 billion a major task in its own right, and the Bank has to Russia alone), almost no PERs were under- sometimes taken the lead in this area. In other taken in the first half of the decade, and many countries, particularly those that have become countries had no public sector analytical work at EU members, the Bank has much less influence all until the late 1990s or beyond. Lack of inter- over the development agenda. est by borrowers contributed to this slow pace.10 The Bank is one of many actors in the transi- Outcome12 Many countries had no tion countries. In finan- As was foreseen, gross domestic product (GDP) public sector analytical cial flows, the Bank's role fell sharply at the beginning of the transition. In was relatively small. Bi- the Central and Eastern European countries, the work at all until the late lateral flows (including "transition recession" was relatively shallow and 1990s or beyond. the private sector) have wasoverfairlyquickly;GDPfellonaveragebyless 4 S T R AT E G Y, I M P L E M E N TAT I O N , A N D O U T C O M E F i g u r e 1 . 4 C a p i t a l F l o w s b y S o u r c e , 1 9 8 9 ­ 0 1 CEB Russia Other CIS 3%1% 3% 0% 4% 2% 5% 11% 11% 10% 18% 35% 48% 81% 68% EC+EU members Other bilaterals IBRD+IDA+IFC EBRD Other multilaterals Source: Annex table A.4. than 15 percent, and per capita incomes recov- cent of the population of The decline in the CIS was ered in many countries before the end of the ECA had to survive on far deeper and more decade. The decline in the CIS, however, was far less than US$2.15 per deeper and more prolonged than anyone ex- day; by 1998, an esti- prolonged than anyone pected: GDP fell on average by over 40 percent mated 20 percent lived expected: GDP fell on (ranging from 18 to 76 percent), and none of below that level. The in- average by over 40 these countries has yet regained its pre-transition cidence of poverty is per capita GDP, although growth has picked up much greater in the CIS percent. strongly in recent years (figure 1.5 and annex than in the CEB (annex table A.5).13 Since 2000, annual GDP growth has table A.6 and figure 2.4). Inequality, which ranked averaged over 3.5 percent in the CEB countries, among the lowest in the world at the beginning and close to 7 percent in the CIS.14 of transition, increased as well, more so in the A side-effect of the prolonged transition re- countries with less growth. In some countries-- cession has been the build-up of significant debt Armenia, Bulgaria, and Russia--the Gini coeffi- problems in some countries that started with very cient has nearly doubled (annex table A.6).15 little debt. Official lending levels were based on Infant mortality has dropped in all but two coun- the expectation that the transition recession tries, but life expectancy has fallen in most CIS would be shallow and of short duration. In a countries (figure 1.7).16 number of CIS countries, where the recession The Region made substantial progress in cre- was far deeper and longer than foreseen, and ating market economies: eight countries of the problems of governance more serious than an- CEB joined the EU this year, and two others are ex- ticipated, this led to significant levels of indebt- pected to join in the next several years. The Euro- edness, with effects that are likely to be pean Bank for Reconstruction and Development long-lasting (figure 1.6). (EBRD) maintains a set of Poverty increased far Poverty increased far beyond expectations: at transition indicators show- the beginning of the decade, fewer than 4 per- ing progress by country beyond expectations. 5 E C O N O M I E S I N T R A N S I T I O N R e a l G D P C h a n g e s , b y G r o u p o f C o u n t r i e s , F i g u r e 1 . 5 1 9 9 0 ­ 0 2 ( 1 9 9 0 = 1 0 0 ) 140 120 100 80 60 40 20 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Central and Eastern Europe Baltic States Russia CIS Source: World Bank data. P r e s e n t V a l u e o f D e b t a s P e r c e n t a g e o f F i g u r e 1 . 6 G N I , C I S , 2 0 0 1 Percentage 100 90 80 70 60 50 40 30 20 10 0 Armenia Azerbaijan Belarus Georgia Kazakhstan Kyrgyz Moldova Russian Tajikistan Ukraine Uzbekistan Republic Federation Source: World Bank, World Development Indicators. in a number of reform areas (annex table A.7). 2717) had already achieved a 3 (substantial progress) Scores range from 1, representing little progress, or higher in price liberalization, and 15 had achieved to 4+, which represents standards and perform- a 3 or more in trade and foreign exchange liberal- ance typical of advanced ization (figure 1.8). By 2003, almost all of the re- With a few exceptions, industrialcountries.With mainingcountriesshowedsubstantialprogressin policy reform has a few exceptions, policy both these areas.18 This evaluation does not ex- reform has progressed amine these early reforms, or the loans that sup- progressed steadily since steadily since 1989. By ported them, except to the extent that they 1989. 1994,20countries(outof includedthethematicareascoveredinChapter2. 6 S T R AT E G Y, I M P L E M E N TAT I O N , A N D O U T C O M E C h a n g e i n L i f e E x p e c t a n c y a t B i r t h , F i g u r e 1 . 7 1 9 9 0 ­ 0 1 Number of years 4 CEE Other CIS 3 2 Baltics Republic 1 jikistan Russia Moldova TurkmenistanUzbekistan Ukraine Ta Kyrgyz Belarus KazakhstanAzerbaijan 0 a ­1 garia Poland Latvia Republic Slovenia Hungary Republic Albania CroatiaBul Estonia Romania ArmeniaGeorgia ­2 Lithuania Herzegovina Macedoni Czech ­3 Slovak and FYR ­4 Bosnia ­5 ­6 ­7 Source: Annex table A.6. In 1994 only one country had privatized more ographical orientation of By 2003, all but 2 than 50 percent of large state-owned enterprise trade, the extent of initial countries had completed and farm assets, and 7 (mostly CEB) had priva- macroeconomic imbal- or were on the verge of tized at least 25 percent; 10 (9 of them CEB) had ances, and the legacy of completed small-scale privatization, and another central planning. They completing small-scale 5 had implemented a nearly comprehensive pro- found that while initial privatization. gram. By 2003, 20 had privatized at least 25 per- conditions were impor- cent of large enterprises, and all but 2 had tant, they were not solely responsible for the pat- completed or were on the verge of completing tern of reform. For example, the Baltic countries small-scale privatization. Nine of the countries (8 have achieved substantially greater progress than of them CEB) had a private sector share of GDP the western CIS countries, despite similar start- of 50 percent or more in 1994; by 2002, 22 coun- ing points, and Poland is one of the most ad- tries derived at least half of their GDP from the vanced countries, although it started in a position private sector, and 11 of them (9 CEB), 70 per- very close to Romania. Other pairs of countries cent or more. The areas with the least progress that started out with similar conditions but ex- were financial sector reform, corporate gover- perienced widely different rates of reform include nance/enterprise restructuring, and competi- Croatia and Bulgaria, and the Kyrgyz Republic tion policy, where only 12, 8, and 5 countries and Uzbekistan. De Melo and others (2001) also respectively (all but one CEB) had achieved a concluded that while initial conditions (levels of score of 3 or higher by 2003. development and resources, macroeconomic dis- Differences in initial conditions may explain tortions, trade interdependence, location, years some of the variations in the extent of reform under central planning, and so on) helped explain among countries, but the magnitude of their in- the rate of economic liberalization and growth, fluence is not clear. The EBRD (1999, pp. 27­28) economic liberalization was the most important analyzed the impact of initial conditions, using fac- factor determining differences in growth. Politi- tors such as the degree of industrialization, the ge- cal reform was, in turn, the most important de- 7 E C O N O M I E S I N T R A N S I T I O N N u m b e r o f C o u n t r i e s A c h i e v i n g F i g u r e 1 . 8 S u b s t a n t i a l P r o g r e s s ( R a t i n g 3 a n d A b o v e ) , 1 9 9 4 ­ 0 3 Number of countries 30 25 20 15 10 5 0 Small-scale Price Trade and Large- scale Banking Governance Competition privatization liberalization foreign privatization reform and and enterprise policy exchange interest rate restructuring system liberalization 1994 2003 Source: Annex table A.7. terminant of the speed and comprehensiveness programs in Albania, Azerbaijan, and Ukraine, as of economic liberalization. Falcetti, Raiser, and well as that of the earlier periods in Bulgaria and Sanfey (2002) found that initial conditions dom- Russia, unsatisfactory (annex table A.8).19 This inated the impact of reforms on growth, and that distribution of outcome ratings is lower than that the positive impact of reforms was less robust for OED's other CAEs, but the two groups are not than previously thought. They concluded that al- necessarily comparable or representative.20 In- though the final verdict on the importance of stitutional development impact was rated high or economic liberalization and privatization to growth substantial in only three transition countries (mod- in the transition was not in, early reforms alone est in the others), and sustainability was rated were insufficient to gen- likely in five cases, and uncertain in four. The areas most frequently eratesustainablegrowth. The areas most frequently identified in CAEs identified as warranting OED has produced as warranting greater attention have been PSD, Country Assistance Eval- institutions, and public governance and ac- greater attention have uations (CAEs) for nine countability, as well as public awareness and par- been PSD, institutions, transition countries. Six ticipation, and capacity building for monitoring and public governance rate the outcome of the and evaluation. Box 1.1 discusses the extent to and accountability, as country program satis- which lessons from the transition CAEs have factory, at least for the been reflected in subsequent CASs for the same well as public awareness most recent time period countries. In some cases, such as the impor- and participation, and examined (Bulgaria, Kaza- tance of participatory CAS preparation and the capacity building for khstan, Kyrgyz Republic, need for greater attention to governance and Lithuania, Poland, and legal reform, the increased focus in the CASs monitoring and Russia). CAEs rated the probably reflects trends in the Bank as much as evaluation. outcome of the country it does CAE recommendations.21 8 S T R AT E G Y, I M P L E M E N TAT I O N , A N D O U T C O M E B o x 1 . 1 C A E L e s s o n s a n d t h e C A S R e c o r d CAEs call for building ownership of the lending program through CAEs have pressed for greater realism in discussing risk, higher relevance, sharper prioritization, and greater participa- along with improved contingency planning for risky countries. tion in CAS preparation. Most recent CASs have been prepared Most CASs have a good discussion of risk to the Bank, but risk with adequate consultations, and they focus on efficiency in dis- mitigation strategy is defined mainly in terms of lending volumes. cussing portfolio lessons; they generally pay less attention to rel- Many indicators proposed in CASs are couched in qualitative evance. terms and are not monitorable, although the use of monitorable CAEs for the transition countries emphasize the need for indictors is growing. core economic and sector work (ESW) (including Poverty As- As recommended by CAEs, CASs now give substantial at- sessments and Public Expenditure Reviews) as a prerequisite tention to governance, and, to a lesser extent, to legal reform. for a sound program in any country. The Bank should use the ESW While CASs acknowledge that enforcement of laws and regu- to build local capacity, and disseminate it in the country. Recent lations is weak and the judiciary ineffective, the strategy to CASs emphasize core ESW products; they do not discuss dis- deal with these issues is not clear, although in the case of in- semination strategy, nor how these products will be used to help frastructure, CASs do emphasize the regulatory framework. At- authorities formulate policies and programs. Some large proj- tention to financial sector issues is generally satisfactory, with ects still precede relevant ESW. the exception of improving financial accountability. There is lit- CASs do not discuss how to encourage increased government tle discussion of corporate governance issues and remedies. management of aid coordination or better monitoring and eval- Regarding other issues raised in the CAEs, CASs have virtu- uation. While they often cite the principle of comparative ad- ally no discussion of which projects or programs will be used vantage, they rarely use it as an operational guide. Good to mainstream gender issues and objectives, and rarely dis- discussions of comparative advantage can be found for Hungary, cuss decentralization. However, agriculture is receiving greater Kazakhstan, the Kyrgyz Republic, and Slovenia. Few CASs ad- attention in CASs, which are now addressing the issue of how equately explore the role of the IMF, nor do they provide the to respond to the vested interests that dominate the sector in a specifics of how the International Finance Corporation (IFC), number of countries. the Multilateral Investment Guarantee Agency (MIGA), and the Bank will work together. Source: Annex B. Project outcomes in the transition countries Bank average by commitments and about the are rated lower than those for the Bank as a same by numbers of projects (annex table A.9). whole by amount of net commitments (74 per- Across the Region, the project ratings are cent satisfactory, compared with 78 percent above the Bank average for all of the CEB coun- Bankwide), but higher by numbers of projects tries (annex table A.9). There are large varia- (82 percent satisfactory, compared with 74 per- tions among the CIS countries, where outcome cent Bankwide, figure 1.9).22 Institutional de- ratings vary from close to 100 percent satisfac- velopment impact and sustainability rate higher tory by commitments (Kazakhstan, Kyrgyz Re- by both measures in transition countries than public, Ukraine) to 5 percent or less satisfactory Bankwide. The bulk of the transition countries (Belarus, Turkmenistan).23 In Russia, only 40 fall into the middle-income category. When bro- percent of commitments have been rated satis- ken down separately for low- and middle-in- factory; high ratings for sustainability reflect the come countries, the former retain their rankings irreversibility of most of the policy and institu- relative to the Bankwide numbers with respect tional changes.24 The percentage of active proj- to outcome--better by number of projects and ects rated at risk, by numbers and by worse by commitments--but their performance commitments, is about the same as the Bank is relatively lower for sustainability and institu- average, but much higher in the CIS than in the tional development impact. Outcome ratings CEB (annex table A.10). Ratings by sector are for middle-income countries remain below the shown in annex tables A.11 and A.12. Although 9 E C O N O M I E S I N T R A N S I T I O N P r o j e c t R a t i n g s b y C o u n t r y G r o u p a n d F i g u r e 1 . 9 B a n k w i d e , A p p r o v e d F Y 8 9 ­ 0 3 Outcome (% satisfactory) 100 90 80 70 60 50 40 30 20 10 0 Bankwide ECA transition CEE Baltics Russia Other CIS Percent of commitments Percent of projects Source: Annex table A.9. the transition countries have higher rates of sat- positive about the role of ESW; some point out that isfactory outcomes than the Bank average in knowledge, including ESW and TA, was the Bank's many sectors, in three of the sectors with the most valuable contribution, and others would greatest amount of lending--economic policy, have liked more of it (box 1.2). rural, and transportation, representing 44 percent CAEs, however, have questioned the ade- of commitments--they are substantially lower.25 quacy of ESW. Eight CAEs found the quality of Economic and sector work (ESW), to the ex- ESW to be satisfactory, but found its relevance or tent that it has been done, receives high marks, timeliness unsatisfactory in three countries, and particularly for quality, both inside the Bank and its impact on the country dialogue unsatisfactory Economic and sector among clients. The in five. The Russia CAE (OED 2002c, p. ix) con- Bank's Quality Assurance cluded that "An assistance strategy oriented work receives high marks, Group (QAG) has re- around analytical and advisory services . . . with particularly for quality, ported on the quality of limited financial support for Russia would have both inside the Bank and ESW since FY98. In all but been more appropriate than one involving large one of those years, tasks volumes of adjustment lending,"and a project as- among clients. in ECA countries scored sessment for a series of adjustment and TA loans above the Bank average in percentage of reports to Georgia stated that more ESW (particularly an rated at least satisfactory (annex table A.13).26 All earlier PER) would have helped in designing the of the tasks sampled in FY01 and FY02 were rated reform program. satisfactory. OED's knowledge of the impact of Bank administrative costs, both per dollar of PERs indicates that, in the cases where they were total commitments and per dollar of commit- carried out, their outcome and impact were higher ments with satisfactory outcome or nonrisky in ECA than in any other Region. PERs for Latvia status, have been nearly the same on average in (1994), Russia (1995), and the transition countries as in the Bank as a whole, CAEs, however, have Bosnia and Herzegovina but with large subregional variations. Costs per (1997, impact not evalu- dollar of commitments were about average for questioned the adequacy ated) were cited as best the CEE countries, more than double the aver- of ESW. practice. Borrowers are age for the Baltic states, about half the average 1 0 S T R AT E G Y, I M P L E M E N TAT I O N , A N D O U T C O M E B o r r o w e r s ' V i e w s o f E c o n o m i c B o x 1 . 2 a n d S e c t o r W o r k Hungary: "The Bank's economic and sector work was of high Poland: "The impact of the World Bank experts and the [ESW] quality both in terms of the incorporated knowledge and views was assessed as very considerable for the policy dialog in the from within the country and of practical recommendations....[Its] country and for the capacity building of the government and efficacy ... can be seen in its contribution to intellectual debates, other elites, especially in the early years ... when the decision particularly in the debates on pension reform and higher edu- makers in the country learned the new, market approach to the cation.... The Bank's high level [ESW] has been an indispensa- economy." ble part of its assistance." Kazakhstan: "ESW was, to a large extent, relevant and helpful to the country's policymakers. It laid the background and framed Source: Blaszczyk, Cukrowski, and Siwiñska 2002, p. 5; Báger the thinking for discussions with the World Bank." 2002, pp. 6, 11, 18; Jandosov 2002, p. 12. for Russia, and about 50 percent above average for the rest of the CIS. After adjusting for the av- erage size of projects, more transition countries had costs per dollar of commitments below what would be expected than above. 1 1 2 Thematic Findings C hapter 1 presented standard evaluative data on the effectiveness of Bank assistance to the transition economies, but this information alone does not lead to recommendations for improving the Bank's effec- tiveness. Accordingly, this chapter looks at a few key areas of Bank assistance with a view to identifying lessons. It summarizes the main findings of five back- cation was not a problem sector, a much more ground papers prepared for this study.1 The five sobering picture has emerged. The curricula, areas--PSD, PSM, financial sector, social pro- textbooks, and teaching practices do not support tection, and energy--were chosen because of acquisition of the skills necessary for market their importance to the Bank's lending program economies and open societies; inequities in (see figure 1.3) and to the critical issues of tran- learning opportunities are growing; the gross en- sition.2 A sixth lending category, economic pol- rollment rate in basic education has fallen in icy, includes a significant number of components many countries (annex table A.6); most countries and conditions in the five areas. However, the have significant inefficiencies; the sector is still evaluation does not include all areas where the dominated by government, inadequately coun- Bank was active. The Bank's experience with terbalanced by competition and participation; price and trade liberalization, where significant and severe limits on public budgets compound achievements were realized and sustained, is the problems, with energy and wage bills crowd- not reviewed; the latter is the subject of an on- ing out other inputs, and a severe infrastruc- going OED study. Two other important sectors-- ture crisis in the CIS. Systematic monitoring of agriculture and health--have been addressed the situation could have revealed these problems in previous OED studies (see boxes 2.1 and 2.2).3 sooner. The education sector, which has not been re- The five selected thematic areas are interre- viewed by OED, and which accounted for less lated. For example, PSD in the transition coun- than 3 percent of commitments through FY03, tries is as fundamentally about restructuring has recently been highlighted in a Regional strat- institutions that deal with fiscal expenditure, wel- egy paper (World Bank 2003). That paper found fare provision, regulation, monitoring, and ad- that although, at the start of the transition, both judication as it is about promoting the growth of the Bank and the countries thought that edu- the private sector. A poorly clarified division of 1 3 E C O N O M I E S I N T R A N S I T I O N R e f o r m i n g A g r i c u l t u r a l P o l i c y B o x 2 . 1 i n T r a n s i t i o n E c o n o m i e s The Bank has provided substantial support to the reform of agri- productivity growth. Despite the greater attention to rural poverty cultural policies, including high-quality analytic work. Rural in recent strategy statements from the ECA Region, there is no lending in the transition economies is second only to multi- evidence yet of improved project monitoring of living standard sector projects in the number of projects financed (figure 1.3), indicators. Nor is there much discussion of poverty in project and more than half of all Bank agriculture sector reviews in the documents. early 1990s were devoted to these countries. Rural projects as OED's study found no evidence that particular instruments of a whole have lower rates of satisfactorily rated outcomes than Bank assistance were more effective than others, emphasizing either the average for ECA or rural projects Bankwide, but re- the need to tackle policy reform with a battery of complemen- sults vary significantly across themes. Trade liberalization is tary instruments, including analytic work, technical assistance, largely complete, and considerable advances have been made adjustment lending, and investment lending. Experience suggests with land reform and in developing rural financial markets, but that institutional and land reform should have been addressed less has been accomplished in post-privatization follow-up and at the beginning of the transition. Some small pilot projects the reform of state institutions serving the sector. Land policy and achieved major results; for example, most state and collective rural finance, which have received more Bank resources than farms in Azerbaijan have been privatized, based on a pilot proj- have other areas, are also associated with the best project re- ect financed by the Bank. sults. There is evidence of a moderately positive relationship be- tween the level of agriculture policy reform and agriculture Source: Heath 2003. S u p p o r t i n g a H e a l t h y T r a n s i t i o n : B o x 2 . 2 E v i d e n c e f r o m S e l e c t e d C o u n t r i e s Health reform is a difficult, long-term process involving a wide from lending or nonlending support for building capacity and con- range of stakeholders, and it is further complicated by the ab- sensus for reform. Given regular turnover of governments and sence of a widely agreed model for the financing and structure ministers, engagement with a wide range of stakeholders, in- of health systems. The Bank's financial contribution is typically cluding Parliament and opposition parties, is essential. Pro- small relative to total health financing in a country, so its influ- jects were also more likely to be successful when carried out ence depends on catalyzing wider reforms. The outcomes of re- in partnership with other donors, nongovernmental organizations, forms have varied considerably: some countries achieved or research institutes. The impact of studies and analyses de- improvements in system performance and outcomes (Estonia); pended on the extent of local involvement and dissemination (Al- others face continued deterioration in health services and stag- bania, Hungary, Romania) and on the government's absorptive nation in health indicators (Romania). capacity for technical analysis (Albania, Romania). The Bank can The Bank's initial health projects in the Region underesti- further enhance its contribution to sector reform through im- mated the political and institutional difficulties of reforms, and proved monitoring and evaluation at the project and sector lev- were thus over-optimistic regarding the pace and prospects for els and through continuing to experiment with new lending reform. There is remarkably little evidence on the impact of re- instruments, including Adjustable Program Loans and Learning forms, reflecting the lack of priority given to monitoring and and Innovation Loans. evaluation. The Bank's most successful projects, and its most sig- nificant contributions to the sector reform process, resulted Source: Johnston 2002. 1 4 T H E M AT I C F I N D I N G S fiscal responsibilities between branches and lev- Private Sector Development4 els of government created an unstable business A major goal of the transition was to transform environment. The limited capacity of tax admin- state-dominated and controlled economies into istrations led to tax evasion and arrears, unevenly market-driven, private sector­oriented economies applied tax rules, and a gap between effective and through the privatization of state assets, the im- statutory rates, driving entrepreneurs into the in- position of market discipline on state-owned en- formal sector. The competitiveness of existing en- terprises (SOEs), and encouragement of new terprises was undercut by their energy inefficiency private enterprises.5 Both borrowing govern- (spurred by past state energy subsidies) and by ments and the Bank quickly identified PSD as a their social safety net responsibilities. The fi- central reform priority. Loans to Poland and Rus- nancial impact on the enterprises of collapsing sia in 1991­92 helped Private property has markets, economic pricing of energy, and con- shape a Bank strategy for tinuing social expenditures was cushioned by PSD assistance with en- become the dominant continued subsidies through the banking sys- terprise reform at its basis for productive tem and from the energy companies. The failure core. The central objec- transactions in most of of governments to develop sustainable, finan- tive was to establish a crit- cially sound welfare systems has made these gov- ical mass of profit- the transition economies. ernments loath to sever ties with enterprises, seeking corporations, no and has encouraged them to support loss-mak- longer dependent on state support for their sur- ing enterprises that provide significant non-wage vival, and a class of owners willing to invest in their benefits to employees. These issues and others enterprises and manage their restructuring. More will be taken up in the remainder of this section. recently, post-privatization restructuring and as- Chapter 3 will discuss some crosscutting lessons sistance programs have grown in importance. and recommendations. Other categories of Bank assistance that con- F i g u r e 2 . 1 P r i v a t e S e c t o r S h a r e o f G D P , 2 0 0 2 Percent 100 90 CEE Baltics 80 Russia Other CIS 70 60 50 40 30 20 10 0 Latvia Republic Hungary Republic AlbaniaPoland Bulgariaomania R Slovenia Croatia Estonia Lithuania ArmeniaGeorgiaGeorgia Ukraine Republic Belarus Macedonia Federation Kazakhstan Azerbaijan MoldovaUzbekistan Tajikistan Czech Turkmenistan Slovak FYR Kyrgyz Bosnia-Herzegovina Russian Source: Annex table A.7. 1 5 E C O N O M I E S I N T R A N S I T I O N B o x 2 . 3 I F C ' s S u p p o r t t o T r a n s i t i o n E c o n o m i e s IFC's country assistance strategies focused on privatization as- particularly high volumes in Russia (US$1.7 billion); Czech Re- sistance (including advisory work); pre- and post-privatization public and Kazakhstan (US$0.5 billion each); and Hungary, finance; development of financial markets; assistance to small Poland, and Romania (US$0.4 billion each). In line with strate- and medium-size enterprises (SMEs); and investments in infra- gic priorities, approvals were concentrated in finance (27 per- structure and export-oriented industries generating foreign ex- cent), infrastructure (17 percent), and oil and gas (10 percent). change. IFC broadly succeeded in following these strategies. IFC also mobilized US$2.2 billion in syndicated loans from com- Approval volumes were constrained mainly by external factors mercial banks. such as the absence of necessary reforms or interested sponsors, A comparison of 61 mature investment projects in transition the Russian crisis, and the EBRD's substantial market presence. countries with 317 evaluated projects in other countries shows IFC strategies emphasized non-investment operations as a that transition country projects had similar development out- way to leverage IFC's expertise for maximum impact, initially in come success rates and similar IFC work quality ratings, but the FSU countries (where viable investment opportunities were significantly lower investment outcome success rates, and thus limited by the dearth of suitable local companies having an ac- a significantly lower proportion of projects with both satisfac- ceptable sponsorship or ownership structure and by the macro- tory-or-better development and investment (win-win) outcomes. economic downturn), and later also in Central and Southern This is not a surprising result given the pioneering nature of IFC's Europe as IFC increased its selectivity in that region. This strat- operations in the Region--they were likely to produce sub- egy led to unprecedented volumes of technical assistance (TA), stantial development impacts, but exposed IFC to a greater de- totaling US$170 million and including US$55 million in trust gree of investment risk. Outcomes in Central and South East fund (TATF) assignments and US$12 million in PSAPT assign- Europe (CSE) and the Baltics were somewhat better than those ments, or one-third of TATF and PSAPT approvals worldwide, in in the FSU. Projects in strategically targeted sectors and areas FY90­03. The Foreign Investment Advisory Service (FIAS) per- yielded mixed results: formed 104 diagnostic reviews and other assignments, one-fifth of its global work. · Privatization-related projectshad lower development Within its investment operations, during FY90­03 IFC ap- and investment outcome success rates than other projects, proved a net US$5.9 billion, or 14 percent of its worldwide net reflecting problems related to the sustained "old-style" man- approvals for the period, in 432 transition country projects, with agement of privatized companies. tained PSD components include financial sector the CEB than in the CIS countries. In the more ad- strengthening, regulatory and judicial reform, vanced reformers, firms have made significant and compensatory programs for vulnerable progress in cutting ties to the state, resolving fi- groups (all discussed later in this report). The con- nancial difficulties, attracting investment, devel- tributions of IFC and of MIGA are summarized in oping new products, and finding new export boxes 2.3 and 2.4 and annex tables A.14 and A.15. markets. The entry of large numbers of new firms IFC provided substantial amounts of technical as- is responsible for much of the job creation in these sistance in addition to its investments. countries. By contrast, the countries lagging behind Private property has become the dominant basis have yet to establish favorable conditions for firm- for productive transactions in most of the transi- level reforms. Initial reforms have not created the tion economies (figure foundations for renewed growth, and significant The countries lagging 2.1), but privatization parts of the enterprise sector in several countries behind have yet to alone could not create a remaininalow-investment,low-restructuringtrap. establish favorable receptive investment cli- Bank lending for PSD has had a number of ef- mate. Privatization led to fects. It appears to have had the greatest impact conditions for firm-level better outcomes in the on private sector growth in the CIS, where coun- reforms. advanced reformers of tries receiving high levels of PSD commitments 1 6 T H E M AT I C F I N D I N G S · Financial marketsprojectshadsimilardevelopmentout- The EBRD operates only in transition countries where it has come success rates, but significantly lower investment out- a broader mandate that includes public sector operations. Even come success rates, than those in the rest of IFC, reflecting excluding the public sector, EBRD's commitments have ex- the impact of the Russian financial crisis and the slower-than- ceeded IFC's nearly fivefold in CEE countries, nearly fourfold in expected pace of banking system development in most coun- the FSU, and threefold in the Baltics, and its non-investment sup- tries. port has exceeded IFC's fivefold. EBRD's appetite for investing · SMEprojects,whichIFCsupportedmainlythroughfinancial significant amounts sometimes precluded IFC from attractive in- intermediaries, had higher development outcome success vestment opportunities, but, overall, its presence alleviated the rates than similar projects elsewhere. Projects in CSE coun- pressure on IFC to commit larger volumes and enabled IFC to be tries, where entrepreneurial culture was more developed, out- more selective, albeit within a much-reduced pipeline of op- performed non-SME CSE projects on both development and portunities. Because the EBRD has played a major role in the Re- investment outcome, while those in the FSU out-performed gion's transition for the benefit of PSD in general, it is non-SME FSU projects on development outcome, but had indeterminate whether its presence had a net positive or neg- similar investment outcome success rates. ative impact on IFC's investment and development results. Among the lessons from IFC's experience in transition IFC's transition country investment portfolio has performed economies are the need to (1) tailor the mix of investment and very poorly, making a significantly negative net contribution to non-investment instruments to country circumstances and IFC's IFC's income for the FY90­03 period. learning curve; (2) analyze not only the client's nominal share- While comprehensive evaluation data are not available, TA holder structure, but also its underlying ownership; and (3) be was delivered in a satisfactory manner and largely yielded pos- prepared to intervene with the government to ease regulatory itive impacts. On both an ex-ante and ex-post basis, the Oper- barriers and protect the emerging private sector from unfair ations Evaluation Group (OEG) concludes that the TA-intensive practices. strategy was appropriate, particularly for FSU countries, as an efficacious and efficient way of contributing unique addition- ality with pioneering reach, achieving broad development out- comes while minimizing investment losses. Source: Operations Evaluation Group, IFC. B o x 2 . 4 M I G A O p e r a t i o n s i n T r a n s i t i o n E c o n o m i e s During FY90­02, MIGA issued guarantees supporting 88 projects MIGA's guarantee program in Russia prudently and selectively in 20 countries, for a maximum aggregate liability of over US$2 met demands from private investors for political risk insurance billion (annex table A.15). These guarantees facilitated more than and has suffered no losses. Similarly, in Bulgaria, MIGA did not US$5 billion in foreign direct investment (FDI). Four countries ac- suffer any claim losses during the 1996­97 economic crisis. counted for two-thirds of the FDI: Russia alone received 27 per- However, MIGA did not realize its potential in Bulgaria and cent; Bulgaria, 19 percent; and the Czech Republic and Poland, Kazakhstan. Bank staff, government officials, and the investment 10 percent each. Close to half of the guarantees were for finan- community are not always familiar with MIGA guarantee and cial services, and another quarter for manufacturing, 11 percent technical services, and MIGA could do more within the coun- for infrastructure, and 9 percent for mining. MIGA also provides tries to promote its activities and increase its cooperation with information for potential investors through its Investment Pro- other development institutions, including IFC. motion Network Web site (IPAnet) and other country-specific sites, such as PrivatizationLink Russia, launched in October 2000. Source: Operations Evaluation Unit, MIGA. 1 7 E C O N O M I E S I N T R A N S I T I O N quintupled the size of their private sectors rel- comes. Rather, it presents some of the lessons ative to GDP during 1992­00, while countries re- that can be gained from looking back at the ex- ceiving low levels of assistance only tripled the perience. relative size of their private sectors.6 In the CEE Critics have argued that the Bank (along with countries, the Bank had less apparent impact: the other donors) gave inadequate attention to in- relative size of the private sector doubled re- stitutional deficiencies in the rush to promote the gardless of the level of PSD assistance. A possi- divestiture of medium-size and large SOEs-- ble explanation is that foreign direct investment particularly through sale mechanisms such as was relatively more important in these coun- vouchers that did not ensure adequately con- tries (see figure 1.4). While revenue generation centrated ownership--and that the Bank de- was not a central objective of privatization, the voted insufficient attention to regulatory regimes sale of large SOEs did generate significant pro- to strengthen post-privatization ownership struc- ceeds, as high as 20­30 percent of GDP (in Geor- tures, corporate governance, and enterprise per- gia, Hungary, Kazakhstan). More important, PSD formance.8 Reviews of the literature and of assistance appears to have had a substantial pos- internal Bank documents show that reformers itive impact on enterprise reform, although the and their advisors recognized the need to reform causality could run the other way, with credible regulatory, anti-monopoly, commercial, capital signals from governments regarding reform market, and bankruptcy regimes, but that these prompting greater amounts of lending.7 were often regarded as "second-generation" re- The most successful projects for SOE reform form issues, to be pursued once there was a and restructuring tended to be either the first critical mass of privatized firms. Bank assistance major loans to countries, with borrowers who programs initially reflected the view that priva- were highly committed to reform (Hungary and tization must take place quickly, taking advantage Kazakhstan), or loans following major TA or ad- of limited reform "windows," to prevent the pos- justment efforts that laid the groundwork (Ar- sibility of reversals, including the return of the menia, Latvia). The least successful projects communists, and that new private owners would generally suffered from powerful domestic op- restructure the enterprises, provide adequate position, usually from trade unions (for example, corporate governance, and lobby for further lib- in Bulgaria, Poland, and Romania); internal op- eralizing reforms and supporting institutions.9 position within the governments; or overly am- An analysis of CAS objectives shows that in the bitious targets based in part on overestimation Baltics, Bosnia and Herzegovina, Kazakhstan, of borrower capacity and commitment. the Kyrgyz Republic, Moldova, Tajikistan, and Privatization of small enterprises was generally Ukraine, institutional reform objectives were in- rapid and successful (see figure 1.8). However, the cluded before or alongside privatization objec- speed and methods used tives, and a number of the early lending programs Privatization of small for the privatization of did include projects to support institution build- enterprises was generally medium-size and large ing, in addition to privatization and enterprise SOEs--and the role of reform. However, for 17 other countries, insti- rapid and successful. the World Bank therein-- tutional objectives appeared late in the decade However, the speed and have been the subject of or not at all. An examination of project docu- methods used for the major international de- ments reveals that very few of the early Bank PSD bate since the beginning projects contained specific "institutional" com- privatization of medium- of the transition. This ponents, and the majority of regulatory reform size and large SOEs--and evaluation does not at- and competition policy projects were initiated the role of the World Bank tempt to determine who after privatization in most transition countries, therein--have been the was right and who was especially in the CIS.10 wrong, or whether alter- It should be noted that borrowers often pre- subject of major native methods might ferred reform packages that emphasized enter- international debate. have led to better out- prise reforms (especially privatization) at the 1 8 T H E M AT I C F I N D I N G S expense of institutional efforts, and in several procedures were often While many of the laws cases where "institution building" loans were overwhelmed by the and institutions made before enterprise reforms or privatization enormity of the task, the supporting markets are had progressed substantially (Armenia, Bulgaria, shortage of staff and in- now in place in most and Ukraine in 1993, Georgia in 1995), the out- stitutional capacity, and comes of these loans were unsatisfactory, mainly social or political pres- transition countries, the because of weak borrower commitment. Where sures. The approach to capacity of a number of significant attention has been devoted to post- problematic firms could governments to enforce privatization regulatory structures and institu- be improved in the fu- tional frameworks to support markets, results are ture through greater at- them has been severely mixed: while many of the laws and institutions tention to the design of weakened by frequent supporting markets are now in place in most rule-based administra- changes in regulations, transition countries, the capacity of a number of tive procedures to initi- governments to enforce them has been severely ate the liquidation of their discretionary weakened by frequent changes in regulations, enterprises while they interpretation by public their discretionary interpretation by public offi- are on the state's bal- officials, and the cials, and the resulting corruption. ance sheets. The ownership structure emerging from The emphasis in future resulting corruption. voucher privatization schemes has been associ- privatization should, ated with low investment and little restructuring when circumstances permit, be on more meas- (Djankov and Murrell 2000). In some countries-- ured, better prepared transactions and on help- particularly those for which EU accession was a ing governments ensure that the process is central policy objective--the requirements of transparent, competitive, and open to foreign accession prompted the pursuit of second-gen- participation. The lagging reformers often have lit- eration reforms. But in many CIS countries this tle knowledge of trade sales, workouts and liqui- momentum did not materialize. It soon became dation, or investor-led restructuring. For internal evident in some countries that vested interests political reasons, government officials are fre- had become powerful enough to oppose the quently reluctant to use outside experts. The Bank adoption of institutional and regulatory frame- and IFC/EBRD should work in tandem, with the works that would constrain their further acqui- Bank helping to organize the process, and the sition of wealth. With the knowledge afforded by IFC/EBRD making investments.11 hindsight, it is apparent that the Bank, along The bulk of PSD assistance until the late 1990s with other donors, should have tried harder to was devoted to the privatization of existing SOEs, promote the improvement of the institutional rather than support for new firms. Experience framework for business and investment, as well demonstrates, however, that in both advanced as, and in parallel with, privatization. and slow reformers, recovery was achieved All transition countries have enterprises whose largely because of the the expansion of new sale and restructuring has proven highly prob- firms. The Bank is now focusing more heavily lematic. In the worst cases, these ailing firms on promoting improvements in the business have continued to drain public resources and environment, with an emphasis on removing have bottled up valuable assets that could be barriers to the entry of new firms and barriers used by new firms. In many cases, it was evident to exit for others, and creating incentives that early on that the enterprises were value sub- allow existing firms to tracting and would receive little new investment. move out of the infor- Future privatization Reliance on bankruptcy procedures--no mat- mal sector (World Bank should ensure that the ter how well designed--in addition to burden- 2002b). A variety of legal process is transparent, ing the limited capacity of the judicial systems, reforms are needed--in proved disappointing, even in some advanced re- company law, collateral competitive, and open to formers. Administrative or other out-of-court laws, security laws, bank- foreign participation. 1 9 E C O N O M I E S I N T R A N S I T I O N Political analysis could ruptcy and anti-mo- choices made by the Bank were probably ap- have informed the Bank's nopoly laws. Moreover, propriate, given what was known at the time. respect for private prop- However, by the mid-1990s, it is reasonable to ask work to a greater extent erty and contractual whether the Bank was focusing sufficiently on the than it did. rights and the assurance climate for PSD and the appropriate methods for that judicial enforce- privatizing medium-size and large enterprises.13 ment is competent and non-corrupt will re- main critical for the growth and expansion of Governance, Public Sector Management, the private sector. and Institution Building14 Finally, political analysis could have informed At the start of the transition, few in the Bank the Bank's work to a greater extent than it did. were focused on assistance for governance and For example, staff communications regarding PSM reform. The World Development Report Poland's privatization program reveal a fear of en- 1983: Management in Development had high- terprise workers' councils, particularly when it lighted the role of good government in devel- came to granting them a veto over the privati- opment, and the Bank's first PSM team had been zation of their firms. In the event, widespread established in the early 1980s within central proj- protests against reform by workers did not, for ects staff, but from the late 1980s through the mid- the most part, materialize. There were strikes and 1990s, the subject received little attention. The demonstrations against enterprise reforms-- ECA Region established a small group in the early particularly among coal miners in Ukraine, Ro- 1990s, but did not build up a substantial number mania, and elsewhere--but these were relatively of specialists until 1997 (the year in which the localized. More often, workers--and labor World Development Report focused on the role unions--emerged as allies of enterprise reform. of the state). The Bank's approach to governance In Poland and the Czech Republic, for example, was first set out in a 1992 publication entitled Gov- it was the labor unions that served as a check on ernance and Development, which recognized the excesses of SOE managers (limiting their that the quality of governance had a determining asset-stripping and theft) and that demanded impact on economic development and was there- second-generation regulatory and institutional re- fore an appropriate matter for the Bank to address forms following privatization. This finding sug- (see also Shihata 1991). gests that greater emphasis should be placed on A review of transition CASs in the early to building local constituencies--not merely en- mid-1990s shows little concern with governance, trepreneurs, but workers and reform-minded a finding not unique to the ECA Region. During local politicians as well--capable of demand- the period FY94­98, the proportion of lending ing further policy reforms. These constituencies Bankwide for public sector governance was 8 per- can be developed through consultations with cent, and for rule of law, 1 percent. In ECA, lend- civic groups--particularly those representing ing for these areas was 9 percent and 2 percent labor interests and business associations. of the total respectively; only the Latin America The Bank's ECA Region carried out its own and Caribbean Region lent as high a share of its study of the transition after 10 years (World Bank resources to these areas. Nonetheless, in retro- 2002b). The lessons and agenda for the future spect, the modest efforts--by the Bank; by other that emerge from that study are reproduced in donors; and, most important, by the countries box 2.5. OED agrees with these lessons. With the themselves--to address the countries' weak ca- benefit of hindsight, pacity to manage the reform process were not At the start of the OED also considers that sufficient in the face of the persistence of poor transition, few in the the Bank should have governance, a high degree of "state capture" Bank were focused on pursued this agenda by private interests, and pervasive bureaucratic sooner than it did.12 In corruption. assistance for governance the earliest years of the The first Bank report to discuss corruption and PSM reform. transition, many of the openly appeared in 1997 (World Bank 1997b). In 2 0 T H E M AT I C F I N D I N G S L e s s o n s f r o m T r a n s i t i o n -- B o x 2 . 5 T h e F i r s t T e n Y e a r s · Privatization should be part of an overall strategy of discipline for privatization of future medium-size and large enterprises. and encouragement. It will also improve the performance of existing privatized en- · Small enterprises under state ownership (generally enter- terprises by assisting transparent consolidation of shares prises with fewer than 50 employees) should be sold quickly where ownership is diffuse. It will also facilitate bank- and and directly to new owners through an open and competitive nonblank-based financial intermediation. auction, without restrictions on who may bid for the shares. · Privatization should be accompanied by increasing compe- · Medium-size and large enterprises should target sales to tition in the market for the products sold by the enterprise in strategic outside investors. With a concentrated, controlling question and vigorously enforced by the competition policy interest, they will have a clear stake to best use the enterprises' authority. This can discipline managers in an environment assets. Although several transaction methods may be used, in- where corporate governance is weak. cluding negotiated sales, this can be brought about most ef- · The cash flow and property rights of the state should be clar- fectively through competitive "case-by-case" methods, more ified for enterprises in which the state continues to hold an deliberative than voucher schemes or rapid, small auctions. ownership stake. They use independent financial advisors who both prepare the ª Divesting enterprises in sectors characterized by natural mo- enterprise for sale and act as sales agents on behalf of the state. nopoly or oligopoly (where average production costs decline · Investor protection should be enshrined in the legal system continuously as scale increases and the market and society and enforced, covering rules to protect minority sharehold- are best served by one or a few enterprises) must proceed with ers; rules against insider dealings and conflicts of interest; great caution, if at all. Advances in technology have made such creditor surveillance accounting, auditing, and disclosure sectors increasingly rare. But where they exist--as in local standards; and takeover, insolvency, and collateral legislation. distribution of natural gas--an efficient regulatory regime When court enforcement of contracts is weak, these provi- that protects the public interest is a prerequisite, lest di- sions should be supplemented by a stock market regulation vestiture transform an inefficient public monopoly into a for financial intermediaries, such as investment funds and bro- poorly regulated or nonregulated private monopoly. kers, who then have an incentive to ensure compliance by other participants in financial markets. This will set the stage Source: World Bank 2002b pp. 79­80. 2000 the ECA Region published Anticorruption dicial and public administration reform. Simi- in Transition. In the same year the Bank issued larly, in Russia the Bank largely neglected PSM at its first major strategy paper on public sector re- first--neither of the first two quick-disbursing form (World Bank 2000d), which confirmed that loans (1993 and 1995) included PSM reform-- governance had become a central concern of but since 1998, it has the Bank. Almost all transition CASs now place supported significant Almost all transition CASs PSM reform at the center of the assistance strat- public sector reforms. As- now place PSM reform at egy, and this has been reflected in recent proj- sistance to the Kyrgyz Re- the center of the ects. An example of this turnaround is Albania: public through 2000 the CAE found that the lack of focus on gover- included only one proj- assistance strategy. nance and institutional reform was a critical ect and no ESW address- omission during 1992­97. Since 1999, however, ing governance and PSM; the most recent OED project assessments have found that the projects take a comprehensive approach, using Bank has made a substantial contribution to PSM adjustment and TA and covering a wide set of in- reform, including the introduction of a medium- terrelated issues, including civil service reform, term expenditure framework and initiation of ju- accountability, and civil society voice and access. 2 1 E C O N O M I E S I N T R A N S I T I O N Stakeholder analysis Given the many influ- "voice and accountability," while the lowest should be standard ences at work, it is diffi- scores for the CEB countries (though still above cult to distinguish the the CIS) were in "control of corruption," "rule practice, and an integral impact of Bank assis- of law," and "government effectiveness." Fur- part of program and tance from that of other ther evidence is found in the Bank's reports on project design. participants. At least corruption in ECA (World Bank 2000a; 2004), some of the available which show mixed but generally encouraging data suggest an improvement in governance trends in both the CEB and CIS.16 However, con- over the past six years. The World Bank Institute's cerns over data comparability put these con- (WBI) governance database includes indicators clusions in doubt, and other sources of data--for of governance performance across 6 dimensions example, the Global Competitiveness Survey-- for 27 transition economies. Ninety-five obser- indicate that corruption in ECA is increasing, vations showed improvement between 1996 and not decreasing. 2002, while 65 recorded deterioration.15 Progress It appears that an inadequate understanding of was uneven across the dimensions: "regulatory the political and social situation contributed to fail- quality" showed the greatest improvement (18 ures in some operations, such as when the Ukraine countries), while "control of corruption" showed Parliament rejected a loan that had already been the least (11 countries). "Voice and accounta- negotiated.17 The design and implementation of bility," "political stability," and "rule of law" each reform initiatives should be based on an un- improved in about 16 countries. The CEB coun- derstanding of the underlying political and so- tries, particularly those acceding to the EU, have cial processes at the core of government that made greater progress than the others (figure determine the motivation and behavior of stake- 2.2). In 2002, the lowest scores for the CIS coun- holders. Such understanding would enable the re- tries were generally in "control of corruption" and forms to take into account the realities that help I m p r o v e m e n t s i n G o v e r n a n c e I n d i c a t o r s , F i g u r e 2 . 2 1 9 9 6 ­ 0 2 Number of countries showing improvement 14 12 10 8 6 4 2 0 Voice and Political Government Regulatory Rule of law Control of accountability stability effectiveness quality corruption CEE + Baltics (14 countries) CIS (12 countries) Note: Total sample, 26 countries: Bosnia and Herzegovina not included in government effectiveness and control of corruption measures. Source: WBI Governance Indicators ( 2 2 T H E M AT I C F I N D I N G S explain the functioning of public institutions.18 accountability, detailed Institutional reform Stakeholder analysis, which until recently was knowledge of inter- and involves discarding long- largely absent from the ECA Region's work pro- intra-sectoral expendi- established habits and grams, should be standard practice, and an inte- ture allocations, or in- patterns of behavior--a gral part of program and project design. The formation on the Region has recognized the importance of this distortions from budget complicated and lengthy work in recent publications (World Bank 2002b) execution, which may process. and seminars; boxes 2.7 and 3.1 provide good ex- deviate substantially amples from a number of countries. from budget allocations. Toward the end of the Many of the components of a PSM reform decade, the pioneering work by the ECA Re- strategy are interdependent, with financial, legal, gion, and the surveys by the Bank, the EBRD, and administrative, and personnel aspects. They also others, documented pervasive corruption and cut across sectors. Yet in most of the cases ex- massive diversion of public resources in the Re- amined for this study, reform was approached in gion and opened this area to wide public de- an ad hoc, incomplete manner, without a com- bate.20 This work highlighted the importance of prehensive, cross-sectoral institutional devel- confronting corruption, an issue that had pre- opment and PSM reform strategy. Moreover, viously been taboo for the Bank, as well as the institutional reform goes beyond changing or- need to link public expenditure analysis with ganizational structures and rules; it also involves the broader issues of public financial accounta- discarding long-established habits and patterns bility (Sahgal and Chakrapani 2000). In 2000 it of behavior--a complicated and lengthy process. become mandatory for country teams to pre- Major institutional changes of the kind needed pare a Country Financial Accountability Assess- in the transition economies may have to be ment, a Country Procurement Assessment spread over several decades, rather than com- Report, and a Public Expenditure Review for pressed within the time frame of one or a few each borrower. To date, all three have been com- adjustment loans. Two relatively new instru- pleted for only nine transition countries, al- ments--Adjustable Program Loans (APLs), with though the ECA Region is planning to complete their ten-year horizon, and Learning and Inno- these diagnostic studies for all of its countries by vation Loans (LILs), designed to support reforms the end of FY04. Given the pervasive corruption involving a long learning process--seem to be so well documented in Anticorruption in Tran- well suited to the situation in some transition sition, this work is clearly of great importance. economies. A Bank review of the early experience OED's recent review of progress in main- with such lending noted that it was particularly streaming anti-corruption activities in Bank as- suitable for dealing with institutional reforms sistance (OED forthcoming) concluded that the involving substantial changes in bureaucratic be- Bank should set minimum governance pre- havior. Where it is relevant, the ECA Region requisites for lending, and this is particularly should seek to adopt a long-term strategy for in- important when large amounts of money are stitution building assistance, based on a "learn- at stake. ing approach," with a 10­20 year commitment, Improving public financial accountability de- with the understanding that programs will need pends on the willingness of the political leaders to be modified over time.19 and key officials to change the system. One way Public expenditure analysis has long been a to build ownership of the reforms is to have the central focus of Bank economic work, but, as key players participate in and share the diag- noted above, it received little attention in the nostic. Most studies to date have not been joint transition economies until the late 1990s. In the exercises, and it is not clear whether borrowers meantime, the Bank had transferred considerable are truly eager to achieve genuine public finan- sums to transition economies (especially Russia) cial accountability. Strengthening of public fi- in the form of adjustment loans, without the nancial accountability generally results in some benefit of credible systems of public financial "losers"; stakeholder analysis can help those pro- 2 3 E C O N O M I E S I N T R A N S I T I O N The governments should moting reform to under- Web sites). Equally, the Region could encour- prepare time-bound, stand and modify the in- age all governments to replace their secrecy laws centives facing key actors with public information acts along the lines now monitorable action plans, to motivate them to sup- being proposed in Uzbekistan.23 agreed with the donor port reform. Following E-governance, the use of information and community. the studies, the govern- communications technology, has tremendous ments should prepare unexploited potential to increase public ac- time-bound, monitorable action plans, agreed countability by improving the transparency of with the donor community. government actions, tracking the movement of A key tool to increase public accountability and funds, and reducing the number of face-to-face discourage corruption of all types is transparency. interactions between the officials and the pub- The Bank has had a major influence through its lic where corruption might arise (in paying cus- insistence in projects on transparent practices in toms duties and taxes, obtaining permits, areas such as procurement and tax administra- registering land, tendering and procurement, tion.21 While recognizing that increasing atten- and the like). The ECA Region has only a pilot tion is being paid to promoting a culture of project in this area. Box 2.6 presents some ex- transparency, more emphasis is warranted. The amples of the benefits of e-governance in another ECA Region should go out of its way to make all Region. its studies and documents public and to dis- Establishing the rule of law is critical if the tran- seminate them fully-- the Bank already has a dis- sition economies are to build successful demo- closure policy that is very supportive of this cratic market-based economic systems. Most objective, but the delivery is still weak.22 In ad- transition economies urgently need assistance for dition, through all its operations, the Region judicial reform, an important aspect of the rule could encourage gov- of law, but the ECA Region, along with the rest Most transition ernments to report more of the Bank, geared up slowly in this area. No economies urgently need regularly and more fully CASs discussed judicial reform before FY97, and to their parliaments and in the following four years, only three cited prob- assistance for judicial to the public at large lems in the judiciary, although many identified reform. (through government deficiencies in specific laws. Through 2001, the R e d u c i n g C o r r u p t i o n t h r o u g h B o x 2 . 6 E - G o v e r n m e n t i n I n d i a The Department of Revenue in Karnataka has computerized 20 the use of computers and other electronic devices at 10 remote million records of land ownership by 6.7 million farmers in the interstate border check posts in Gujarat, India, a team of pub- state. Previously, farmers had to seek out the village account- lic officials has reduced corruption and significantly increased ant to get a copy of the Record of Rights, Tenancy and Crops (RTC), the state's road tax revenue. a document needed for many tasks such as obtaining bank The Vijaywada Online Information Center (VOICE) delivers mu- loans. There were delays and harassment. Bribes had to be nicipal services such as building approvals and birth and death paid. Today, for a fee of Rs.15, a printed copy of the RTC can be certificates, and handles the collection of property, water, and obtained online at computerized land record kiosks in 140 offices. sewerage taxes. The VOICE system uses five kiosks located The Central Vigilance Commission has begun to share with close to the citizens. It has reduced corruption, made access to citizens a large amount of information related to corruption. Its services more convenient, and improved the finances of the Web site has published the names of officers from the elite ad- municipal government. ministrative and revenue services against whom investigations have been ordered or penalties imposed for corruption. Through Source: 2 4 T H E M AT I C F I N D I N G S Region had supported only six stand-alone ju- capacity to intermediate A well-conceived strategy dicial reform projects. While another 11 had sig- financial resources and for public sector reform nificant judicial reform components, and 79 had no need for prudential will include initiatives to legal reform components, these often supported regulations of financial passage of laws or supplied equipment, rather supervision. Initial CASs, mobilize and build the than encouraging the reform of systems. More- with few exceptions, capacity of civil society. over, three-quarters of these projects came only treated financial sector after FY95. Evaluation reports suggest that the reform as a central element of the transition. majority of laws supported by the Bank have The immediate objectives were to create an ef- been submitted or passed, but that legal reform ficient and unified payments and settlement sys- has not yet met the broader objectives stated in tem; the policies, institutions, and instruments the loan documents (Gupta, Kleinfeld, and Sali- necessary to design and execute monetary pol- nas 2002). This is a big issue for EU accession icy operating through market processes; and an countries. While the focus on this important efficient system for mobilizing savings and di- area has increased, additional attention is recting them toward the most promising in- warranted, possibly including the creation vestors and investments, bringing market of judicial reform capacity within the ECA discipline to bear on the decisions and man- Region.24 agement of the borrowers themselves. In broad Governments are unlikely to carry through a terms, the assistance programs have been highly major reform of PSM unless pushed and moni- relevant. A basic understanding quickly formed tored by a vocal, informed, and organized civil in the Bank with respect to the essential ele- society. A well-conceived strategy for public sec- ments of financial sector transition, and these el- tor reform will include initiatives to mobilize ements were repeated in almost all the countries and build the capacity of civil society, includ- where active programs and dialogues were sus- ing NGOs, civic organizations, professional as- tained. Macroeconomic stability was emphasized sociations, business chambers, and the as a precondition for healthy financial develop- press--the "drivers for change." The Bank largely ment. Bank programs focused on putting in ignored civil society in this context, but some in- place the basic legal and regulatory framework novative initiatives have taken place during the and accounting systems for a market-based fi- last three years (box 2.7); they should be greatly nancial system, with initial emphasis on the expanded in the future. banking sector. Efforts were made to impose market discipline on the decisions of banks and Financial Sector25 enterprises through hard budget constraints. At the outset, transition economies possessed fi- However, such constraints were not always en- nancial systems whose basic purpose was to al- forced. Moreover, the need to reform the en- locate funds according to the plan, with a limited terprise and banking sectors in parallel was B o x 2 . 7 U k r a i n e -- S t r e n g t h e n i n g C i v i l S o c i e t y A "People's Voice" project, promoted by the Bank, aims to build ice weaknesses revealed by the surveys. The 2000 CAS, recog- integrity in municipal government and pressure local leaders from nizing that governance and institutional reform would only be suc- below to improve public service delivery. Surveys have been used cessful if there was true ownership by government, Parliament, to provide monitoring and feedback. This has led, for example, and a majority of civil society, stated that the Bank will work "in to the establishment of one-stop citizen service centers. One partnership with stakeholders and will incorporate benchmarks municipality established working groups to respond to the serv- of increased transparency and accountability in its operations." 2 5 E C O N O M I E S I N T R A N S I T I O N sometimes ignored, and the magnitude of the re- was essential for spurring a supply response from quired shift in social expenditures away from the private sector and could not wait until the enterprises was underestimated. macroeconomic and sectoral policy and institu- The Bank's financial sector analytical work tional framework were perfected (Albania and has generally been of high quality, but its timing Bosnia and Herzegovina). In a few cases, lending may have reduced its impact: fewer than one- programs comprised only one or two operations third of the reports reviewed for this evaluation over the entire decade, either because of lack of were completed in the first half of the decade agreement on strategy (Belarus, Slovak Republic, (through 1996), but during this time more than Turkmenistan) or lack of interest in borrowing half of the lending operations with financial sec- (Czech Republic). tor components were approved. Some extreme The Bank's assistance to financial sector tran- cases were Armenia, Georgia, and the Kyrgyz sition cannot be evaluated by adding up or av- Republic, where the first pieces of formal finan- eraging the programs undertaken in 26 different cial sector work appeared only in 1999­00, fol- countries. At the extremes, a very modest Bank lowing substantial Bank lending in the financial intervention in Estonia was associated with highly sector, and Albania, Bosnia and Herzegovina, positive results because of foreign investment and Poland, where no dedicated formal financial and the reform dynamic and skills already avail- sector work was found at all, despite numerous able in the country (annex table A.7 includes loans aimed at least partly at financial sector some indicators of financial sector reform). Lim- objectives.26 ited interventions in Belarus and Turkmenistan, The number and volume of Bank loans for fi- in contrast, were associated with virtually no nancial sector development rose rapidly after progress at all, which was explained largely by the 1991. Lending began to taper off after 1996, re- countries' resistance to change. Among countries flecting progress in some cases, frustration in ranked as top performers by the end of the others, and a tendency of the EU accession coun- decade, Hungary and Poland each benefited tries to rely increasingly on European assistance. from substantial financial sector lending pro- Both governments and external donors often re- grams.27 However, after a very large lending pro- sponded to rapidly unfolding events with stop-gap gram with financial sector objectives, Russia was measures, and lending programs and policy dia- still in the lower echelon of countries in finan- logues were interrupted cial sector development. The size of the pro- Both governments and by changing governments grams responded to the degree of interest of or by policy reversals. governments in borrowing, the rate of progress external donors often Country circumstances in implementation, and the degree of external responded to rapidly varied widely. Thus, al- pressure on the Bank to keep resources flowing. unfolding events with though specific reform el- In addition to differences in initial conditions, re- ements are common to sults depended largely on the ability and will- stop-gap measures, and most programs, it is not ingness of governments to reform institutions lending programs and surprising that the Bank and make the difficult political decisions policy dialogues were did not follow a common required. interrupted by changing approach to the selection Most transition economies have made tangi- or sequencing of opera- ble progress toward the development of market- governments or by policy tions. For example, in a based financial systems. Figure 2.3 shows, for reversals. few cases (such as the example, growth in credit to the private sector. 1995 assistance strategy However, levels of financial development var- for the former Yugoslav Republic of Macedonia), ied widely by the end of the decade, with the CEB staff asserted that Bank credit line operations countries significantly more advanced than those would require the satisfactory implementation of the CIS.28 Major issues remain to varying de- of banking reforms under the ongoing adjust- grees in all countries, including inadequate fi- ment loan. In other cases, staff argued that credit nancial sector supervision and accounting 2 6 T H E M AT I C F I N D I N G S C h a n g e i n D o m e s t i c C r e d i t t o P r i v a t e F i g u r e 2 . 3 S e c t o r , 1 9 9 3 / 9 5 t o 2 0 0 2 Percent of GDP 30 Baltics 20 CEE Other CIS Russia 10 0 ­10 Croatia Hungary SloveniaPoland Romania Republic Macedonia Albania Bulgaria Republic LatviaEstonia LithuaniaFederation Ukraine Moldova Belarus Georgia Armenia Republic KazakhstanAzerbaijan Turkmenistan Slovak FYR Czech Kyrgyz ­20 Russian ­30 ­40 ­50 Note: Data for Turkmenistan are for 2000. Source: World Development Indicators. standards, poor corporate governance, low lev- supervision should be an important trigger for els of monetization and intermediation, small and financial assistance. Similarly, while most Bank illiquid capital markets, and weak bankruptcy assistance for financial sector transition has laws and protection of creditor rights. Efforts pressed for their adoption, progress in the ef- to tighten budget constraints on banks and en- fective enforcement of international account- terprises were largely unsuccessful because of ing standards should be viewed as an early weak administrations and legal institutions, in- indicator of the authorities' determination to adequate information, and the heavy social and carry out reform and as another trigger for political costs of enforcement. A number of les- Bank financial assistance. sons have emerged. The most serious shortcomings in the Bank's The constitution of a proper legal and reg- support to legal and regulatory reform were in ulatory framework is essential for an efficient underestimating the time and the additional as- market-based financial sector, and Bank pro- sistance and human resource development re- grams have correctly emphasized putting this quired to make the new laws and regulations framework in place. However, submitting and effective. The virtual ab- The most serious even enacting laws is not enough. Some of the sence of specialized laws that were enacted were hastily drafted, and lawyers, judges, ac- shortcomings were in later had to be modified or replaced. The key is countants, and other underestimating the time implementation of the legal framework, in- professionals was recog- and the additional cluding laws governing banking and central nized and given consid- banking, bankruptcy, and collateral. Slow erable emphasis in the assistance and human progress in upgrading the authority and effec- Bank's policy papers and resource development tiveness of the bank supervisory agency, in- ESW reports, and highly required to make the new cluding the resolution of failed banks, has been specific training was pro- laws and regulations a consistent predictor of poor financial sector vided through TA and in- performance. Increasing effectiveness of bank vestment loans to the effective. 2 7 E C O N O M I E S I N T R A N S I T I O N staff of project implementation units, to finan- tween banking sector and enterprise reform and cial intermediaries participating in Bank credit in developing comprehensive programs for re- lines, and to the restructuring and privatization forming the two in parallel, some of the major agencies. However, few resources were devoted analyses and assistance efforts did not take them to the extended training needed to operate the into account. In Russia the early, rapid privati- larger system. High priority should be given to zation of both banks and enterprises apparently the intensive training of bank supervisors, obscured the continuing interlocking owner- lawyers and judges, accountants and auditors, ship and accompanying governance issues that and the other skilled professionals on whom undercut the reliance on private operators to re- the effectiveness of the legal and supervisory alize the real sector restructuring and credit re- framework depends. As noted above, growing allocations. Country strategies did not pay recognition in the Bank of the time required for sufficient attention to how the process could the institutional changes needed to sustain be subverted by the perverse incentives of bank structural change has led to the introduction of and enterprise managers and interlocking own- new lending instruments, such as APLs, de- ers. Privately owned banks strongly interlinked signed to provide continuing support over a with major borrowing enterprises make poor longer time horizon. candidates for sound and efficient intermedia- Strong, financially sustainable banking insti- tion. Measures are needed early in the transi- tutions are essential to the development of sta- tion process to strictly enforce prudential ble financial systems and to the efficient regulations, which can include minimum cap- intermediation of financial resources. State- ital requirements and limiting loan concen- owned banks, especially those emerging from the tration and related-party lending. Bank central planning tradition, have seldom demon- ownership and governance issues should, along strated long-term prospects for becoming sound with financial viability, be scrutinized care- and efficient financial intermediaries, and early fully in determining the eligibility of financial efforts should be made to attract reputable pri- institutions to participate in Bank TA programs vate strategic investors. Among 17 transition and credit line operations. countries to which the Bank lent for privatization, Institutional development programs for par- the public share of assets in banks fell from 94 ticipating banks should attach high priority to percent in the early 1990s to 20 percent a decade strengthening basic banking skills, such as credit later; this compares to a decline from 77 percent policies and procedures, risk management, in- to 25 percent in a worldwide sample of countries. ternal controls and information systems, in- In cases where privatization is not rapid or com- cluding accounting standards. Support to the plete, however, state-owned banks cannot be development of sound financial and regula- ignored. While fully commercialized behavior tory institutions requires a multi-year com- may be an overly optimistic expectation, sub- mitment and is highly supervision-intensive. stantial efforts are still needed to improve the The Bank and other donors have provided large incentive framework that guides the behavior amounts of TA for this purpose. Even when other of state-owned banks, through stronger gover- donors finance the assistance in the context of nance, tighter budget a broader Bank program, the Bank should mon- Support to the constraints, enforce- itor its progress, since it is crucial to the success development of sound ment of prudential reg- of the overarching objectives. Assessment of this ulations, divestiture of progress should be a central consideration in the financial and regulatory branches, and restric- decision of whether to go forward with a follow- institutions requires a tions on the scope of up project. multi-year commitment banking licenses. Close to half of all operations with financial Although the Bank sector components in the transition economies and is highly supervision- was a leader in analyzing over the past decade have included lines of intensive. the interrelationships be- credit intermediated through private or public 2 8 T H E M AT I C F I N D I N G S financial institutions, although total commit- having a properly functioning banking system, ad- ments for such projects have fallen dramatically. equate accounting and auditing conditions with Over three-quarters of the Financial Intermedi- effective disclosure requirements, responsible ary Loans (FILs) in the ECA Region have been in corporate governance, and protections for mi- sectors other than finance, with the biggest con- nority shareholders, and the problem was exac- centration in the rural sector. The wide variation erbated by most shares being in the hands of found in the timing, design, implementation, individuals with little idea of their meaning and and evaluation of FILs suggests a continued worth. While the development of efficient cap- widespread ambivalence within the Bank about ital markets is an important component of fi- their proper objectives, including the financial nancial sector development, it does not have sustainability of the intermediaries, and the con- the same urgency as the need to build a strong ditions under which they should be carried out. banking system. Moreover, the underlying assumption that credit would be a binding constraint on PSD in the Social Protection30 early transition experience can be questioned in The transition strategy adopted by the donor hindsight, as the utilization of credit lines was far community gave high priority to stabilization of less than anticipated: 40 percent of commit- the economy and structural reforms to mod- ments approved during FY93­02 were canceled. ernize and privatize key economic sectors. Reform Ratings of projects containing lines of credit of the social protection system was viewed largely have been particularly low in the financial, rural, as a way to cushion the impact of the disruptions social protection, and PSD sectors (less than from the structural reforms.31 But the transition half of commitments satisfactory). Financial presented major challenges for social protection sector staff should be systematically involved in systems. The changes in industrial structure in- the design of financial intermediary opera- creased, at least in the short run, the demand for tions and should ensure that the factors that will assistance to job losers. Lower-income house- determine the sustainability of the financial holds needed protection from consumer price in- flows, instruments, and institutions being sup- creases resulting from the removal of indirect ported are adequately taken into account. 29 subsidies, and assistance programs required more As the number of FILs has fallen, a growing effective targeting as unemployment rose and share of recent operations has supported the compensation differentials increased. Privatization start-up of rural and microfinance institutions, of enterprises that had formerly maintained which initially depend on government and/or records and paid most social protection benefits donor resources. Their eventual sustainability required the creation or reform of government and independence will require a capacity to mo- or other specialized institutions to administer bilize savings and attract commercial funds. Mi- benefits. Finally, all of these changes took place crofinance projects should give greater attention at a time of diminished fiscal capacity. Pension pro- to developing savings services and the resulting grams were particularly affected. With privatiza- supervision requirements, and they should in- tion and increased self-employment, often up to clude a donor exit strategy from the start. half of the labor force fell out of the formal sys- Capital markets development was sometimes tem, sharply reducing contributions, while most overemphasized in the early years of the transi- of those already eligible, along with new retirees, tion, both within and outside the Bank, as a still qualified for benefits based on previous em- principal means to rationalize corporate gover- ployment. It also became clear that new forms of nance and finance enterprise restructuring, and intergovernmental fiscal arrangements were the attention given this issue was counterpro- needed to allow national ductive to the extent that it drew attention away and local governments to Often up to half of the from more immediate concerns. No formal stock share the fiscal burden. labor force fell out of the market could have played the role assigned to it The Bank had had lit- by the mass privatization proponents without first tle experience with so- formal system. 2 9 E C O N O M I E S I N T R A N S I T I O N cial protection programs. Its initial social pro- placements proved far fewer than anticipated tection reform agenda for the transition in the short term, particularly in the CIS coun- economies emerged from sector reviews un- tries, and where unemployment rates had risen, dertaken in the early 1990s on several countries, the slow growth of alternative employment op- and was articulated most completely in Labor portunities undermined retraining efforts. More- Markets and Social Policy in Central and East- over, the governments and the Bank had not ern Europe (Barr 1994). Bank activities gener- anticipated the longer-term unemployment prob- ally followed this agenda, and subsequent lem--people too old to be retrained who could internal analyses confirmed its relevance.32 Areas not realistically find new jobs. The result was of primary emphasis included strengthening em- large expenditures for programs not originally de- ployment services, reforming pension systems, signed to deal with this problem, such as pen- and improving benefits targeting. The agenda for sions for early retirement or disability. pension reform, particularly the recommended By mid-decade, financial difficulties in the move to flat benefits, was not popular in many pension programs of most transition countries transition countries. had become major fiscal problems, while dete- The situation was complicated by an alterna- riorating economies were causing sharp increases tive model, presented in Averting the Old Age Cri- in poverty rates, particularly in the CIS, expos- sis (World Bank 1994), based primarily on ing the weaknesses in existing social assistance experience in Latin America and focused exclu- programs (figure 2.4). The Bank's emphasis sively on pension reform, where it advocated a shifted to pension reform, supporting major three-pillar system.33 This model was not incon- changes to the structure of the benefit formula; sistent with the long-run agenda in Labor Mar- increases in the retirement age; and the intro- kets (Barr 1994)--the first pillar would provide duction of mandatory, funded pillars in several the minimum income guarantee of the flat ben- cases. Twenty countries enacted at least one efit structure--but if adopted too early in the major reform, usually with significant assistance transition, its shift to advance funding for the from the Bank. second pillar (comprising individual accounts) The pension reform aspects of a number of would exacerbate the fiscal problems of transition the early adjustment loans failed, even when governments by diverting some of the pension the loans as a whole were rated satisfactory. contributions being used to finance payments Later loans, including two to Latvia for a funded to current retirees. It also ignored first-pillar sus- second pillar, were more successful.35 The Bank tainability problems, especially evident in tran- has had a major impact on pension policy re- sition countries with their mature demographic form efforts in Bulgaria, Croatia, Estonia, Hun- structures. Moreover, its implementation re- gary, Latvia, Lithuania, Poland, and Romania. quired the creation of fairly sophisticated finan- In many cases the main impact came about cial and regulatory institutions. through substantial TA--often in cooperation Lending focused initially on helping employ- with other donors--for seminars, interaction ment services deal with the expected surge of with local analysts, and other methods to trans- displaced and unem- fer knowledge to local officials.36 The TA fre- By mid-decade, the ployed workers.34 Al- quently was associated with lending, and, in pension programs of most though rated satisfactory, some cases, loans helped focus the borrowers' transition countries had these early projects, like attention on the need for reform, even if the re- those in other sectors, forms did not occur in the time frame envi- become major fiscal suffered from instability sioned (for example, Russia in 1997); in others problems, while in the government insti- they followed the adoption of the reform and fa- deteriorating economies tutions and inexperience cilitated its implementation (Croatia in 2002). of the borrowers in deal- All the pension reforms followed, at least in were causing sharp ing with Bank projects. part, the model developed for transition coun- increases in poverty rates. Most important, job dis- tries, and about half incorporated features from 3 0 T H E M AT I C F I N D I N G S P o v e r t y H e a d c o u n t I n d e x ( $ 2 . 1 5 / d a y ) , F i g u r e 2 . 4 L a t e s t Y e a r , 1 9 9 5 ­ 9 9 Percent of population 70 60 50 Other CIS 40 30 Russia 20 CEE Baltics 10 0 Albania Latvia Romania Bulgaria Republic HungaryPolandCroatia RepublicSlovenia Moldova Republic Armenia Georgia UkraineBelarus Macedonia LithuaniaEstoniaFederationTajikistan Azerbaijan Kazakhstan Turkmenistan FYR Slovak Czech Kyrgyz Russian Source: Annex table A.6. Averting, whose system of individual, funded many Bank staff now believe that it is probably accounts was attractive to reformers (box 2.8). beyond the institutional capacity of the less de- Averting broadened the debate about pension veloped of the transition countries (see, for ex- reform and helped secure a place for it on the ample, Lindeman, Rutkowski, and Sluchynskyy policy agenda of most countries, but its contro- 2000). A clear strategic approach to pension versial approach led to major disagreements reform, one that differentiates according to the among international agencies active in assisting capacity--both institutional and fiscal--of the pension reforms, as well as within the Bank, and country, has been needed for years, and still is. its publication probably delayed pension re- The Bank did not devote the same kind of re- forms in some countries (such as Russia). Im- sources or energy to social assistance reform as plementing the approach has been difficult, and it did to pension reform. Although the Bank's H u n g a r y -- P r o m o t i n g P u b l i c D e b a t e B o x 2 . 8 o n P e n s i o n R e f o r m The World Bank's monograph, Averting the Old Age Crisis, gen- Hungary. The government and the Parliament finally passed erated wide public debate over the issue of pension reform. An the three-pillar pension system bill in the fall of 1997, and it be- unprecedented professional and public dialogue emerged on came effective as of January 1, 1998. the introduction of the three-pillar pension system. There was no previous example of such a vivid discussion of policy issues among government experts, stakeholders, and individuals in Source: Báger 2002, p. 11. 3 1 E C O N O M I E S I N T R A N S I T I O N portfolio of social assistance­related activities is cial insurance contributions and delivering ben- larger than that of pension activities, and most of efits. Most pension administration loans dealt the project outcomes (or implementation with relatively modest administrative improve- progress) have been rated satisfactory, the suc- ments, with some notable exceptions, such as a cesses in the former are far more modest.37 Con- loan to Bulgaria in which TA funded through ditions attached to adjustment loans were grants from other donors strengthened the ca- successful in supporting program expansions (for pacity of the social security administration and example, Romania), the clearing of arrears (Albania helped achieve a national consensus on changes and Tajikistan), or improvements in targeting (Ar- not previously acceptable to the public or the Par- menia, Bulgaria, and Russia). They were less suc- liament. Half of the loans related to pension ad- cessful in implementing new programs, as ministration supported the development of illustrated by the failure in the Ukraine and the can- second-pillar institutions, rather than improve- cellation of the last tranche of the Bulgarian So- ments in the operations of the basic system. cial Protection Adjustment Loan. Many of the ESW and the many Bank-sponsored seminars activities involved building local capacity to con- focused almost exclusively on the policy issues duct and analyze household surveys (Belarus, associated with pension reform, and virtually ig- Bulgaria, Latvia, and Romania). Even there, TA nored administrative issues. offered outside of the loan process appears to have Most transition countries still lack adequate been more effective than the lending itself.38 capacity to monitor and analyze their social pro- ESW has devoted considerable attention to an- tection needs and to develop appropriate policy alyzing safety net issues and, starting in the mid- responses.39 The Bank supported actuarial train- 1990s, poverty. Most Bank poverty and social ing in Bulgaria, Macedonia, and Russia. Bank safety net assessments, along with a number of staff worked closely with local analysts on the Pol- CAEs, conclude that improvements are needed ish and Hungarian pension reforms; this assis- in the size and structure of assistance programs: tance focused on the preparation of reforms, too great a share of benefits goes to higher-in- with fewer resources to help with implementa- come households; inhabitants of poorer regions tion. The World Bank Institute (WBI) managed of a country find it more difficult to qualify for a Training Program on Social Policy Reform in benefits and receive less; and benefit levels are Transition Economies (SPRITE) supported by too low to be of much use in fighting poverty. If bilateral donors during 1994­01. An evaluation poverty reduction is to remain a major goal in carried out for WBI (World Bank 2001) found that the transition countries, in the 12 CIS countries it covered, the program Too great a share of the Bank will have to de- helped build a consensus on health and pension benefits goes to higher- vote as much attention reforms, improved technical skills of local spe- to the reform of social cialists, provided continuity to the reform income households; assistance programs in process, created a network of trainers, con- inhabitants of poorer the future as it has to tributed to collaboration among a variety of in- regions of a country find pension programs in the stitutions, and provided materials that were past. adopted by academic institutions. However, the it more difficult to qualify Lending tended to program itself was not sustainable when its fund- for benefits and receive neglect administrative ing ended, as it did not provide for full cost re- less; and benefit levels are reforms, often because covery. A review of recent CASs found virtually the borrowers did not no discussion of strategies to further build do- too low to be of much use want to pay for techni- mestic capacity for carrying out either analysis in fighting poverty. cal assistance. Only a or projects. Where Bank-assisted reforms have small number of the (rel- been successful, it is usually only after an ex- atively few) investment loans in the pension and tended period of time, during which Bank staff social assistance areas aimed at strengthening the and consultants interacted repeatedly with local basic institutions responsible for collecting so- reformers, helping them understand and de- 3 2 T H E M AT I C F I N D I N G S velop their reform options and form a consen- more prominently the re- The Bank should devote sus in favor of reform among local leaders. Ad- gional differences, par- additional attention to equate resources for these participatory ticularly the differences building institutional activities are one key to successful social pro- in institutional capacity, capacity in policy tection reforms; assistance with implementation among transition coun- is also important. The Bank should devote ad- tries. analysis and ditional attention to building institutional ca- Social protection sys- administration of both pacity in policy analysis and administration of tems consist of large, pensions and social both pensions and social assistance.40 complex, and politically The contributors to Labor Markets and Social sensitive programs. Fun- assistance. Policy (Barr 1994) anticipated the problems damental changes in many transition economies would have in im- these systems that reduce or eliminate promised proving targeting because of their large informal benefits are major political challenges. They re- sectors and inadequate information systems. quire extended public discussion and political However, until recently the Bank did far too lit- consensus building, and adjustment loans have tle to help develop techniques to improve tar- proven to be poor mechanisms for helping this geting of social assistance benefits. The case of process. Adjustment loans are more likely to be Armenia shows what can be accomplished: in the effective in encouraging policy change when it late 1990s, the Bank supported integrated living involves modest but affordable expansions or standards surveys. Together with adjustment when it reflects an existing consensus about the lending, these surveys facilitated the introduc- need for and nature of the reform--for example, tion of a single, targeted poverty benefit, re- incorporating an adequate minimum pension placing a complex system of child allowances provision in Kazakhstan and increasing the min- and other benefits that went to poor and non- imum pension in Russia in 1997.42 Investment poor alike. In addition, highly subsidized rates needs in social protection tend to be rather for electricity, transport, and communal serv- modest, and clients are reluctant to borrow for ices were substantially eliminated, and replaced TA. Even the ESW sponsored by the Bank will with cash transfers to a more narrowly defined have only limited impact without adequate funds group of highly vulnerable beneficiaries. Else- to finance dissemination and discussion of its re- where, the Bank held a conference on alterna- sults. Thus traditional instruments have not tive targeting approaches, sponsored at least been well suited to reforming social protection one report (Grootaert and Braithwaite 1998), systems. and supported three pilots in Russia. Far more The weakest link in the Bank's strategy of so- is needed. cial protection reform for the transition While the results of Bank activities in the tran- economies was in translating the larger vision sition economies generally confirm the rele- into systematic and strategic agendas at the vance of the strategy described in Labor Markets country level. Only two countries, Russia and and Social Policy, in retrospect, the strategy Bulgaria, had ESW that attempted to focus should have addressed additional areas that broadly on this area.43 Al- have proven to be barriers to social protection most without exception, The weakest link in the reform in virtually every transition economy: the social protection sec- Bank's strategy of social labor laws that encourage labor hoarding among tions of CASs were little protection reform for the declining firms and discourage hiring among more than listings of transition economies was expanding firms; strategies for sharing fiscal and projects in the pipeline.44 policy burdens associated with operating assis- They rarely provided any in translating the larger tance programs among levels of government; appreciation of the link vision into systematic and special problems in coverage and adminis- between social protec- and strategic agendas at tration caused by the growth of informal sec- tion reform and public tors.41 The strategy should also have recognized sector administrative re- the country level. 3 3 E C O N O M I E S I N T R A N S I T I O N form, or sequencing of projects to make sure that tenable and--after a lengthy process of discus- the administrative and policy aspects were syn- sion and debate both within the Bank and be- chronized. There have been some notable reform tween the Bank and outside stakeholders--the successes, particularly in the pension area, but Bank issued a policy paper in 1993 on electric also a number of missed opportunities, partic- power lending (World Bank 1993). The policy ularly in social assistance. The failures appear to (also supported by IFC and MIGA) linked Bank be linked to insufficient attention to the devel- support to country commitment to reforms in opment of a policy consensus within the client three areas: commercialization, corporatization, countries, to improving administrative and other and arm's-length regulation. This approach called institutional capacities and linking them to the for commercialization and corporatization prior policy development process, and to developing to privatization, as a means to introduce com- new and innovative ways to target benefits. Coun- petition, but it did not include strategic or op- tries need a broad public understanding of the erational guidelines for implementation. reasons for and the nature of the reforms and re- Power sectors in most transition countries form prescriptions, closely tailored to their par- had little prospect of reaching commercial stan- ticular situation. Social protection reform works dards because of the inefficiencies of state own- best when analytical work, consensus build- ership and poor governance, and by 1996, the ing activities, and institutional capacity build- Bank had in practice adopted a reform approach ing precede the enactment of legislation. that also included unbundling and primarily ad- vocated privatization as a means to achieve com- Energy45 mercialization. Formally adopted in 1998, this The transition countries inherited substantial strategy had four main objectives (Lovei 1998; infrastructure and, in some cases, possessed sig- World Bank 1998): (i) protecting the public in- nificant quantities of oil, natural gas, and coal. Tra- terest through improved regulatory regimes, ditionally, these sectors were vertically integrated demonopolization, increased safety, less envi- public monopolies, a structure that led to seri- ronmental impact, and transformation of the ous inefficiencies in investment, operations, and sector from a net user to a net provider of budg- pricing. Most companies and service providers etary resources; (ii) rehabilitating energy supply were heavily subsidized, while customer service facilities, assisting with the institutional aspects was inadequate and facilities were poorly main- of restructuring and privatization, and mitigating tained. Supply-side problems were exacerbated the social impact of restructuring; (iii) facilitat- by low efficiency of consumption, lack of me- ing private investment; and (iv) promoting re- tering, and unwillingness to pay. None of the gional initiatives to increase energy trade and regulatory or institutional arrangements neces- sharing of information. sary for commercial operations was in place, An analysis of over 100 completed projects and there were serious environmental prob- confirms that these long-term objectives were an lems. Moreover, the sector is particularly prone integral part or even the main objective in nearly to corruption because the stakes are high, and two-thirds of them. The rest, primarily for re- the opportunities for habilitation, usually contained institution build- Power sectors in most rent-seeking, plentiful. ing or some reform conditionality. In less than transition countries had The Bank did not have one-quarter of the rehabilitation operations did a great deal of experience the long-term objectives appear to play no sig- little prospect of reaching in this area (OED, OEG, nificant part. In retrospect, probably too much commercial standards and OEU 2003a). By the emphasis fell on privatization and restructur- because of the beginning of the 1990s, ing, and too little on regulation, strengthening inefficiencies of state many Bank staff had con- utility financial and managerial performance, cluded that "business-as- and combating corruption.46 While projects pur- ownership and poor usual" lending to public sued restructuring objectives in 22 out of 24 governance. power utilities was un- countries, they dealt with regulation in only 10. 3 4 T H E M AT I C F I N D I N G S Nonlending instruments focused mainly on and privatization of part Efforts to integrate policy advice, through freestanding sector re- of the state-owned utility. environmental concerns ports or notes; training (both formal and on- Countries receive 1 point were generally effective. the-job); and technical assistance, such as that for each of the six steps, provided by the Joint UNDP/World Bank Energy so countries that have taken all six steps receive Sector Management Assistance Program a score of 6.48 Although results are available for (ESMAP). The strategy also emphasized improved all segments of the energy sector, electric power cooperation with external partners and building is used in this evaluation as a proxy for energy stakeholder participation. sector reform, since that sector is uniformly sig- The outcome ratings of the completed dedi- nificant in all the countries. The reform indica- cated energy projects are about the same as the tors for 24 transition countries confirm the average for all projects in the ECA transition priority given to commercialization, corporati- countries and higher than the Bankwide average zation, and unbundling, which were objectives for the sector (annex tables A.11 and A.12). in 22 of the countries; 16 had taken steps toward Short-term objectives were achieved through commercialization and corporatization, and 13 quick-disbursing rehabilitation and emergency re- toward restructuring by mid-1998. Only 10 coun- covery projects. The satisfactory achievement tries had regulation as an explicit objective, and of long-term objectives appears to have resulted 11 had taken that step by mid-1998. Three coun- from a programmatic approach in 14 countries tries had some privatization in the absence of an where the Bank used a blend of adjustment and energy law (Russia) or without a law or a regu- investment operations. Efforts to integrate en- lator (Bosnia and Herzegovina, Kazakhstan). vironmental concerns were generally effective. Figure 2.5 shows the reform scores for each The Bank's aid coordination efforts seem to country, superimposed on a chart showing the have been productive, with some exceptions, change in their energy efficiency between 1992 but there were shortcomings in promoting stake- and 2000. Four countries (Armenia, Georgia, holder participation and, most important, in Hungary, and Poland) received a score of 6. They combating corruption. are among the countries showing the greatest im- A recent study by the ECA Region of power provement in energy efficiency, and they are sector reforms (World Bank forthcoming) found also among the eight countries where this eval- that in the most aggressive reformers, subsidies uation judged the outcome of the programmatic to utilities appear to be falling; tariffs have risen, approach followed by the Bank to be fair to along with revenues per kilowatt-hour, for pub- good.49 The one country where the outcome lic and private operators; and reforms slightly im- was poor (Romania) has a score of zero, but proved energy efficiency in power plants. there was substantial reform subsequently. The However, electricity expenditures as a share of other countries with a zero score are Azerbaijan, income increased, especially for the poor, sug- Kyrgyz Republic, Slovak Republic, Tajikistan, and gesting a need for measures to mitigate this ad- Uzbekistan; their performance in energy effi- verse impact, and the study also identified a ciency has been mixed. The average number of need for more and better monitoring and data steps taken by the group of 24 as a whole is to evaluate these results more fully. 2.83; that is, they had on average taken less than The Scorecard project funded by ESMAP in half of the requisite steps toward energy sector 199847 provides indicators of progress toward cer- reform. Compared with other Regions of the tain key objectives in the energy sector. The Bank in mid-1998, the 24 countries come out be- Scorecard identifies six central steps: corporati- hind the Latin America and the Caribbean Region zation/commercialization of the state-owned util- and the South Asia Region on the reform score- ity; passage of an energy law; start-up of a card, but ahead of the Africa, East Asia and Pa- regulatory body; private sector investment in cific, and Middle East and North Africa Regions. independent power producers; restructur- The evidence on sequencing of reforms is am- ing/unbundling of the core state-owned utility; biguous in ECA, as it is in other regions (OED, 3 5 E C O N O M I E S I N T R A N S I T I O N OEG, and OEU 2003a). The Region's own review progress toward restructuring and privatization, of power sector reform and private participation although it is likely that the government would concluded that the push for unbundling and pri- have implemented the reforms in any case. Pri- vatization was premature (as in Ukraine) and, in vatization of coal mines in Russia was a highly general, attempts to leap from a totally non-com- complex task carried out in an environment of mercial state-owned entity to private commercial difficult political and industrial relations, and utilities did not work (Krishnaswamy and Stug- might not have been possible without strong gins 2002). However, in some cases (Kazakhstan government commitment and efforts to consult and Central European countries) "leapfrogging" important stakeholders, together with Bank flex- to privatization as a means to achieve commer- ibility in the design and implementation of proj- cialization did lead to positive sector change, ects. Closure of loss-making mines in Russia and even where this approach was not fully suc- reduced budgetary subsidies for the coal sector cessful, service quality from over 1 percent of GDP in 1993 to under 0.1 Privatization of coal and coverage have percent by 2001, and such economic benefits tended to improve. were also found in Poland and Ukraine (OED, mines in Russia might not Of course, the indica- OEG, and OEU 2003b). Inadequate government have been possible tors of overall progress commitment and consensus appears to have without strong do not necessarily meas- limited progress in privatizing Poland's coal sec- ure the relative impor- tor, but a review of PSD in energy in Poland government commitment tance of Bank assistance. found a clear association, if not causality, be- and efforts to consult OED reviews indicate tween the Bank program and most of the insti- important stakeholders, that the Bank's involve- tutional changes in the subsectors affected by ment in Hungary's en- Bank projects. Bank performance was rated as together with Bank ergy sector probably had satisfactory in 89 percent of the projects re- flexibility. beneficial effects on the viewed for this study, but this statistic, which is C h a n g e i n G D P p e r U n i t o f E n e r g y U s e , F i g u r e 2 . 5 1 9 9 2 ­ 0 0 , a n d E n e r g y R e f o r m S c o r e , 1 9 9 8 1995 US$ per kg. oil equivalent 1.3 6 1.1 Baltics 4 0.9 CEE 6 0.7 5 4 Other CIS 6 6 0.5 2 0 2 4 0 0 0 3 Russia 0.3 2 4 1 2 0 0.1 4 0 UkraineTurkmenistan ­0.1 Latvia 5 ­0.3 PolandAlbania Hungary Republic Republic SloveniaCroatia Romania Bulgaria Estonia Herzegovina LithuaniaFederation ArmeniaGeorgia Tajikistan Republic Moldova Belarus KazakhstanAzerbaijan Uzbekistan ­0.5 and SlovakCzech Kyrgyz Russian Bosnia Source: WDI and World Bank, 1999. 3 6 T H E M AT I C F I N D I N G S significantly higher than the ratings given to hand in hand with con- Energy sector reform is Bank performance in all projects Bankwide, does trol of the macroeco- not in itself sufficient to not lend itself to any conclusions about the link nomic situation. In such between the Bank's role and country outcomes.50 deal with some key circumstances, the Bank It does, however, support the Region's view that appropriately chose to problems. the Bank succeeded in fundamentally changing apply a blend of lending the debate in the ECA transition countries from instruments in many countries, including struc- whether or not to carry out certain reforms to tural adjustment, sector adjustment, specific in- when they should be undertaken. vestment, technical assistance, emergency Rehabilitation, emergency relief, and critical recovery, and programmatic structural adjust- imports accounted for over one-third of the 102 ment loans. Moreover, lending was usually ac- energy projects. Given conditions at the start of companied by ESW.54 the transition period, the Bank may well have Second, energy sector reform is a complex been right to emphasize these objectives at first. and long-term process that must alter deep- However, difficulties in attaining the objectives rooted incentive systems and cultural attitudes, in as many as two-thirds of the projects, partic- as well as institutions and markets. In some ularly because of procurement problems and countries, accession to the EU is a strong moti- conflicts between short- and long-run objec- vating factor to maintain sound economic poli- tives, point to three key lessons for project de- cies, but it was unrealistic to expect restructuring sign. First, intensive efforts to pre-identify critical and privatization to overcome legal, political, import needs are usually inadequate to enable attitudinal, and payment obstacles and be im- a new borrower to administer the Bank's pro- mune to destabilizing macroeconomic factors. curement regulations--negative lists are prefer- Regulatory reforms are essential, but are not able. Second, the Bank should not count on sufficient. Improving commercial performance project implementation units to resolve diffi- and corporate and sectoral governance are culties in implementing standard procurement primary, regardless of sector structures and and disbursement procedures.51 Institutional ownership. Whether privatization is feasible as capacity can be strengthened through on-the-job an immediate option to achieve these goals de- training of local counterparts, and assistance pends on country circumstances. The Bank with procurement matters can be best provided needs to develop operational guidance as to through specialists based in Bank resident mis- what sequence of reforms and interventions sions. Third, rehabilitation-type projects should works best in particular country situations.55 not be encumbered with long-term reform ob- Third, because of the complexity and long- jectives, either formal or informal.52 term nature of energy sector reform, borrowers Reform of the energy sector was linked with usually require TA to help them design and im- a broader need for reform in other sectors, and plement the necessary measures. In one case, also with the profound political, economic, so- OED suggested that Bank coal sector restruc- cial, and institutional changes taking place at turing programs in transition countries should widely different rates in the economies in tran- include TA to familiarize local technical experts sition. That linkage had important implications with modern, cost-saving procedures for closing for the Bank's lending and non-lending opera- mines. Transition countries have generally re- tions. Four main lessons emerge for the longer sisted borrowing for TA, but the Bank must con- term. First, energy sector reform is not in itself tinue to stress its importance and seek ways to sufficient to deal with some key problems, such supply it. Field office staff can play an important as the elimination of subsidies to energy sector role in ensuring the success of a major reform entities; increased discipline in metering, billing, program through effective day-to-day manage- and collecting payments; reforming pricing pol- ment of operations. icy; and closing uneconomic energy production Finally, it is highly desirable to foster the par- facilities.53 Reforms such as tariff policy must go ticipation of a wide cross-section of society in 3 7 E C O N O M I E S I N T R A N S I T I O N the reform of the energy sector. Variations on this ample, working from a "negative" list rather than lesson are reported in more than half the coun- trying to pre-identify critical imports. Little or no tries with energy lending, and it probably con- policy conditionality would be involved, although stitutes the most common lesson, also found in ESW and the policy dialogue would be con- other sectors. In its most obvious version, it ducted intensively from the beginning, along refers to the importance of borrower commit- with training and TA (both in addition to and as ment to and ownership of the reforms, but it also part of the ESW). Furthermore, significant efforts extends to seeking, identifying, and working would be devoted at this early stage to donor co- with "champions" in strategic decisionmaking po- ordination and building stakeholder participa- sitions, explaining the purpose of the reforms to tion. The latter would help frame the TA and the most affected parties and trying to soften the lending, which would move from emergency impact on the most vulnerable social groups. operations to a combination of investment and These lessons suggest an approach to lending adjustment projects. The timing of critical pol- that might be applied to countries with poor or icy measures should benefit considerably from damaged infrastructure and energy sectors still stakeholder involvement, especially that of key dominated by state-owned enterprises. Initially, counterparts, who could help evaluate alterna- quick-disbursing rehabilitation and emergency re- tives and choose the timing of politically difficult covery operations would tackle the shortage of decisions. Projects would deal with corruption critical supplies and the need for urgent restora- and ensure that the foundations of good gover- tion and maintenance of facilities. Disbursement nance are laid in the sector entities as a prepa- formalities would be kept to a minimum--for ex- ration for later privatization. 3 8 3 Lessons and Recommendations T he Bank shared the optimism of many early reformers and Western ob- servers about the speed with which economic liberalization and legal and policy changes would produce robust supply responses in the transition economies--particularly those of the CIS--and consequently about the depth and duration of the initial declines in output and employment and the related social costs and political turbulence. In large part, this optimism was related to the expectation that the rapid shift of control over resources to private hands, along with the liberalization of prices and trade, would lead quickly to more rational resource use under market discipline. But this did not happen in many countries. Mean- be much better prepared to identify and address while, the Bank, along with other donors, greatly rapidly growing poverty by monitoring poverty underestimated the impact of corruption and of levels as a priority from the very beginning of the weakness of core institutions and public ad- its involvement in a country. ministrations in managing the transition process, The transition from a centrally planned econ- and did not address these areas adequately in its omy requires a vast web of interrelated changes assistance programs. An appropriate institu- in attitudes and concepts as well as laws, policies, tional and regulatory framework and a capa- and institutions. One of the key generic lessons ble, transparent public sector are central that emerges from evaluations of the transition elements of an efficient, market-oriented private experience is that a care- sector. Analytical work on governance and fully crafted external as- The transition from a public sector management should precede large sistance program can centrally planned amounts of Bank lending, particularly in sit- help to design and im- economy requires a vast uations where obvious problems are likely to af- plement these changes fect assistance programs. and ameliorate their so- web of interrelated Poverty has also been a far more serious prob- cial costs, but however changes in attitudes and lem than the Bank expected in countries mak- well designed a program concepts as well as laws, ing the transition from plan to market, most of reform, the rate of notably in the CIS. In the future the Bank can progress will be largely policies, and institutions. 3 9 E C O N O M I E S I N T R A N S I T I O N determined by the government's ownership of signed to minimize delays (use negative lists it and the degree of consensus it is able to mo- rather than trying to pre-identify critical im- bilize in the society at large. A well-informed ports); do without project implementation units; civil society can also be a major "driver" for and forego long-term reform objectives. Beyond change, and stakeholder analysis is an impor- the short term, capacity building should be cen- tant input to understanding the political and tral to any country strategy. 1 social processes at work in a country that can OED's 2001 Annual Review of Development have a major impact on the outcome of assis- Effectiveness (OED 2002a) found that stand- tance. The growing Bank emphasis on stake- alone TA loans fared better than any other form holder participation--for example, in the of lending in countries with low ratings for pol- preparation of CASs and PRSPs--is a move in the icy and institutional environment, particularly right direction; many other specific examples in the ECA Region, suggesting that the Bank can be found, as this approach becomes main- should focus on creating capacity and institution streamed in all forms of Bank assistance (box 3.1). building in these countries. However, many (par- A related theme that emerges from OED as- ticularly CIS) countries are averse to borrowing sessments of Bank assistance to the transition for TA, often leaving it to bilateral grants, which economies has been the limited capacity of most have been less successful. The Bank provides TA of the borrowing governments to design and through other means as well, such as collabo- implement complex and difficult programs and rative project preparation and ESW, and bor- legal structures and the rowers value this contribution. APLS and LILs, along with tendency of the Bank to A number of relatively new Bank instruments, the effective use of TA, can underestimate the dura- such as APLS and LILs, along with the effective be used to promote policy tion and intensity of the use of TA, can be used to promote policy reform reform and institutional assistance needed. Re- and institutional change over the longer term. habilitation and other Experience has demonstrated the lengthy time change over the longer projects with short-term often needed for ownership and consensus to term. objectives should be de- emerge and the importance of learning from B o x 3 . 1 S t a k e h o l d e r P a r t i c i p a t i o n A key element of the Bank's country strategy implementation in liamentarians. In Lithuania the Structural Adjustment Loan team the Ukraine was a significant market reform education and briefed multi-party committees throughout the period of parlia- awareness program. The Resident Mission, along with the World mentary elections. Intensive dialogue between the government, Bank Institute, carried out a program of seminars, workshops, and mining companies, and trade unions, and the participation of the roundtable discussions with government officials, parliamen- unions in program design, contributed significantly to the suc- tarians, academics, and others on the need for reform, the nature cessful implementation of the employment restructuring pro- and objectives of the reform, and the benefits and outcomes gram in the Poland Coal Sectoral Adjustment Loan. Both OED and likely to result. The director for Ukraine, Belarus, and Moldova QAG have praised the Bank's work in Russia's coal sector, in par- has instituted stakeholder analysis for all projects. Public in- ticular its extensive consultations with stakeholders. In the formation campaigns in Armenia for judicial reform and in Bul- Bank's Structural Adjustment Participatory Review Initiative garia for pension reform facilitated implementation by ensuring (SAPRI), Hungary was one of seven countries in which civil or- that policies were widely acceptable to the people. Preparation ganizations were included with the Bank and governments to as- of the 2002 Albania CAS included consultation with representa- sess and analyze the economic and social impacts of adjustment tives of civil society and the private sector, as well as with par- lending (Báger [2002] describes this exercise and its results). 4 0 L E S S O N S A N D R E C O M M E N D AT I O N S experience. Perhaps the most important com- itorable action plans to Aid coordination in ECA ponent of a successful strategy for supporting implement them; these still falls well short of the transition is flexibility. Political and social would provide the analysis should play a role, along with eco- framework for the ideal. nomic and institutional analysis, to identify donors to agree with the problems and develop solutions along the way. government on how much external support is ESW plays an important role, not only in en- to be provided, by whom, and for what, with a suring that lending operations are based on view to avoiding overlaps and allowing donors sound country knowledge, but also in inform- to specialize in sectors or areas where they have ing public debate on the issues of transition. It both a special interest and the relevant expert- is valued by borrowers, sometimes above fi- ise. Ideally the process is led and coordinated nancial assistance. Given its importance to the by the recipient government.4 The PRSP is im- Bank's country dialogues and to the design of proving the alignment between donors and re- country strategies and projects, all ESW, in- cipient countries for the poorest countries, but cluding informal reports, should be subjected OED's joint evaluation of the Comprehensive to more systematic retrospective evaluation of Development Framework found that the trans- both quality and impact, and an effective strat- action costs of delivering aid remain high and egy for its dissemination should be an integral donors continue to engage in unproductive com- part of the Bank's country assistance strategies.2 petition (CDF Secretariat 2003). The donors Borrower participation in carrying out ESW need to identify one among them to be the main can be an effective means of building capac- partner for a particular sector, program, or proj- ity in a country.3 ect, to lead the policy dialogue in that area and Aid coordination in ECA still falls well short of assist the government in coordinating the donor the ideal, at the level of both policy and imple- contributions, both technical and financial. mentation (box 3.2). The conflicts, duplication, Chapter 2 of this report identified a number and lack of an agreed development agenda in of sectoral and thematic areas where the Bank some countries reduce the effectiveness of all needs to define clearer strategies for assistance, donors. The goal should be to help governments differentiated by the state of governance and in- define clear development strategies, with mon- stitutional capacity in each country: B o x 3 . 2 A i d C o o r d i n a t i o n As laid out by the Bank and the Development Assistance Com- The absence of an integrated development agenda paves the way mittee (DAC) of the Organization for Economic Cooperation and for supply-driven assistance, with each donor focusing on areas Development, aid coordination should integrate external as- it feels are most important, often with little consultation with the sistance with the development priorities of the recipient; re- government or with other donors, and, in some cases, compet- sponsibility for coordination should reside primarily with the ing with other donors or financing activities with conflicting ob- recipient government; and both recipients and donors should ad- jectives. Such instances are common, for example, in financial here to strategic objectives and investment programs (OED intermediary loans, where other agencies have funded credit 2001). CAEs present a mixed picture of the quality of aid coor- lines with lower interest rates than those required in Bank dination in the transition countries, but provide no examples of loans, or sponsored narrowly directed credit lines in conflict with countries meeting the DAC criteria. Few if any of the transition Bank efforts to convince governments to phase out the use of di- country governments are equipped to provide the necessary rected credit. Provision of technical assistance by bilateral framework for coordination, and often they do not view this as grants, in conjunction with Bank projects, has often proven not a priority; their interest lies mainly in resource mobilization. to be useful, particularly when it is tied to national suppliers. 4 1 E C O N O M I E S I N T R A N S I T I O N · Legal and judicial reform is critical for im- have proven to be difficult, greater attention is provements in the business climate (company needed to the design of rule-based adminis- law, collateral laws, security laws, bankruptcy trative procedures to initiate their liquidation. laws, anti-monopoly laws, respect for private · Additional measures to strengthen the finan- property, contractual rights), the financial sec- cial sector include enforcement of prudential tor (banking and central banking, bankruptcy, regulations, including limits on loan concen- collateral, failed bank resolution), social pro- tration and related-party lending; training for tection (labor laws), and governance in general. bank supervisors, lawyers and judges, ac- The focus should be on implementation as countants and auditors, and other skilled pro- much as on the passage of laws. fessionals; and for state-owned banks, stronger · Improved governance, including transparency, governance, tighter budget constraints, di- can increase public accountability and dis- vestiture of branches, and restrictions on the courage corruption. The Bank should go out scope of banking licenses. Progress in in- of its way to make its own studies and docu- creasing the effectiveness of bank supervision ments public and should encourage govern- and in not just adopting, but also enforcing, in- ments to report more regularly and more fully ternational accounting standards should be to their parliaments and to the public at large. among the triggers for financial sector lending. The use of information and communications · Financial sector staff should be involved in the technology has tremendous potential to in- design of all financial intermediary loans and crease public accountability. should ensure that the factors important to sus- · Given the alternative models for pension re- tainability are adequately taken into account. Mi- form, a clear strategic approach is needed, dif- crofinance projects should give greater attention ferentiated by the ability of the country to to developing savings services and should in- administer and fund the system. corporate a donor exit strategy from the start. · Improved commercial performance and cor- · Reform of social assistance programs (other porate and sectoral governance should be the than pensions) should include capacity building primary objectives for enterprises in the energy to help national institutions analyze needs, de- sector. The sequencing of reforms, including velop a policy consensus, and improve targeting the feasibility of immediate privatization, de- of benefits; administrative reforms to improve pends on country circumstances. Some oper- collections, targeting and efficiency; and actions ational guidance is needed on what sequence in areas that have proven to be barriers to social of reforms and interventions works best in protection reform in virtually every transition particular country situations. economy--labor laws that encourage labor Chapter 2 also identified a number of other hoarding among declining firms and discourage areas that warrant greater attention: hiring among expanding firms, strategies for · Additional efforts are needed to assess and sharing fiscal and policy burdens of assistance improve the business climate, particularly by programs among different levels of government, removing barriers to the entry of new firms and and problems in coverage and administration creating incentives for firms to move out of the caused by the growth of informal sectors. informal sector; providing a capable, trans- · Energy sector reform is not in itself sufficient to parent public sector; and strengthening the deal with all the problems affecting the sector, financial sector. suchastheeliminationofsubsidiestoenergysec- · The emphasis in future privatizations should, tor entities; increasing discipline in metering, when circumstances permit, be on more meas- billing, and collecting payments; reforming pric- ured, better prepared transactions and on help- ing policies; and closing uneconomic energy ing governments follow a transparent, production facilities. A blend of instruments, in- competitive process open to foreign partici- cluding investment, adjustment, technical assis- pation. For firms that continue to drain pub- tance, and programmatic lending, as well as ESW, lic resources and whose sale and restructuring can support the necessary elements of reform. 4 2 ANNEXES ANNEX A: SUPPLEMENTARY TABLES A.1: Number of IBRD/IDA Approved Projects for Transition Countries, FY89­03 A.2: IBRD/IDA Commitments to Transition Countries, by Instrument, FY89­03 A.3: IBRD/IDA Commitments to Transition Countries, by Sector, FY89­03 A.4: Total Receipts by Source, Official and Private, 1989­01 A.5: GDP Per Capita of Transition Countries, FY89­02 A.6: Social Indicators A.7: Progress in Transition by Country, 1994­03 A.8: CAE Ratings for Transition Countries through FY03 A.9: OED Project Ratings by Country, Approved FY89­03 A.10: At-Risk Ratings for Transition Countries, February 2004 A.11: OED Project Ratings in Transition Countries by Sector, Approved FY89­03 A.12: Comparison of Bankwide and ECA Ratings by Sector, Approved FY89­03 A.13: Quality of Economic and Sector Work A.14: IFC Activities in Transition Countries, FY90­03 A. IFC Approvals and Net Commitments by Country, FY90­03 B. IFC Technical Assistance, FY90­03 A.15: MIGA Guarantees by Country, FY90­02 4 5 E C O N O M I E S I N T R A N S I T I O N N u m b e r o f I B R D / I D A A p p r o v e d P r o j e c t s f o r T a b l e A . 1 T r a n s i t i o n C o u n t r i e s , F Y 8 9 ­ 0 3 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 CEE 3 8 13 10 15 19 17 21 26 33 29 23 26 18 17 Baltic States 3 4 8 5 7 1 5 4 3 3 1 Russia 4 6 9 9 8 3 3 2 5 2 5 Other CIS 4 12 22 24 24 28 34 14 18 17 19 Total 3 8 13 10 26 41 56 59 65 65 71 43 52 40 42 Source: World Bank data. I B R D / I D A C o m m i t m e n t s t o T r a n s i t i o n T a b l e A . 2 C o u n t r i e s , b y I n s t r u m e n t , F Y 8 9 ­ 0 3 Adjustment Investment Total Country # Projects $ million # Projects $ million # Projects $ million Central and Eastern Europe Albania 7 170 42 530 49 700 Bosnia-Herzegovina 6 339 36 495 42 834 Bulgaria 11 1,051 19 751 30 1,801 Croatia 2 297 18 740 20 1,037 Czech Republic 1 450 2 326 3 776 Hungary 5 1,025 19 1,677 24 2,702 Macedonia, FYR 6 319 19 311 25 631 Poland 7 1,820 30 3,565 37 5,385 Romania 6 1,680 32 2,120 38 3,800 Slovak Republic 2 257 3 84 5 341 Slovenia 1 80 4 98 5 178 Total 54 7,488 224 10,696 278 18,184 Baltic States Estonia 1 30 7 121 8 151 Latvia 4 166 15 250 19 416 Lithuania 3 239 14 252 17 491 Total 8 434 36 623 44 1,058 Russia Russian Federation Total 9 6,320 47 6,821 56 13,141 Other CIS Armenia 6 335 23 401 29 736 Azerbaijan 3 202 17 395 20 597 Belarus 1 120 3 73 4 193 Georgia 5 280 27 445 32 725 Kazakhstan 5 1,070 18 854 23 1,924 Kyrgyz Republic 8 346 19 304 27 649 Moldova 5 295 16 234 21 529 Tajikistan 4 167 14 155 18 322 Turkmenistan 3 90 3 90 Ukraine 7 2,260 19 1,263 26 3,523 Uzbekistan 1 160 12 439 13 599 Total 45 5,234 171 4,653 216 9,887 Overall result 116 19,477 478 22,793 594 42,269 Source: World Bank data. 4 6 A N N E X A : S U P P L E M E N TA R Y TA B L E S I B R D / I D A C o m m i t m e n t s t o T r a n s i t i o n T a b l e A . 3 C o u n t r i e s , b y S e c t o r , F Y 8 9 ­ 0 3 By number of projects By $ million Sector # Projects Sector $ million 1 Rural 84 1 Economic policy 10,638 2 Energy and mining 66 2 Energy and mining 7,061 3 Economic policy 66 3 Transport 4,077 4 Transport 56 4 Rural 3,957 5 Public sector governance 55 5 Financial 3,571 6 Social protection 52 6 Public sector governance 2,597 7 Financial sector 37 7 Private sector development 2,431 8 Health, nutrition and population 35 8 Social protection 2,305 9 Private sector development 35 9 Health, nutrition and population 1,468 10 Education 27 10 Urban development 1,327 11 Urban development 25 11 Education 1,162 12 Water supply and sanitation 23 12 Water supply and sanitation 759 13 Environment 20 13 Global information/communications technology 483 14 Global information/communications technology 7 14 Environment 393 15 Social development 6 15 Social development 42 Total 594 Total 42,269 Source: World Bank data. 4 7 E C O N O M I E S I N T R A N S I T I O N 0 126 845 147 803 896 593 otalT 8,822 5,272 7,249 1,782 5,720 1,265 18,309 43,270 11,337 63,785 25,521 18,352 53,150 156,262 189,636 0 4 77 26 73 89 87 686 416 688 512 190 160 577 262 102 2001 3,773 4,538 2,807 4,085 18,074 19,946 0 41 12 25 70 81 860 114 118 727 297 250 161 115 2000 ­160 1,779 ­172 2,652 2,463 3,163 23,823 24,770 0 81 85 244 905 313 425 -45 91 70 72 975 176 118 126 1999 1,348 2,350 4,096 1,467 3,005 25,503 27,068 0 02 73 11 55 243 624 721 501 837 206 173 178 1998 1,608 7,360 1,171 9,764 ­363 3,938 5,024 Private, 24,085 26,653 0 52 54 11 48 913 511 922 435 717 786 158 124 221 and 1997 3,148 4,128 2,682 8,177 1,627 3,681 11,663 16,314 0 0 83 21 59 52 543 893 122 456 663 872 145 153 1996 9,731 2,271 3,508 1,096 5,194 1,540 3,484 13,520 0 11 49 22 64 87 606 852 836 214 728 645 996 110 110 Official 1995 3,065 1,040 3,214 5,138 2,722 11,909 16,679 0 22 44 77 11 3 67 41 71 1994 614 190 285 829 459 5,443 1,334 1,339 8,944 4,318 4,735 1,831 3,274 Source, 0 12 62 3 0 0 968 312 431 123 773 -31 -18 35 1993 4,812 3,218 9,348 8,406 1,729 2,881 3,640 10,692 by milllion) (1960­01). 0 0 62 1 4 1 1- 2- 0 0 4 163 329 1992 8,016 1,103 1,018 5,412 1,745 7,163 9,420 9,750 10,326 Recipients Aid to (US$ 0 0 0 32 0 0 0 0 0 0 1 1991 255 825 822 561 5,617 6,719 1,383 9,101 1,933 Flows 11,036 Receipts 0 0 0 93 0 0 0 0 0 0 0 0 0 Financial 1990 186 254 254 289 289 of 7,579 1,537 9,340 otal T 1989­01 7 0 0 0 0 0 3 0 0 0 0 0 0 0 0 0 0 0 0 0 Distribution 1989 10 Baltics Geographical A.4 and CD-ROM: Europe members able bilateral B ESAF multilaterals members bilateral B ESAF multilaterals CIS members bilaterals B ESAF multilaterals OECD/DAC T D & otalT D & otalT D & otalT Central EC+EU Other IBRD+IDA+IFC EBRD AS. SAF Other Russia EC+EU Other IBRD+IDA+IFC EBRD AS. SAF Other Other EC+EU Other IBRD+IDA+IFC EBRD AS. SAF Other Source: 4 8 A N N E X A : S U P P L E M E N TA R Y TA B L E S 505 537 411 729 453 525 2002 1,071 1,671 1,733 5,549 5,691 5,735 2,418 3,762 1,611 4,595 5,000 3,100 2,659 2,734 1,495 1,579 1,893 1,787 1,038 12,326 460 505 417 678 420 986 511 2001 1,032 1,632 1,652 5,269 5,574 5,540 2,415 3,716 1,541 4,405 4,708 2,893 2,488 2,609 1,317 1,502 1,717 1,587 11,978 979 422 479 399 638 384 896 497 2000 1,595 1,547 5,078 5,381 5,372 2,541 3,678 1,462 4,267 4,464 2,666 2,320 2,471 1,193 1,429 1,497 1,354 11,653 914 383 468 382 623 357 840 485 1999 1,551 1,453 4,943 5,207 5,136 2,441 3,536 1,451 4,180 4,148 2,476 2,215 2,255 1,114 1,347 1,342 1,194 11,160 853 360 453 374 643 346 835 472 1998 1,455 1,412 4,961 5,177 4,908 2,351 3,396 1,466 4,129 4,143 2,388 2,241 2,131 1,066 1,298 1,287 1,057 10,624 789 979 331 439 372 686 335 845 460 1997 1,298 1,349 4,785 5,226 4,662 2,286 3,242 1,536 3,977 3,921 2,242 2,074 2,235 1,192 1,293 1,017 10,218 841 981 934 315 396 343 673 334 864 445 1996 1,421 4,402 5,288 4,441 2,270 3,038 1,632 3,771 9,744 3,531 2,035 1,925 2,208 1,066 1,258 1,179 Countries 761 546 868 315 355 325 713 407 953 446 1995 1,560 4,059 5,037 4,367 2,263 2,868 1,564 3,570 9,419 3,348 1,950 1,824 2,280 1,033 1,240 1,296 FY89­02 1994 687 425 799 361 344 348 721 472 459 1,511 3,686 4,731 4,289 2,311 2,684 1,457 3,363 9,053 3,154 1,941 1,706 2,375 1,149 1,332 1,438 1,076 ransition T .. 621 745 455 382 435 611 493 1993 1,477 3,481 4,608 4,153 2,369 2,557 1,399 3,211 8,694 3,151 1,900 1,878 2,713 1,300 1,507 1,044 1,807 1,390 of US$), .. 563 804 601 538 514 740 517 1992 1,487 3,783 4,588 4,165 2,571 2,469 1,377 3,346 8,331 3,351 2,193 2,231 2,967 1,410 1,656 1,056 2,088 1,621 1995 Capita .. .. 1991 607 973 603 596 1,587 4,282 4,682 4,288 2,765 2,414 1,484 3,603 8,784 4,175 3,328 2,830 3,473 1,367 1,563 1,756 1,486 1,063 2,330 1,800 Per .. .. 1990 842 665 611 1,716 5,438 5,270 4,858 2,741 2,604 1,702 4,217 9,659 4,514 3,703 3,005 3,666 1,542 1,583 1,232 1,985 1,769 1,179 2,569 1,969 capita. GDP (constant .. .. .. .. .. .. .. .. .. .. per 1989 942 642 614 1,855 5,018 1,808 4,322 4,861 3,731 3,794 1,449 2,094 1,817 1,215 2,614 2,108 GDP 2003. lowest August the of A.5 of as Eastern year Herzegovina FYR The name database and and Federation able Republic Republic States CIS Republic bold: WDI In T Country Central Europe Albania Bosnia Bulgaria Croatia Czech Hungary Macedonia, Poland Romania Slovak Slovenia Baltic Estonia Latvia Lithuania Russia Russian Other Armenia Azerbaijan Belarus Georgia Kazakhstan Kyrgyz Moldova ajikistanT urkmenistanT Ukraine Uzbekistan Note: Source: 4 9 E C O N O M I E S I N T R A N S I T I O N T a b l e A . 6 S o c i a l I n d i c a t o r s Basic education Poverty gross enroll- headcount Gini coefficient Life expectancy Mortality rate, ment rate index for income at birth, infant (per (% of 6/7­14/15 ($2.15/day), per capita total (years) 1,000 live births) age group) latest year 1987­ 1996­ 1989­ 1996­ Country 1995­99 90 99 1990 2001 1990 2001 90 97 Albania 11.5 .. 0.27 72 74 37 23 90.8 87.6 Armenia 43.5 0.27 0.59 72 74 50 31 95.5 82.9 Azerbaijan 23.5 .. .. 71 65 84 77 89.5 96.6 Belarus 1 0.23 0.28 71 68 18 17 95.8 94.1 Bosnia and Herzegovina .. .. .. 71 74 18 15 .. .. Bulgaria 3.1 0.23 0.41 71 72 15 14 98.4 94.0 Croatia 0.2 0.36 0.35 72 74 11 7 96.0 89.0 Czech Republic 0 0.19 0.25 72 75 11 4 97.6 99.1 Estonia 2.1 0.24 0.37 69 71 12 11 96.2 93.7 FYR Macedonia 6.7 .. 0.37 72 73 32 22 89.4 86.9 Georgia 18.9 0.29 0.43 72 73 24 24 95.2 80.7 Hungary 1.3 0.21 0.25 69 72 15 8 99.0 99.2 Kazakhstan 5.7 0.3 0.35 68 63 42 81 93.9 89.2 Kyrgyz Republic 49.1 0.31 0.47 68 66 68 52 92.5 89.2 Latvia 6.6 0.24 0.32 69 70 14 17 95.8 90.7 Lithuania 3.1 0.23 0.34 71 73 10 8 94.0 95.8 Moldova 55.4 0.27 0.42 68 67 30 27 95.8 91.6 Poland 1.2 0.28 0.33 71 74 19 8 97.9 98.0 Romania 6.8 0.23 0.3 70 70 27 19 93.6 95.0 Russian Federation 18.8 0.26 0.47 69 66 17 18 93.0 90.8 Slovak Republic 2.6 .. .. 71 73 12 8 96.8 96.3 Slovenia 0 0.22 0.25 73 76 8 4 96.1 99.8 Tajikistan 68.3 0.28 0.47 69 67 98 91 94.1 85.5 Turkmenistan 7 0.28 0.45 66 65 80 69 94.3 83.1 Ukraine 3 0.24 0.33 70 68 18 17 92.8 90.7 Uzbekistan .. .. .. 69 67 53 52 92.2 89.7 Sources: Poverty headcount and Gini coefficient from World Bank 2000c. Life expectancy and mortality rate from WDI. Enrollment rates from World Bank 2003. 5 0 A N N E X A : S U P P L E M E N TA R Y TA B L E S 03 2 2+ 2- 1+ 2+ 3- 3- 3 3+ 2 2 2+ 4- 2+ 1+ 3- 3- 2 3+ 3 2+ 2+ 3 1+ 1 2 2- 20 ture reform frastructurenI Infrastruc- 1 1+ 1 1 1 1+ 2- 2+ 2 1+ 1+ 1 3- 1 1+ 2 1 1 2 1 2- 1 2- 1 1 1 1 1994 2- 2 2- 2 2- 2+ 3- 3 3+ 2 2- 2- 4- 2+ 2 3 3 2 4- 2 3- 3- 3- 1 1 2 2 2003 markets and Securities non-bank financial institutions 1 1 1 2 1 1 2 3- 2- 1 1 1 2 2- 1 2 2 2 2 2 2- 3- 3- 1 1 2- 2 1994 institutions 2+ 2+ 2+ 2- 2+ 3+ 4- 4- 4- 2+ 3 2+ 4 3 2+ 4- 3 2+ 3+ 3- 2 3+ 3+ 2- 1 2+ 2- 2003 Financial and Banking reform rate interest 2 1 1 1 1 2 3- 3 3 1 2 1 3 1 2 3 2 2 3 2 2 3- 3 1 1 1 1 liberalization 1994 2- 2 2 2 1 2+ 2+ 3 3- 1 2 2 3 2 2 3- 3 2 3 2+ 2+ 3 3- 2- 1 2+ 2 2003 policy 1 1 1 2 1 2 1 3- 2 1 1 1 3 2 2 2 2 2- 3 1 2 3 2 2 1 2 2 Competition 1994 1994­03 trade 4+ 4+ 4- 2+ 4- 4+ 4+ 4+ 4+ 3+ 4+ 4+ 4+ 3+ 4+ 4+ 4+ 4+ 4+ 4 3+ 4+ 4+ 3+ 1 3 2- , 2003 and and radeT foreign system exchange 4 2 1 1 1 4 4 4 4 1 4 1 4+ 2 3 4 4 2 4 4 3 4 4 1 1 1 2 1994 Markets 4- 4+ 4 3- 4 4+ 4 4+ 4 4 4 4+ 4+ 4 4+ 4+ 4+ 4- 4+ 4+ 4 4+ 4 4- 3- 4 3- 2003 Country Price liberalization 1994 4- 4- 4- 3- 1 4 4 4 4 3- 4 4- 4+ 3- 4+ 4+ 4 4- 4 4 4- 4 4- 2+ 2+ 3- 4- by 2 2+ 2+ 1 2 3- 3- 3+ 3+ 2 2+ 2 3+ 2 2 3 3 2- 3+ 2 2+ 3 3 2- 1 2 2- 2003 and 2 1 1 1 1 2 2 3 3 1 2 1 3 1 2 2 2 2 3 2 2- 3 3- 1 1 1 1 enterprise Governance restructuring 1994 4 4- 4- 2+ 3 4- 4+ 4+ 4+ 3 4 4 4+ 4 4 4+ 4+ 3+ 4+ 4- 4 4+ 4+ 4- 2 4 3 2003 ransition Small-scale 3 2+ 1 2 2 2 4 4 4 3 4 2 4- 2+ 4 4 4 2 4 2+ 3 4 4 2 1 2 3 Enterprises privatization 1994 T 2+ 3+ 2 1 2+ 4- 3+ 4 4 2+ 3 3+ 4 3 3 3+ 4- 3 3+ 3+ 3+ 4 3 2+ 1 3 3- 2003 in 1 1 1 2- 1 2 2 4 3 1 2 1 3 2 3 2 3 2 3 2 3 3 2 1 1 1 2 Large-scale privatization 1994 75 70 60 20 45 70 60 80 80 40 60 65 80 65 60 70 75 50 75 65 70 80 65 50 25 65 45 of 2002 (EBRD %) Private sector estimate, share GDP 1994 50 40 20 15 40 40 65 55 35 20 55 20 30 55 50 20 55 35 50 55 30 15 15 30 20 Progress 3.4 3.0 8.1 4.3 8.1 4.6 1.4 8.6 2.0 5.4 4.7 2.4 3.7 4.3 5.4 2.0 6.2 5.4 2001 10.0 10.3 10.0 14.9 38.7 22.3 49.3 25.0 Population (milions) 145.4 A.7 Herzegovina data. Federation and able Republic Republic Republic EBRD T ugoslaviaY Macedonia Country Albania Armenia Azerbaijan Belarus Bosnia Bulgaria Croatia Czech Estonia FR FYR Georgia Hungary Kazakhstan Kyrgyz Latvia Lithuania Moldova Poland Romania Russian Slovak Slovenia ajikistanT urkmenistanT Ukraine Uzbekistan Source: 5 1 E C O N O M I E S I N T R A N S I T I O N C A E R a t i n g s f o r T r a n s i t i o n C o u n t r i e s T a b l e A . 8 t h r o u g h F Y 0 3 Institutional Country Dates Outcome development impact Sustainability Albania 1992­97 MU M U Azerbaijan 1995­98 MU M L Bulgaria 1991­97 U NR NR 1998­01 S M L Kazakhstan 1990­99 MS M U Kyrgyz Republic 1993­00 MS S U Lithuania 1991­02 S H HL Poland 1989­96 S S L Russia 1992­98 U NR NR 1999­01 S M L Ukraine 1992­98 MU M U Note: Outcome: S = satisfactory, MS = moderately satisfactory, MU = moderately unsatisfactory, U = unsatisfactory. Institutional development impact: H = high, S = substantial, M = modest. Sustainability: HL = highly likely, L = likely, U = uncertain. NR = not rated. Source: OED. 5 2 A N N E X A : S U P P L E M E N TA R Y TA B L E S O E D P r o j e c t R a t i n g s b y C o u n t r y , T a b l e A . 9 A p p r o v e d F Y 8 9 ­ 0 3 Total a Sustaina- Inst. dev. Total a Sustaina- Inst. dev. evaluated Outcome bility impact evaluated Outcome bility impact Country (no.) (% sat.) (% likely) (% subst.) ($m) (% sat.) (% likely) (% subst.) Central and Eastern Europe Albania 25 84 68 48 337.8 88 67 45 Bosnia-Herzegovina 26 100 83 42 506.0 100 80 56 Bulgaria 20 80 78 53 1,049.0 95 83 43 Croatia 10 90 90 50 482.0 83 98 45 Czech Republic 6 100 83 67 661.7 100 100 98 Hungary 24 88 91 58 2,003.0 96 94 71 Macedonia, FYR 14 79 83 54 403.1 95 73 49 Poland 28 79 74 57 3,214.4 87 90 69 Romania 15 80 87 53 2,003.7 71 76 32 Slovak Republic 3 100 67 100 130.4 100 100 100 Slovenia 5 100 100 75 130.9 100 100 100 Total/ average 176 86 81 54 10,921.9 89 87 60 Baltic States Estonia 7 100 100 86 109.6 100 100 74 Latvia 11 82 90 82 296.5 95 97 77 Lithuania 11 100 90 80 267.5 100 90 74 Total/ average 29 93 93 82 673.5 98 95 75 Russia Russian Federation 26 52 90 36 7,124.9 40 89 23 Total/ average 26 52 90 36 7,124.9 40 89 23 Other CIS Armenia 15 87 86 67 466.5 84 90 75 Azerbaijan 3 67 50 0 148.5 48 44 0 Belarus 5 60 40 60 158.0 5 21 5 Georgia 15 80 93 60 417.1 57 84 47 Kazakhstan 16 81 69 69 1,157.6 97 94 96 Kyrgyz Republic 12 83 58 42 363.3 95 48 39 Moldova 10 70 50 20 316.4 78 46 18 Tajikistan 7 71 57 29 145.3 63 82 42 Turkmenistan 1 0 0 0 21.1 0 0 0 Ukraine 16 87 60 47 2,434.0 96 63 46 Uzbekistan 4 67 33 0 245.6 35 9 0 Total/ average 104 78 66 48 5,873.4 84 67 52 ECA transition countries b 335 82 78 53 24,594 74 83 48 World Bank overall 2,125 74 62 43 178,811 78 70 46 Low-income ECA 51 76 65 36 1,636 66 53 28 World Bank overall 1,022 66 49 35 69,564 74 61 36 Middle-income ECA 279 83 80 56 22,827 74 85 49 World Bank overall 1,076 81 73 51 108,703 81 76 53 a. The total commitments or number of projects evaluated is not equal to the commitments or projects rated, since some evaluated projects are not rated in all categories. Therefore this column is not necessarily the denominator for the subsequent columns. b. ECA countries excluding Cyprus, Kosovo, Portugal, Serbia & Montenegro, Turkey, and Yugoslavia. Source: World Bank data as of February 2004. 5 3 E C O N O M I E S I N T R A N S I T I O N A t - R i s k R a t i n g s f o r T r a n s i t i o n C o u n t r i e s , T a b l e A . 1 0 F e b r u a r y 2 0 0 4 Net Commitment Number of commitment, Projects Projects at risk, Commitment Country projects millions US$ at risk at risk, % millions US$ at risk, % World Bank total 1,323 89,852 252 19 15,596 17 ECA transition countries 243 9,276 43 18 1,692 18 Central and Eastern Europe Albania 20 268 2 10 23 9 Bosnia-Herzegovina 19 296 0 0 0 0 Bulgaria 8 241 1 13 14 6 Croatia 11 448 1 9 5 1 Hungary 1 32 0 0 0 0 Macedonia, FYR 8 106 1 13 13 12 Poland 9 994 1 11 38 4 Romania 19 1,145 4 21 175 15 Slovak Republic 5 282 0 0 0 0 Slovenia 2 25 0 0 0 0 Total/ average 102 3,836 10 10 268 7 Baltic States Latvia 6 78 0 0 0 0 Lithuania 5 106 1 20 20 19 Total/ average 11 184 1 9 20 11 Russia Russian Federation 24 2,043 9 38 779 38 Total/ average 24 2,043 9 38 779 38 Other CIS Armenia 13 230 2 15 26 11 Azerbaijan 13 321 1 8 30 9 Belarus 1 23 0 0 0 0 Georgia 16 297 5 31 111 37 Kazakhstan 7 546 0 0 0 0 Kyrgyz Republic 15 272 3 20 70 26 Moldova 12 150 1 8 11 7 Tajikistan 10 166 4 40 95 57 Turkmenistan 0 0 0 0 Ukraine 11 889 2 18 80 9 Uzbekistan 8 317 5 63 202 64 Total/ average 106 3,213 23 22 626 19 Source: World Bank data. 5 4 A N N E X A : S U P P L E M E N TA R Y TA B L E S O E D P r o j e c t R a t i n g s i n T r a n s i t i o n T a b l e A . 1 1 C o u n t r i e s b y S e c t o r , A p p r o v e d F Y 8 9 ­ 0 3 Institu- Institu- tional tional develop- develop- Total Sustaina- ment Sustaina- ment evaluated Outcome bility impact Total Outcome bility impact (# (% (% (% evaluated (% (% (% Sector Board projects) satisfactory) likely) substantial) (US$ million) satisfactory) likely ) substantial) Education 11 82 100 55 347 98 100 91 Energy and mining 41 80 89 50 4,419 74 81 57 Environment 20 95 80 80 78 100 93 100 Economic policy 57 74 77 39 8,556 62 84 29 Financial sector 25 83 79 54 1,787 94 91 81 Global information/ communications technology 6 100 100 67 287 100 100 90 Health, nutrition and population 14 86 86 50 657 93 93 32 Public sector governance 26 92 85 73 1,372 97 82 76 Private sector development 20 80 68 58 1,506 92 91 85 Rural sector 43 72 62 49 2,050 75 55 36 Social protection 26 85 82 62 1,488 44 96 36 Transport 26 88 79 60 1,593 76 87 45 Urban development 12 82 56 18 314 89 71 8 Water supply and sanitation 8 86 60 29 139 92 87 36 Overall result, ECA transition countries 335 82 78 53 24,594 74 83 48 World Bank overall 2,125 74 62 43 178,811 78 70 46 Source: World Bank data as of February 2004. 5 5 E C O N O M I E S I N T R A N S I T I O N C o m p a r i s o n o f B a n k w i d e a n d E C A R a t i n g s T a b l e A . 1 2 b y S e c t o r ( p e r c e n t o f n e t c o m m i t m e n t s ) , A p p r o v e d F Y 8 9 ­ 0 3 Sustaina- Sustaina- ID impact , ID impact, Outcome, Outcome, bility, bility, % substan- % substan- % sat % sat % likely % likely tial tial Sector Board (Bank) (ECA) (Bank) (ECA) (Bank) (ECA) Education 84 98 74 100 43 91 Energy and mining 71 74 64 81 45 57 Environment 62 100 69 93 39 100 Economic policy 68 62 64 84 34 29 Financial sector 81 94 77 91 55 81 Global information/communications technology 95 100 97 100 64 90 Health, nutrition and population 80 93 78 93 50 32 Public sector governance 86 97 84 82 55 76 Private sector development 88 92 81 91 57 85 Rural sector 79 75 63 55 49 36 Social development 100 a 100 a 100 a Social protection 88 44 76 96 45 36 Transport 90 76 77 87 63 45 Urban development 83 89 71 71 28 8 Water supply and sanitation 59 92 37 87 25 36 Overall result 78 74 70 83 46 48 a. No projects in ECA. Source: World Bank data as of February 2004. 5 6 A N N E X A : S U P P L E M E N TA R Y TA B L E S T a b l e A . 1 3 Q u a l i t y o f E c o n o m i c a n d S e c t o r W o r k Satisfactory or better (percent)a FY98 FY99 FY00 FY01 FY02 Bankwide 72 73 86 90 92 AFR 56 47 85 85 94 EAP 75 82 91 96 88 ECAb 82 69 90 100 100 LCR 72 89 82 81 77 MNA 100 94 100 89 100 SAR 90 100 78 83 100 Tasks (number) Bankwide 40 60 65 70 75 AFR 11 13 9 11 9 EAP 4 11 12 12 10 ECAb 9 16 16 16 22 LCR 8 8 12 11 16 MNA 2 7 6 8 8 SAR 6 5 10 12 10 a. Weighted average to account for oversampling of costlier tasks. b. Includes four tasks in Turkey. Source: World Bank data. 5 7 E C O N O M I E S I N T R A N S I T I O N all 0.9 2.0 5.4 4.1 5.4 1.9 6.1 7.1 1.5 0.5 0.2 3.9 0.4 1.8 7.4 1.3 1.7 0.9 0.0 0.7 1.3 3.7 1.5 1.6 7 10.7 46 27.9 47 of 100 Percent transition volume By 6 0 commitments 33 70 69 55 19 14 65 46 60 32 26 46 51 58 13.3 Sub- total 190 144 379 192 217 252 136 263 984 129 239 1,619 1,676 3,534 net 26,594 IFC all 1.1 5.0 5.3 3.6 5.0 5.6 3.9 7.5 6.7 1.4 1.4 0.6 4.2 0.3 3.9 6.1 1.7 3.1 2.8 0.0 1.7 3.9 4.7 1.4 1.4 8 of 47 17.8 46 Percent 100 transition number of 4 5 5 2 1 6 0 6 5 5 By 18 19 13 18 20 14 27 24 15 14 22 11 64 10 14 17 72 14.7 No. 167 165 359 projects 2,434 all 2.8 1.6 4.2 2.9 9.1 6.4 1.4 7.4 6.7 2.7 0.4 0.2 2.5 0.3 1.3 8.4 0.8 1.1 0.5 0.0 1.1 2.6 2.5 1.2 2.2 6 amounts. 46 29.8 49 of 100 FY90­03 Percent transition volume 3 cancellation 92 82 24 11 16 74 48 64 29 67 71 13.7 of By 163 246 171 535 375 434 393 156 145 490 155 145 130 346 (US$M) 2,671 1,749 2,851 5,868 net Approvals 42,951 are approvals net all 2.8 3.7 4.6 3.2 4.6 6.0 3.0 7.6 5.8 2.1 1.4 0.7 3.0 0.5 3.0 7.4 2.1 1.4 2.5 0.5 1.9 5.1 3.7 1.4 2.1 7 of 45 19.9 48 100 mmitments IFC Percent transition co Countries, number Net of By 12 61 9 6 3 2 20 14 20 26 13 33 25 13 31 9 6 32 86 11 2 8 22 61 6 9 13 14 2003. No. 194 207 432 projects 3,075 30, June 8 3 8 0 0 0 2 0 0 0 9 64 72 48 25 25 45 19 47 7.7 IFC, 530 123 153 240 100 272 393 102 893 Including B-loans 1,274 2,241 29,065 from are all ransition 2.8 1.2 3.9 2.7 6.1 1.3 7.2 7.8 2.0 0.4 0.1 3.0 0.2 0.9 9.4 0.6 1.1 0.4 0.0 0.8 3.2 1.9 1.4 1.8 5 data volume of 13.1 49 26.4 46 T Percent 100 By transition in 33 11 61 47 05 98 92 3 76 Commitment 11.5 (US$M) 227 100 318 219 498 107 587 633 159 245 762 257 154 116 149 420 Approvals 1,065 3,945 2,141 3,745 8,109 70,526 approvals amounts. FY90­03, 2 2 4 4 5 5 1 8 7 1 2 0 1 0 0 7 1 1 0 0 0 5 1 2 2 5 41 14 29 75 10.4 gross 718 Including B-loans guarantee IFC Country include all 2.8 3.7 4.6 3.2 4.6 6.0 3.0 7.6 6.0 2.1 1.4 0.7 3.0 0.5 3.0 7.6 2.1 1.4 2.5 0.5 1.8 5.1 3.7 1.4 2.1 7 Activites by number of 45 20.0 48 Percent 100 loans By transition of 9 6 3 2 9 6 2 8 6 9 Approved IFC No. rojectsp 12 16 20 14 20 62 31 33 26 13 13 33 87 11 22 61 31 14.1 195 209 435 3,075 Commitments BMS. from Net are IFC and Europe Russia of data A.14 & % Region/ as Central FSU Baltics Approval Approvals Europe Republic Republic Russia Republic OEG; able & transition IFC IFC T A: ransitionT country Central Albania Bosnia Bulgaria Croatia Czech Hungary Macedonia Poland Romania Slovak Slovenia Subtotal, FSU Armenia Azerbaijan Belarus Georgia Kazakhstan Kyrgyz Moldova Russia ajikistanT urkmenistanT Ukraine Uzebekistan Subtotal, Baltics Estonia Latvia Lithuania Subtotal, otalT otalT ransitionT Sources: 5 8 A N N E X A : S U P P L E M E N TA R Y TA B L E S I F C A c t i v i t e s i n T r a n s i t i o n C o u n t r i e s , T a b l e A . 1 4 F Y 9 0 ­ 0 3 ( c o n t i n u e d ) B: IFC Technical Assistance, FY90­03 Donor-funded TA Private Sector Advisory Foreign Investment (including Services in Policy Advisory Service TATF) Transactions (PSAPT) (FIAS) By volume By volume By number Transition Region/ Approvals Percent of all Approvals Percent of all No. of Percent of all country (US$M) transition (US$M) transition projects transition Central Europe Albania 415,370 0 -- -- 3 3 Bosnia 4,735,400 3 -- -- 4 4 Bulgaria 822,000 1 77,777 1 7 7 Croatia 965,510 1 -- -- 7 7 Czech Republic 1,976,000 1 2,668,262 20 4 4 Hungary 1,613,600 1 62,630 0 4 4 Macedonia 1,407,460 1 -- -- 3 3 Poland 1,635,000 1 3,687,916 27 1 1 Romania 4,489,300 3 3,877,495 29 7 7 Slovak Republic 332,029 0 -- -- 3 3 Slovenia 52,700 0 312,363 2 3 3 Regional (including SEED) 12,745,000 8 -- -- -- -- Subtotal, Central Europe 30,685,369 20 10,686,442 79 46 44 FSU & Russia Armenia 1,064,670 1 214,980 2 6 6 Azerbaijan 966,160 1 -- -- 2 2 Belarus 8,890,000 6 -- -- 1 1 Georgia 824,850 1 571,528 4 5 5 Kazakhstan 913,000 1 28,008 0 3 3 Kyrgyz Republic 643,980 0 -- -- 7 7 Moldova 1,802,970 1 -- -- 2 2 Russia 56,758,430 36 521,259 4 10 10 Tajikistan 3,325,860 2 -- -- -- -- Turkmenistan 60,000 0 -- -- -- -- Ukraine 39,637,379 25 1,441,511 11 2 2 Uzbekistan 1,404,900 1 -- -- 1 1 Regionala 2,559,000 2 -- -- -- -- Subtotal, FSU & Russia 118,851,199 76 2,777,286 21 39 38 Baltics Estonia 600,000 0 -- -- 3 3 Latvia 327,500 0 -- -- 7 7 Lithuania 1,349,150 1 -- -- 3 3 Regional 1,547,500 1 -- -- -- -- Subtotal, Baltics 3,824,150 2 -- -- 13 13 Europe, regional 3,940,389 2 -- -- 2 2 Total transition 157,301,107 100 13,463,728 100 104 100 a. Amounts raised through Private Enterprise Partnerships (PEPs) since FY01, totalling US$29 million, are distributed among individual PEP client countries. Source: OEG. 5 9 E C O N O M I E S I N T R A N S I T I O N T a b l e A . 1 5 M I G A G u a r a n t e e s b y C o u n t r y , F Y 9 0 ­ 0 2 Maximum FDI aggregate Country facilitated Contracts liability (% of (US$ Country (% Country Projects issued (US$ thousands) total) thousands) of total) Albania 2 2 8,585 0.42 10,700 0.21 Armenia 1 1 2,700 0.13 3,000 0.06 Azerbaijan 3 5 74,888 3.63 59,455 1.18 Bosnia and Herzegovina 7 20 96,391 4.67 62,676 1.24 Bulgaria 7 10 70,005 3.39 979,317 19.43 Croatia 2 3 75,712 3.67 68,285 1.36 Czech Republic 6 10 232,276 11.26 537,966 10.68 Georgia 1 1 3,402 0.16 2,130 0.04 Hungary 5 9 70,644 3.42 199,304 3.96 Kazakhstan 5 10 66,169 3.21 135,582 2.69 Kyrgyz Republic 3 7 109,980 5.33 360,089 7.15 Macedonia 1 1 19,164 0.93 30,740 0.61 Moldova 2 2 63,792 3.09 139,000 2.76 Poland 9 12 146,398 7.09 486,660 9.66 Romania 6 9 207,255 10.04 215,206 4.27 Russian Federation 20 30 617,538 29.93 1,353,672 26.86 Slovak Republic 4 8 91,565 4.44 201,474 4.00 Turkmenistan 1 1 8,000 0.39 13,800 0.27 Ukraine 2 2 49,000 2.37 70,000 1.39 Uzbekistan 1 2 50,000 2.42 110,000 2.18 Total 88 143 2,063,464 100.00 5,039,056 100.00 Total overall MIGA guarantees, FY90­02 376 597 11,056,000 45,822,247 Transition country (%) 23.4 24.0 18.7 11.0 Source: OEU, MIGA. 6 0 ANNEX B: CAE LESSONS AND NEW CASS Lesson Recent CASs ESW: Need more analytical work, especially Poverty Assess- CASs emphasize core ESW. ments (PAs) and Public Expenditure Reviews (PERs). Good Living Standards Measurement Study needed. Emphasize dissemination (inadequate in Poland, Bulgaria). Do not discuss dissemination or strategy to achieve im- pact on authorities. Sequence properly. Not done: big loans do not always follow important ESW (e.g., social sector work in Bosnia and Herzegovina, Azer- baijan; PER in Albania done after major Structural Ad- justment Credit dealing with public administration reform). ESW was properly sequenced in Armenia. Build domestic capacity. ESW as tool to build domestic capacity not discussed. Participation: Consult with stakeholders, explain to population how Bank Most CASs, especially from 2000+, developed in consul- strategy tries to alleviate poverty. tation. Client surveys/consultations show Bank has not yet been able to convincingly explain how the strategy will al- leviate poverty. Aid Coordination: Examine IMF role and show transparently in the CAS the All CASs discuss aid coordination. IMF role not high- areas supported by IMF, other donors, Bank. lighted. Need to encourage govt. management of aid coordination. No discussion of this in CASs. Lending Instruments, Project Design: Build ownership for investment lending by improving rel- CASs discuss portfolio performance, lessons, but do not evance and efficacy and developing project prioritization discuss how to improve relevance of projects. skills. Take better account of country-level relevance in compo- CASs do not discuss allocation of investments within proj- nents of investment projects (Kazakhstan urban transport, ects. Bulgaria health financed low-priority investments). Risk Assessment: Need more realism in assessing progress, risks, government Most CASs have very good discussion of risk to the Bank, commitment. especially Russia, Ukraine, Romania. Very transparent Need to improve contingency planning for risky countries about lack of political support for reform. Risk mitigation (Kyrgyz). strategy is defined solely in terms of lending volumes. 6 1 E C O N O M I E S I N T R A N S I T I O N Lesson Recent CASs In projects avoid broad Structural Adjustment Loans (SALs) Lending scenarios avoid SALs when uncertain commitment; if uncertain commitment; use floating tranches, Sectoral Ad- they do not suggest floating tranches or SECALs. justment Loans (SECALs) instead of SALs. Selectivity, Comparative Advantage: In choosing sectors for Bank lending, look at subsectors as All CASs say Bank will be selective, according to com- well (e.g., other donors active in transport, but Bank could parative advantage, but basically a list of where other have financed rural roads; other donors active in education, donors involved. Underlying theme is that Bank will stay so Bank stayed out, but not clear what others doing). out of infrastructure because other donors supporting it, but not clear if all subsectors relevant to constraints are covered. Good discussion of comparative advantage in Slovenia, Kazakhstan, Kyrgyz, Hungary. Capacity Building: Need to develop capacity for monitoring and evaluation and No discussion in any CAS of strategy to build domestic ca- for donor coordination. pacity for either area Monitorability of CAS: CAS benchmarks should be monitorable. Performance monitoring a separate section in most CASs. But indicators are not monitorable (e.g., reduction, steady improvement, continued progress). Very well done in Slovak Rep., Armenia, Kazakhstan. Need to say how will identify turning points in a country's CASs for Turkmenistan, Belarus say no new loans unless performance (for poor performers). policy performance improves. Belarus shifts focus to ESW, supervision. But monitoring system to identify turning points is not evident. Governance, Legal Reform, Institutions: Bank has paid insufficient attention to these areas. They CASs have substantial focus on governance, and greater are key to EU accession, and they are binding constraints attention than earlier to legal reform. in non-EU countries. Focus on broader governance and accountability arrange- CASs are focusing on broader governance issues, but not ments, not narrowly on PSM. clear what and where the weaknesses are in accounta- bility arrangements. The discussion across countries is vir- tually indistinguishable in diagnosis. Need more balance between PSM and PSD. CASs have very balanced discussion of PSM, PSD. Poverty, Gender: Need greater government commitment to poverty allevia- Govt. commitment to poverty alleviation is assumed, ex- tion, particularly in targeting social assistance to the vul- cept Kazakhstan, where a difference between govern- nerable. ment and Bank is noted. Link between poverty reduction and proposed actions is not stated. No discussion of potential social impact of policy reforms. Social protection discussion more extensive than health, education. Use existing work to inform design of projects on gender. No statement of which projects will mainstream gender. Design should include poverty identification and targeting. 6 2 A N N E X B : C A E L E S S O N S A N D N E W C A S S Lesson Recent CASs Decentralization: Need more advice on decentralization issues (Kazakhstan, Rarely discussed. Bulgaria devolved responsibility for social assistance to local governments, but it became a residual in the budget and exacerbated inter-regional inequalities). Privatization, PSD: Need more work on enabling environment, governance, legal CASs acknowledge that enforcement of laws and regu- and regulatory framework and its enforcement, judicial lations is weak and the judiciary ineffective, but the strat- reform, transparency in privatization, reduction in arbitrary egy to deal with these issues is not clear. tax laws. Mass privatization only for small enterprises; auction ap- Little discussion of privatization methods. proach in environment of weak corporate governance led No discussion of corporate governance. to asset stripping. Don't encourage management employee buyouts (MEBOs) (e.g., Bulgaria). Address fiscal aspects of privatization. Trying to restructure large SOEs without strategic investor involvement rarely works. Use full range of Bank Group instruments--IFC, MIGA, CASs describe what IFC, MIGA and Bank are doing, and Bank. have generic statements of how these activities comple- ment each other, but no specifics on how the three will work together in specific PSD areas. Apply lessons from IFC, MIGA experience. Results from PSD surveys, client surveys are noted, but nothing on actual transaction experiences of IFC, MIGA. Financial Sector: Needs greater attention. CASs give attention to financial sector. Avoid directed credit. No CAS suggests directed credit. Agriculture: Needs greater attention. Receiving more attention. Where vested interests dominate (Ukraine), with monop- Vested interests dominate in a number of transition sonistic/monopolistic powers, no adjustment lending. Focus economies, and adjustment lending is still given. on locally based integrated farm support projects. Beware privatization projects that lead to very small hold- ings. Infrastructure: Work with government to set up infrastructure privatiza- CASs emphasize regulatory frameworks before privatiza- tion program and related regulatory framework. Do not tion. work with dysfunctional public utilities. Need fundamen- Stopped working with dysfunctional public utilities in tal change in management, employee incentives, ac- early 1990s. countability structures. CASs discuss public administration reform, but not re- source based management or accountability. Energy: Needs greater attention, especially to get prices right. Persuade authorities that power sector needs to operate independently and commercially. Education: Relatively neglected. Source: ECA Region CASs and OED CAEs. 6 3 ANNEX C: PEOPLE INTERVIEWED1 Asad Alam Lead Economist, Poverty Reduction and Economic Management (ECSPE) James Anderson Economist, Poverty Reduction and Economic Management (ECSPE) Robert J. Anderson Former Lead Economist, ECAVP Emily Andrews Lead Economist (ECSHD) Laura Ard Lead Financial Sector Specialist, Financial Sector Operations and Policy Department (OPD) Asad Alam Sector Manager (ECSPE) Konstantin Atanesyan Consultant (ECSPE) Marie Bakker Lead Financial Sector Specialist, Private & Financial Sectors Development Sector Unit (ECSPF) Luca Barbone Country Director, Belarus, Moldova, Ukraine Sandra Bloemenkamp Senior Public Sector Management Specialist (ECSPE) Lilia Burunciuc Country Program Coordinator, Central Asia Country Unit (ECCU8) Henk Busz Sector Manager, Energy Unit, Europe and Central Asia Regional Office David Craig Country Director, Burkina Faso, Mali, Mauritania, São Tomé and Príncipe, (AFC15) Maria Dakolias Lead Counsel, Legal and Judicial Reform Unit (LEGLR) John Eriksson Consultant, Corporate Evaluations and Methods (OEDCM) Gabriella Ferencz Lead Financial Sector Specialist (OPD) Gary Fine Senior Private Sector Development Specialist, Private & Financial Sectors Development Sector Unit (ECSPF) Alexander Fleming Sector Manager, Finance and Private Sector Development, World Bank Institute (WBIFP) Louse Fox Lead Specialist (AFTPM) Michael Fuchs Lead Financial Specialist, Financial Sector Unit, Africa, Africa Technical Families (AFTFS) Kathryn Funk Country Officer, Albania Prem Garg Director, Quality Assurance Group (QAG) Jit Bahadur Gill Lead Public Sector Management Specialist (ECSPE) Roger Grawe Country Director, Czech Republic, Hungary, Moldova, Slovak Republic, Slovenia Cheryl Gray Sector Director (ECSPE) Poonam Gupta Senior Evaluation Officer, Country Evaluation and Regional Relations (OEDCR) Sanjeev Gupta Assistant Director, Fiscal Affairs Department, IMF John Hegarty Manager, Operations Policy and Services (ECSPS) Joel Hellman Senior Public Management Specialist (ECSPE) Jane Holt Sector Manager, Environment (ECSSD) 6 5 E C O N O M I E S I N T R A N S I T I O N Elliot Hurwitz Consultant, Country Evaluation and Regional Relations (OEDCR) Alma Kanani Senior Economist (ECSPE) Basil Kavalsky Former Country Director, Armenia, Belarus, Estonia, Georgia, Latvia, Lithuania, Moldova, Poland, Ukraine Philip Keefer Lead Economist, Development Research Group (DECRG) Ioannis Kessides Lead Economist, Development Research Group (DECRG) Hoonae Kim Sector Manager, Rural Development, East Asia & Pacific Regional Office (EASRD) Jeni Klugman Lead Economist, Poverty Reduction Group (PREMPR) Peter Kyle Lead Counsel, Private Sector Development, Finance, and Infrastructure (LEGPS) Geoffrey Lamb Director, Resource Mobilization Department (FRM) Michael Lav Consultant, Country Evaluation and Regional Relations (OEDCR) Ira Lieberman Senior Policy Adviser, Private & Financial Sectors Development Sector Units, Europe and Central Asia Regional Office (ECSPF) Robert Liebenthal Former Manager (ECHSD) David Lindeman Consultant Johannes Linn Regional Vice President, Europe and Central Asia (ECAVP) Robert Liu Adviser (OPD) Laszlo Lovei Economic Advisor, Delivery Management, Operations Policy and Country Services (OPCDM) Alexandre Marc Sector Manager, Environmentally and Socially Sustainable Development Unit Albert Martinez Lead Private Sector Development Specialist, Quality Assurance Group (QAG) Kathleen McCollom Chief Administrative Officer (ECA) Rick Messick Senior Public Sector Specialist, Public Sector Management Division (PRMPS) Michael Mills Lead Economist (ECSHD) Pradeep Mitra Chief Economist (ECA) Allister Moon Lead Economist (ECSPE) Helga Muller Sector Manager (ECSPE) Craig Neal Senior Public Sector Specialist (ECSPE) John Nellis Senior Fellow, Center for Global Development (Former World Bank Staff, PSD) Judy O'Connor Former Country Director, Georgia Neil Parison Senior Public Sector Management Specialist (ECSPE) Kyle Peters Senior Manager, Country Evaluation and Regional Relations (OEDCR) Christiaan Poortman Former Country Director, Albania, Bosnia and Herzegovina, Macedonia, Serbia Sanjay Pradhan Sector Director (PRMPS) Svetlana Proskurovska Public Sector Management Specialist (ECSPE) Mansoora Rashid Sector Manager (SASHD) Gary Reid Lead Public Sector Management Specialist (ECSPE) Roberto Rocha Lead Financial Sector Economist (OPD) Michal Rutkowski Manager (ECSHD) Randi Ryterman Sector Manager, Public Sector Management Division, Poverty Reduction and Economic Management Network (PRMPS) Gerald Saunders Deputy Legal Counsel, EBRD 6 6 A N N E X C : P E O P L E I N T E R V I E W E D Hjalte Sederlof Consultant (ECSHD) Paul Siegelbaum Former Director, Private & Financial Sectors Development Sector Unit (ECSPF) Sander Sipos Sector Manager, Social Protection (HDNSP) Martin Slough Senior Financial Specialist, Private & Financial Sectors Development Sector Unit (ECSPF) John Spears Consultant, Environment Department (ENV) Gary Stuggins Lead Energy Economist, Energy Unit, Energy and Water Department Helen Sutch Sector Manager (PRMPS) Peter Thomson Sector Manager, Energy Unit, Europe and Central Regional Office (ECSIE) Tunc Uyanik Sector Manager, Financial Sector Unit (ECSPF) Herman von Gersdorff Lead Economist (ECSHD) Deborah Wetzel Sector Manager, Macroeconomics (ECSPE) Suzy Yoon Operations Officer, Delivery Management (OPCDM) Interviewed Earlier by Transition Evaluation Team in Context of Russia CAE William Alexander IMF Anastossia Alexandrova Consultant (ECCU1) Lajos Bokros Director, Financial Advisory Services (ECAVP) Jeanine Braithwaite Senior Economist (ECSHD) Cesare Calari Vice President and Head of Network, Financial Sector Vice Presidency (FSEVP) Russell J. Cheetham Former Country Director, Russia Michael Carter Country Director, India Walter Cohn Consultant, IFC, OEG Kathryn Dahlmeier Social Protection Specialist (ECSHD) Ruben Lamdany Director, Sector and Thematic Program, World Bank Institute (WBIST) Ken Lay Deputy Treasurer and Director, Banking, Capital Markets & Financial Engineering Department (BCF) Andrei Markov Senior Human Development Specialist (ECSHD) Gerhard Pohl Consultant, Informatics Program (ISGIF) Nicholas Stern Former Chief Economist, EBRD and IBRD Jacques Toureille Lead Financial Sector Specialist, Staff Exchange Program (PA9ES) Elena Zotova Senior Technical Specialist (ECSHD) 6 7 ANNEX D: MANAGEMENT RESPONSE Introduction a market economy and an enabling environment Management welcomes the review by the Op- for private sector initiatives, and cushion the so- erations Evaluation Department (OED) of World cial cost of the transition. It considers these ob- Bank assistance to the transition economies. As jectives to be relevant and concludes that the OED notes, this is a meta-evaluation, which is Bank's assistance to the transition countries was largely based on previous evaluative work. Like on the whole successful. In assessing the effec- other evaluative work, it uses the benefit of 20/20 tiveness of such assistance, OED recognizes that hindsight. The review assesses the effectiveness the collapse of the Soviet Union and the ensu- of World Bank assistance to the transition coun- ing transition took place with little warning and tries in the Europe and Central Asia Region on an unparalleled scale. The report mentions (ECA), with a view to eliciting lessons for coun- that political imperatives put the Bank under tries undergoing similar, if less extreme, changes pressure to move quickly and lend large in the future. amounts, and that staff were frequently con- fronted with the need to act, often under diffi- OED Findings cult circumstances, with no relevant experience The report concludes that the countries of the and little country knowledge, learning along the Region have achieved substantial overall way. It also recognizes that the Bank's role, progress. The private sector share of gross do- though small relative to overall financial flows-- mestic product across all transition countries, vir- except in a few small countries--was significant tually nil in 1989, reached nearly 70 percent in in terms of analytical work and policy advice. 2002, even including the late-starting post-con- flict Southeast European countries and the most The Report's View of the Shortcomings of Bank Sup- reluctant reformers. Eight Central and Eastern port, with Hindsight. The report argues that clearly European and Baltic countries joined the Euro- there were mistakes early on when the true na- pean Union on May 1, 2004, and others are ex- ture of transition was not yet fully understood, pected to join in the next several years. and that the effectiveness of the initial strategy Furthermore, policy reform has progressed was limited because (a) the Bank underesti- steadily in most countries, with few reversals. mated the need to focus systematically on poverty alleviation and good governance, and (b) World Bank Support. The World Bank, in collabo- its use of rapid privatization to promote private ration with the IMF, the European Union, and sector development did not always achieve its in- other donors, geared up rapidly to support tended effect without a supporting legal and in- macroeconomic stabilization and structural re- stitutional framework. Over time, the Bank is form and, later, to provide post-conflict support seen as having internalized emerging lessons in Southeastern Europe, in particular. The report and having shifted its emphasis accordingly: notes that the Bank's strategy was to promote poverty alleviation, monitoring, and good gov- macroeconomic stability and sound economic ernance are now prominent objectives in both management, reorient and strengthen public lending and analytic work, and the approach to sector institutions, build the basic institutions of privatization and private sector development 6 9 E C O N O M I E S I N T R A N S I T I O N has evolved considerably. The report also takes analysis of this unique experience. As the report the view, again with the benefit of hindsight, indicates, the Bank has internalized and acted on that more prudent lending levels would have the emerging lessons coming from its experi- been better in the long run for those low-in- ence in supporting transition economies, no- come Commonwealth of Independent States tably with regard to poverty, support for private (CIS) countries--where the transitional recession sector development, and governance. was far deeper and longer than originally fore- seen and where problems of governance were An Unprecedented Event in History. The transition in more serious than anticipated--that which now Eastern Europe and the former Soviet Union was face significant levels of indebtedness. a seminal event, involving political, social, and eco- nomic transformation on an unprecedented scale. Recommendations. The report concludes with No one working on the transition economies, three recommendations for the Bank: (a) pro- whether in the Bank or outside it, foresaw the mote ownership and consensus, (b) improve depth and severity of the transition recession in the effectiveness of its instruments, and the CIS countries. The report acknowledges the (c) define clear strategies for assistance--dif- relatively short and shallow recession in Central ferentiated by the state of governance and in- Europe, which had been broadly foreseen. The stitutional capacity in borrowing countries--in expectation of a comparably short and shallow re- the following areas: legal and judicial reform; cession in the CIS, held by many, including the energy sector enterprise reform; privatization; Bank's key counterparts, combined with the fact pension reform; and transparency and ac- of low poverty and inequality in the Region to start countability, including through wide dissemina- with, implied that any increase in poverty would tion of its own studies. Management is in general be transitional. Thus an emphasis on poverty al- agreement with the thrust of these recommen- leviation would have been misplaced. The Bank dations. Details are provided in the Manage- therefore focused on alleviating transitional ment Action Record, attached as an annex to poverty to the extent tight budgetary realities this Management Response. would permit, by protecting pensions because the elderly were at risk, and on retargeting social as- Management Comments sistance to those affected by downsizing of en- The issues highlighted by the OED report are un- terprises rendered unviable following price deniably better understood in retrospect. The liberalization. It must also be noted that gov- pace of change was so tumultuous, particularly ernments in transition countries during the early in the early years of transition, that the informa- years were reluctant to accept the notion of so- tion available with perfect hindsight is necessar- cial assistance, possibly because of the enduring ily very different from that available earlier, a stigma of poverty, and to borrow for that purpose consideration that limits the applicability of the from institutions associated with developing lessons OED seeks to draw as a guide to action countries. In this context, clients would not have in countries undergoing similar, if less extreme, been receptive to a stronger Bank emphasis on changes. Inasmuch as future actors in such situ- poverty alleviation. Later, when it became clear ations must base policies on information available that the recession was deeper and more severe ex ante, it would have been useful to evaluate than originally expected, the Bank focused its whether the Bank made the best use of knowl- programs more strongly on poverty reduction. In edge available at the time; how well its processes the realm of analytic work, the Region took the balanced the need to draw on a range of diverse lead in publishing a landmark study on poverty opinions with the need for timely intervention in and inequality in Europe and Central Asia (World crisis-like situations; and how it responded to Bank 2000c; at the same time as the World De- pressures from major shareholders, clients, and velopment Report 2000/2001 on poverty, World other constituencies. At the same time, the eval- Bank 2000e), which has been influential in sen- uation provides a thoughtful contribution to the sitizing the development community to poverty 7 0 A N N E X D : M A N A G E M E N T R E S P O N S E and inequality issues across transition countries. retrospective (World Bank 2002b) on transition Indeed, as the OED report notes, reflecting this acknowledges that, while developing market- evolution, poverty alleviation is now prominent compatible institutions had been on the reform in the Region's lending and analytic work, along agenda since the onset of transition, the chal- with support for growth. lenge of doing so in countries without recent market experience was underestimated. OED The Prevailing Environment in the Early Years of Tran- also believes that the Bank often approached sition. The observation that the Bank's strategy was public sector management reform in an ad hoc mistaken because it paid little attention to good manner, without a comprehensive, long-term governance in the early years of transition could institutional development and reform strategy. usefully take more fully into account the envi- But the report may overstate its case in saying ronment prevailing in the countries of the Region that little analysis of public expenditures was at that time. The Bank's assistance program started undertaken before the late 1990s. Although amid massive uncertainty and real concerns, es- stand-alone Public Expenditure Reviews were pecially in the CIS, as to whether the old, highly relatively rare in ECA and throughout the Bank, repressive regime might come back to power or many public sector interventions in ECA were enterprises might be grabbed by local govern- preceded by analytic work on public expenditure ments--more broadly, whether the irreversibility in Country Economic Memoranda or sector re- of steps toward a market economy was guaran- ports carried out in the earlier part of the decade. teed. In 1991, for example, President Yeltsin mounted a tank to stop an insurrection by the Emphasis on Privatization. The report questions communists in Russia. The fluidity of these situ- the relevance of Bank strategy in the early years ations called for speed on the part of the re- because of its heavy emphasis on privatization formers and the Bank and, as a practical matter, to achieve private sector development in coun- precluded the luxury of taking a significant amount tries where institutions of corporate governance of time to analyze governance and public sector were not in place, thus risking the expropriation management issues. Nevertheless, the Bank's of minority shareholders' assets and income of programs worked to depoliticize the allocation of those who had gained control over the enter- resources through price and trade liberalization prise. Since privatization of small enterprises is and through a more transparent budget process widely regarded as having been highly success- to make explicit the myriad of implicit subsidies ful, this is a critique of privatization of medium and greater transparency in the tax system. It also and large enterprises. But the report does not needs to be remembered that the Bank started de- mention that the alternative of delaying privati- veloping its strategy on anticorruption and good zation of medium- and large-scale enterprises governance in the mid-1990s; these issues were until institutions of corporate governance had to become explicit institutional priorities only begun to function was extremely problematic later in the decade when the analytic toolkits for as well. It would have left enterprise assets in the addressing them were developed. When this in- hands of enterprise managers where state au- ternal shift occurred, ECA's efforts to opera- thority had collapsed, leaving the state in the tionalize these policies placed it at the forefront hands of a self-serving and corrupt nomenklatura among the Bank's Regions. and intensifying the use of asset stripping and other forms of capture. Hence, except in situa- Administrative Structure and Public Institutions. In a tions where there was a strategic investor to similar vein, the report observes that while the whom assets could be directly sold, policymak- Bank understood the need to reorient and ers were faced with an extremely difficult choice strengthen public sector institutions, it greatly un- between two unattractive alternatives. Indeed, it derestimated the consequences of still weak is not clear now, even with the benefit of perfect core institutions and public administrations man- hindsight, which of these would have been the aging the transition process. The Region's own preferred course of action. The fact that--as 7 1 E C O N O M I E S I N T R A N S I T I O N OED notes in its report--there have been no sig- (c) case-by-case privatization of medium and large nificant policy reversals in the transition coun- enterprises; (d) an enforceable legal system to pro- tries, except in those that have not substantially tect investors; (e) increased competition; (f) clar- embarked on market reforms, is a remarkable ification of the cash flow and property rights of achievement and must owe something to the re- enterprises with continued state ownership; and formers' strategy of creating a new and evidently (g) an efficient regulatory regime before divesti- irreversible economic reality through rapid and ture of enterprises in sectors characterized by early privatization. This is a complex and con- natural monopoly or oligopoly. However, under- troversial area, and not enough time has elapsed standing the context in which these lessons were to allow a considered judgment to be made. drawn is of the utmost importance. Second-Generation Reforms. On a related note, the The Context for Learning the Lessons on the Private Sec- report observes that, in line with views of lead- tor in Transition Economies. There are two relevant ing policymakers throughout the Region, early points to be made. First, as already noted, the Bank assistance put a lower priority on reform need to create an irreversible economic reality of regulatory, antimonopoly, commercial, capi- often dictated rapid privatization in the early tal market, and bankruptcy regimes--the so- years, when the return of Communism was felt called "second generation" reforms--leaving to be an ever-present danger in the CIS countries. them to be pursued once a critical mass of pri- But once that threat had receded over time, it was vatized firms had appeared.1 It takes the view that appropriate for the Region's retrospective, draw- in the earliest years of the transition, many of the ing on 10 years of country experience, to advo- Bank's choices were probably appropriate, given cate taking a more nuanced approach to what was known at the time. This position might privatization in the context of a strategy of disci- seem to be at odds with the report's criticism of pline and encouragement. That said, the Bank the Bank's emphasis on privatization, a criticism should have critiqued poor privatization deci- that is based on hindsight, illustrating the diffi- sions, such as the loans-for-shares scheme in culty of making some kinds of judgments in an Russia, and expressed its reservations regarding environment of rapidly changing information. mass privatization using vouchers in Bosnia in the However, with the benefit of hindsight, the re- mid-1990s. Second, a greater emphasis on entry port also considers that the Bank should have and expansion of de novo firms ("the new private been quicker to pursue the lessons drawn by the sector"), which have played an important role in Region in its retrospective, which are noted as economic recovery and job creation in conjunc- being consistent with OED's findings. It goes tion with privatization and restructuring, would on to say that by the mid-1990s it is reasonable have been appropriate in the mid-1990s. How- to ask whether the Bank was focusing sufficiently ever, it must be noted that it was not until the Re- on the climate for private sector development gion's retrospective was written that the and the appropriate methods for disciplining development community fully understood the and privatizing medium and large enterprises. mutual complementarity of entry and expansion of de novo firms on the one hand and privatiza- The Lessons from the Region's Retrospective. The les- tion and restructuring on the other, so that nei- sons from the retrospective that are relevant with ther could proceed very far without the other. regard to this issue call for (a) privatization as part of a broad strategy of discipline (imposing Initial Conditions and Policy Response Lags. The re- hard budget constraints on enterprises and banks port's assessment of the early years of transition and monitoring managerial behavior) and en- could set the developments of those years in a couragement (a business environment that levels broader context. The literature on initial condi- the playing field among state-owned, privatized, tions, policy reform, and outcomes makes clear and de novo firms); (b) quick sale of small en- that, when initial conditions are controlled for, terprises through open and competitive auctions; countries that implemented policy reforms wit- 7 2 A N N E X D : M A N A G E M E N T R E S P O N S E nessed a favorable impact on output growth over official creditors, has played a major role in re- the medium term. This importantly implies that ducing their debt burden since 2001. the favorable outcomes noted in the later part of the period under review owe something to the re- OED Recommendations. As OED notes, its findings forms undertaken in the early years of transition and recommendations are broadly applicable and, therefore, that an assessment of the Bank's across World Bank support for most countries. assistance in the early years cannot be undertaken All of the recommendations on sectoral issues-- by looking solely at outcomes in those years. legal and judicial reform, financial sector lend- ing, energy sector reform priorities and Debt Sustainability in CIS Countries. The report ar- sequencing, support for privatization, and advice gues, again with the benefit of hindsight, that on pension reform--are useful and timely. The more prudent lending levels would have been cross-sectoral findings--importance of a knowl- better in the low-income CIS countries, which are edge base and relevant and timely economic now significantly indebted. The report notes and sector work; the promotion of government that this was because official lending levels were ownership and leadership on aid coordination; based on the ex ante expectation that the tran- a comprehensive, long-term approach to public sition recession in the CIS countries would be sector management reform and institution-build- short and shallow. This issue has been exam- ing; and the high priority of poverty monitor- ined in the context of the CIS 7 Initiative that the ing--are of relevance for ongoing work on Bank Bank and the IMF have undertaken, in con- support to client countries. Detailed responses junction with the European Bank for Recon- to OED's specific recommendations are attached struction and Development and the Asian in the Management Action Record. Development Bank (see As already noted, neither the international fi- Conclusions nancial institutions (IFIs) nor other observers Bank Management welcomes the OED review of foresaw the extent of disruption arising from Bank support to transition economies and the op- the dissolution of the Soviet Union. In the event, portunity to discuss and contrast its own self- financing of the initial transition by the IFIs and evaluation of this unique experience with the other donors prevented a further compression views of OED. While the recommendations are of living standards in countries where they were generic and not particularly related to transition already in precipitous decline. Hence OED's economies, Management finds them intuitive view that less lending would have been better im- and accepts them, with a few small qualifications. plies that such a further compression--in coun- As noted above, Management believes that, while tries that were undergoing significant 20/20 hindsight is one approach, the report could adjustment--and the resulting lower debt would have benefited from analysis that took more into have been preferable to the situation that pre- account what was known about the transition vails today. The trade-off between cushioning economies at the time critical support decisions the fall in living standards and ensuring debt were taken. That type of analysis might have sustainability would have been moderated if been more useful for informing the develop- more grant financing had been forthcoming in ment community on how best to draw on avail- the early years, which could then have been fol- able information and balance diverse views when lowed by Bank (and other IFI) financing to sup- going into a totally new environment and how to port structural reform. This raises the question balance the need for timely financial support of whether more efforts should have been made and learning by doing against the need for a solid to secure grant financing for the low-income analytic foundation. That said, Management CIS countries in those years. However, it also thanks OED for a thoughtful review. As the report needs to be pointed out that substantial and notes, the Bank has acted to incorporate the steady growth in the low-income CIS countries major lessons learned in its support to these since 2000, together with debt relief granted by transition economies. 7 3 E C O N O M I E S I N T R A N S I T I O N Management Action Record OED Recommendation Management Response 1. The Bank should help promote ownership and 1. Management agrees with the recommendation that the Bank should consensus: promote ownership and consensus. That concept is at the heart of the a. CASs should support capacity building for Comprehensive Development Framework, which is now mainstreamed. government and civil society, promote stake- a. Management monitors CASs for the inclusion of support for capacity build- holder participation, and take into account ing. The current work on guidance on social development is addressing the underlying political and social processes issues related to stakeholder analysis and participation. That work is that affect stakeholder behavior. planned for completion before the end of FY05. It should be noted, however, that Bank promotion of stakeholder participation must be done in the context of government ownership and leadership, support- ing and encouraging country efforts, rather than trying to impose a sys- tem from the outside. b. ESW should be undertaken with borrower b. Management encourages active borrower participation in most ESW participation and CASs should include a strat- tasks, particularly in core diagnostic ESW. In fact, QAG's assessments egy for its dissemination. have demonstrated a growing trend in the share of participatory ESW. Regional as well as Sector Board guidelines emphasize the benefits of client participation in the preparation of diagnostic ESW products. Therefore, in most cases, client participation is expected. However, there will always be some cases in which clients are primarily interested in the Bank's own analyses and views, as that of a neutral, independ- ent party. In these instances active borrower participation in the prepa- ration of the report/policy note would be counterproductive. At Bankwide reviews of draft CASs, ESW programs, including issues of dissemina- tion, are regularly part of the agenda. However, the CAS is already heavily loaded and Management does not intend to impose a new re- quirement with regard to a strategy for ESW dissemination. 2. The Bank should improve the effectiveness of 2. Management agrees with the overall recommendation. The Bank works its instruments: constantly to improve the effectiveness of its instruments and uses self- and independent evaluation to measure progress. Management would like to note that it does not agree with several of the separate recommendations embedded in the sub-recommendations, in particular one concerning ana- lytic work as a prerequisite to sizeable lending. In general, this will be the case; but there are likely to be cases (notably in emergencies and turn-around situations) where Bank support that might be regarded as sizeable will have to proceed before or in parallel with analytic work. a. Poverty levels should be monitored regularly, a. This is Bank policy; however, in many cases there are issues of capacity particularly in new borrowers. that must be addressed with the support of the Bank or other donors, particularly in new borrowers. b. Analytical work on governance and public b. Three years ago, Management launched a systematic effort to strengthen sector management, along with analysis al- the diagnostic underpinnings of Bank lending to clients with sizeable lend- ready required to understand the structure of ing programs, particularly in the areas of public expenditure manage- 7 4 Management Action Record (continued) OED Recommendation Management Response public expenditures and enhance public fi- ment, financial accountability, and procurement. The diagnostic instru- nancial accountability, should precede sizeable ments used by Bank staff (PER, CFAA, and CPAR) have evolved consid- lending. erably since then, with increasing emphasis on governance issues. While additional analytic work dedicated specifically to governance and public sector management issues may be needed in some countries, Management believes that a formal requirement applied to all countries with planned lending operations above a certain size may lead to du- plication of effort--in cases where sufficient knowledge can be gained from work undertaken/planned by partner agencies or local institu- tions--and can also crowd out traditional sector work essential to en- sure high-quality investment lending. c. The quality and impact of ESW should be c. This is already the case. QAG undertook several rounds of ESW quality evaluated retrospectively. assessments in the FY98-03 period. Likely impact was one of the di- mensions along which the quality of individual ESW products was as- sessed. Recognizing the limitations of this product-by-product impact evaluation methodology, QAG has moved to the quality review of entire ESW and (nonlending) TA programs in selected countries. These com- prehensive country AAA assessments--one has been recently completed for Slovakia--have proven to be better suited to judge the impact of ESW. Management has also recognized that there is a need to improve the self-evaluation of individual ESW products and has developed a new very simple and cost effective results framework that will require ex ante the clear identification of the goals for each ESW task and ex post the evaluation of the extent to which these goals were achieved. This new framework will be implemented in SAP starting during FY05. In addition CAS Completion Reports look at the impact of ESW programs. If, as ex- pected, CAS Completion Reports are mainstreamed, these reports and the related OED reviews will provide regular assessments of the impact of ESW at the appropriate level: the entire country ESW program over the CAS period. d. Recipient governments should lead aid coor- d. The PRSP process provides a framework in low-income countries for re- dination, with donors helping them define cipient governments to take the lead in aid coordination. Donors including clear development strategies, including mon- the Bank help PRSP countries define clear development strategies with itorable action plans for implementation. monitorable action plans for implementation. Regular Progress Reports by IMF and Bank staff measure progress. 3. The Bank should define clear strategies for as- 3. Management agrees in principle that clear strategies are important but sistance in the following areas, differentiated by does not agree with all of the details in the many complex recommenda- the state of governance and institutional capac- tions that are imbedded in the overall recommendation and does not plan ity of each country: any new SSPs in the near future. Guidance to staff exists or is under prepa- ration in each of these areas. 7 5 E C O N O M I E S I N T R A N S I T I O N Management Action Record (continued) OED Recommendation Management Response a. Legal and judicial reform, with a focus on im- a. The Legal Department and the Public Sector Governance Board of the plementation, is needed to improve the busi- PREM Network are working together on developing modes of support ness climate (e.g., company, security, for both legal and judicial reform, in support of private sector develop- bankruptcy, and anti-monopoly laws, con- ment (and poverty reduction). Much of the guidance for supporting tractual rights, and respect for private prop- countries embarking on legal or judicial reform is summarized under Top- erty); the financial sector (banking, central ics in Development on the Bank's external website under Law and Jus- banking, collateral, failed bank resolution); tice and also Public Sector Governance (Legal Institutions of the Market social protection (labor laws); and governance Economy). The Legal Department also maintains a list of qualified con- in general. Financial sector lending should be sultants in this field. Quality assurance with regard to financial sector conditioned on progress in enforcing pruden- lending, including on issues of effective prudential regulation, interna- tial regulations and international accounting tional accounting standards, and the effectiveness of Bank supervision standards, and in increasing the effective- is undertaken by the Financial Sector Network, based on the Board-en- ness of bank supervision. dorsed Financial Sector Strategy. b. The primary objectives for enterprises in the b. In response to the OED/OEG/OEU review, Private Sector Development energy sector should be improved commercial in the Electric Power Sector, Management provided a guidance note to performance and corporate governance; the staff regarding the roles of the public and private sectors in the supply sequencing of reforms, including the feasi- of electricity services. The note calls on staff who are providing advice bility of immediate privatization, depends on to client countries to consider the full range of options, from purely pub- country circumstances. Rehabilitation proj- lic to purely private interventions. It notes that the course that power ects should minimize delays (use negative sector reform can take and the speed at which reforms can be imple- lists) and forego project implementation units mented vary from country to country, and that reform is a continuous, and long-term reform objectives. evolving process. With regard to rehabilitation projects, negative lists may sometimes be appropriate. However, rehabilitation of capital stock often focuses on catching up on deferred maintenance and component replacement, requiring a detailed technical analysis followed by a tar- geted set of investments. It is not clear that using a negative list would be appropriate or would save time in these situations. Management agrees that long-term objectives should not be included in this type of investment loan and has made this clear to staff. As noted in the Man- agement Response to the OED review of the CDF, Management is preparing a good practice note on PIUs and plans to have it available early FY05. c. The emphasis in future privatizations should c. This is, in general, the kind of advice being given by Bank staff supporting be on encouraging a carefully prepared, trans- privatization efforts. There is a large amount of information on this parent, competitive process, open to foreign issue available within and outside the Bank. However, as in all Bank sup- participation. port, country conditions need to be taken into account, including on the issue of foreign participation. d. A strategic approach is needed for pension re- d. With regard to pension reform, the Social Protection Sector Board is pro- form and for improved targeting of social as- ducing a pensions position paper calling for an approach to Bank sup- sistance programs other than pensions, port that is both differentiated and strategic. The Social Protection 7 6 A N N E X D : M A N A G E M E N T R E S P O N S E Management Action Record (continued) OED Recommendation Management Response differentiated by the ability of the country to Strategy, now under implementation, calls for support for social assis- administer and fund the systems. tance that is differentiated by the country's situation, priorities, and needs. The upcoming Sector Strategy Implementation Update will report on progress on all dimensions of the Social Protection Strategy, including these. e. The Bank should promote transparency and ac- e. Transparency and accountability are at the center of the Bank's Public countability by ensuring that its own studies Sector Management Strategy, under implementation. On the basis of that and documents are widely disseminated when- strategy, Bank support to governments emphasizes the importance of ever possible, and by encouraging govern- these issues, notably in the context of PERs, CFAAs, and CPARs. Within ments to report more regularly and more fully the Bank, recent revisions of the disclosure policy have significantly ex- to their parliaments and to the public at large, panded the set of Bank documents that are made available regularly to including through information and communi- the public. Further changes are under consideration by Executive Directors. cations technology. 7 7 ANNEX E: CHAIRPERSON'S SUMMARY: COMMITTEE ON DEVELOPMENT EFFECTIVENESS (CODE) On May 19, 2004, the Committee on Develop- number of findings and recommendations that ment Effectiveness (CODE) discussed the OED cut across sectors and are broadly applicable for report entitled An Evaluation of World Bank As- many regions: holding lending at prudent levels sistance to the Transition Economies together in a new country context, or after a long hiatus with the Management Response to the OED Re- in lending, while building a knowledge base, with view. Written statements were issued by three convincing evidence of government and societal members. ownership of the assistance program; promoting stakeholder inclusion and government ownership Background. The OED study, undertaken in re- and leadership of aid coordination; improving the sponse to a request from CODE members, ex- effectiveness of Bank instruments and defining amined the effectiveness of World Bank assistance clear strategies; carrying out relevant and timely in 26 transition economies in the Europe and economic and sector work (ESW); taking a com- Central Asia Region (ECA) since 1989, with a prehensive, long term approach to public sector view to eliciting lessons for countries undergo- management reform; according high priority to ing similar, if less dramatic, changes in the future. poverty monitoring and analysis of governance Although the evaluation did not include all areas from the beginning of Bank involvement in a where the Bank was active, it provided an in- country; and ensuring transparency and ac- depth examination of five areas of Bank assis- countability, including wide dissemination of tance: private sector development; governance, Bank studies. public sector management and institution build- Management, in its Response to the OED ing; financial sector; social protection; and energy. study, welcomed the review and expressed its Overall, the OED report ranked Bank assistance general agreement with the thrust of the evalu- to the transition countries as successful, but ar- ation. Management found the report's recom- gued that there were mistakes early on when mendations acceptable, with a few qualifications the true nature of transition was not fully un- (see MR), and noted that it could have benefited derstood. The report found the Bank's objec- from analysis that took more into account what tives relevant, but of limited effectiveness during was known about transition economies at the the early years. The main reasons for that, ac- time critical support decisions were taken. Man- cording to the report, were an initial lack of focus agement sought the Committee's guidance on on poverty and good governance and the use of whether an assessment of a seminal event, such rapid privatization to promote private sector de- as the transition in Eastern Europe and the for- velopment without a supporting legal and insti- mer Soviet Union, using perfect hindsight, was tutional framework. The report mentioned that useful as a guide to action to teams that must take the unexpectedly prolonged recession in some support decisions in real time in rapidly evolv- CIS countries led to the accumulation of signifi- ing crisis and near-crisis situations. cant levels of indebtedness. At the same time, the OED evaluation noted that, over time, the Bank Conclusions and Next Steps. Members welcomed internalized emerging lessons and shifted its em- the OED evaluation and the Management Re- phasis accordingly. The study concluded with a sponse and commended the staff for preparing 7 9 E C O N O M I E S I N T R A N S I T I O N an informative, well-written and candid assess- the impact on the Bank's portfolio. OED noted ment. They broadly agreed with the report's that the high fluctuation in policy dialogue in findings and recommendations, and noted that transition countries was partly due to the uneven it had clearly articulated several important les- level of civil society development across the re- sons from the unique transition experience in the gion and the legacy of high reliance on the state. ECA region. The Committee focused its discus- Management concurred with OED's view and sion on the extent to which management has added that frequent government changes in taken the OED recommendations on board and many cases could be perceived as a positive phe- sought more details on how the response could nomenon for countries previously not accus- be best implemented, especially in the areas of tomed to free elections. Management also legal and judicial reform, privatization, financial underlined the positive impact of decentraliza- sector, debt analysis, turnaround situations and tion of the Bank in maintaining consistent dia- poverty analysis. Interest was also reiterated in logue with the clients. Members concurred with the efficacy of CAS triggers and other bench- the OED recommendation to emphasize the im- marks. Some members wished that the report plementation aspect, as opposed to legislative ac- had also addressed a few additional areas, in- tions, and asked whether a new approach will be cluding: cooperation with the Fund; investment reflected in the triggers and benchmarks for the outcomes of the IFC; analysis of the differences upcoming CASs. Management agreed with the across countries; focus on results and compar- necessity to shift the focus to actual implemen- isons with other institutions; and decentraliza- tation and noted that recent CASs, as well as tion. Among issues identified for going forward APLs and other operations are increasingly put- were: employment generation; lessons on cur- ting more emphasis on outcomes. rent practices on governance and public sector management; portability of lessons across sec- Role of the Bank and results. Speakers acknowl- tors and regions; capacity building and use of edged the important role played by the Bank in local expertise; aid coordination; and the issue the ECA region, and stressed the significance of of "gap countries". the Bank's analytical work. Some members Among the specific issues raised by the Com- stressed the importance of looking at the over- mittee were: all results of Bank interventions (including IFC investments) and comparing them with other in- Lessons learned: utility of perfect hindsight approach. stitutions, such as the EBRD. One member ques- Many members agreed with the management tioned whether the Bank possesses enough that the transition period in the ECA region was flexibility for quick and effective engagement in an unprecedented event, and many of the "turnaround" situations, given the rigidity of changes were difficult to foresee. However, they CPIA criteria. Management agreed that the CPIA also emphasized the usefulness of the perfect is by definition a backward-oriented assessment hindsight approach employed by OED, given tool, and not best suited as a basis for allocating the Bank's frequent involvement in post-con- resources in turnaround situation. Management flict and emergency situations, and noted that les- also noted that there was continuous discus- sons deriving from a perfect hindsight approach sion within the institution to improve the CPIA are useful not only in checking assumptions, methodology. In management's view, although identifying blind spots and judging the validity IDA has overall been quite forthcoming in ac- of conventional wisdom, but also in assessing commodating some incremental resource needs when and how corrective actions or adjustments in turnaround situations; it would be equally to strategies could be undertaken. One member important for bilateral donors to stay engaged wanted to know more on variations in the pat- and play a substantive and constructive role. tern of Bank Group engagement in policy dia- logue with clients across the region, given the Sectoral focus and sequencing. Members welcomed volatile political situation in many countries, and the report's recommendation to focus on gov- 8 0 A N N E X E : C H A I R P E R S O N ' S S U M M A R Y: C O M M I T T E E O N D E V E L O P M E N T E F F E C T I V E N E S S ( C O D E ) ernance, reforms in judicial, legal and financial and lessons learned in the process, impact on en- areas, as well as on the ex-ante analytical work on terprise performance, employment, prices and governance, and stressed the importance of wide- their affordability, tax revenues, development of range capacity building to expedite the process. indigenous entrepreneurship, and poverty. Man- Management replied that the ECA Region is in- agement noted that in many cases the reform creasingly giving more prominence to the legal agenda, and namely the quick privatization, had and judicial reform components in many of the been advocated by the reformist governments programmatic loans, as well as to the freestand- themselves, which had often moved at a faster ing legal and judicial reform operations. Man- pace than the Bank. Management stressed that agement also noted that many aspects of legal and in some countries quick privatization, combined judicial reform agenda are financed through the with the related FDI, has been instrumental in IDF (Institutional Development Facility) grants. cementing a culture of market-orientation. Several members noted that the paper would have benefited from additional coverage of such Debt sustainability. Some members supported the topics as employment, decentralization and co- OED finding that the current high indebtedness operation with the Fund. OED replied that, al- of some CIS states was partly induced by the un- though it was not a joint or parallel evaluation derestimated depth of the recession, but noted with the IMF, its analysis did take a careful look that resource flows were vital for future growth at the IMF programs in many of those countries, and that lending decisions were appropriate especially in the context of the Bank's adjust- given all the analysis of debt capacity at that time. ment lending. On employment, management In that context, some members asked whether noted that the Region has been advocating flex- the debt systems have been improved and are cur- ibility of the labor markets as part of the reform rently in place to avoid this type of situation in agenda, but there certainly was a gap in impact future. OED replied that systems are being put on unemployment. Management informed the in place, citing creation of the position of a Di- members that the Region is currently finalizing rector for debt as one of the major steps in that a flagship regional report on employment, which direction. Management noted that economic will shed more light on that issue. growth throughout the region since 2000 has contributed to significant reduction of the share Privatization. While some members agreed with of debt service to exports (approximately 20 per- the management's view that in many cases rapid cent) in the most indebted CIS-7 countries, but, privatization was necessary to make the reform at the same time, acknowledged their persistent process irreversible, others noted the impor- vulnerability in that regard. Management also tance of adjusting reform sequencing to coun- added that in most of the countries in the region, try circumstances and adopting a more gradual debt is more of a collective, rather than just a Bank approach, e.g. choosing commercialization as a problem. Some members expressed their inter- substitute to full privatization in the energy sec- est in the Bank's future approach in similar situ- tor. OED noted that while it agrees with the crit- ations and the use of grant financing. One ical importance of commercialization, especially member called for more flexibility in the Bank's in the energy sector, actual privatization is very approach towards the "gap" countries--those much dependent on the country situation. Man- that have higher than IDA threshold income lev- agement replied that the new guidance to the els, but lack creditworthiness of a typical IBRD staff does follow up on the OED, OEG and OEU country--at the upcoming IDA discussions. Man- recommendations to consider the full range of agement replied that it would actively continue options--from pure public to private interven- to engage, including on the IDA front, to find so- tions--depending on country circumstances. lutions for the "gap" countries. Some members felt that the paper would have benefited from a more detailed cross-regional Poverty reduction. Members agreed with the man- comparative analysis of privatization outcomes agement's view that the drastic drop in living 8 1 E C O N O M I E S I N T R A N S I T I O N standards in many transitional economies was gion, and the text mentions the increases in in- hard to foresee, and emphasized the importance equality. of continuous poverty monitoring. One member wished the report had contained information Cooperation. A member urged the Bank to stay en- on income distribution and changes therein in gaged in the region and maintain close associa- the region. OED concurred with the members' tion with the EU initiatives, given the persistence view on the crucial importance of poverty mon- of considerable differences in income levels in- itoring, but noted that some countries in the side the EU. Management noted that it is planning region still lack the capacity to collect data. OED to continue cooperation with the EU and stressed also noted that the report includes a table show- that the EU accession of some countries pro- ing changes in income distribution in the re- vided a strong stimulus for the whole region. Chander Mohan Vasudev, Chairman 8 2 ENDNOTES Executive Summary 4 of the 9, however, the clients themselves did not as- 1. Management disagreed with the unsatisfactory sign great importance to poverty reduction. rating for the early period in Russia. Recent OED proj- 6. Romania had also been an early member of the ect assessments show that the effectiveness of Bank Bank, but relations were effectively broken off in the assistance to Albania has improved since the CAE was early 1980s. Yugoslavia was in the midst of political written. breakup at the start of the 1990s. 1. La Administración no estuvo de acuerdo en cali- 7. For example, OED's review of the Armenia Sec- ficar de insatisfactorio el período inicial en Rusia. Según ond Structural Adjustment TA Credit found that this evaluaciones recientes de proyectos realizadas por el project, which supported four adjustment operations DEO, la eficacia de la asistencia prestada por el Banco and was the catalyst for significant resources from a Albania ha mejorado desde que se redactó el informe other donors, was the key to reform. de evaluación de la asistencia prestada a ese país. 8. Poland in 1994; Russia and Kyrgyz Republic in 1. La direction rejette la notation « insatisfaisant » 1995; Belarus, Estonia, Ukraine, and Azerbaijan in pour la période initiale du programme d'aide en Rus- 1996-97. sie. Les évaluations récentes de l'OED montrent que 9. Even in the agricultural sector, poverty moni- l'aide de la Banque à l'Albanie est plus efficace que lors toring and lessons learned about poverty impact in de l'évaluation initiale. projects were rare (Heath 2003 pp. 17-18). 10. The Russia CAE noted (OED 2002c, p. 11) that Chapter 1 "Until 2000, the government was not interested in 1. This report covers the transition countries of the Bank studies on the expenditure side of the budget Europe and Central Asia Region of the World Bank; it or financial accountability." Some work may have been does not cover other transitional countries, such as done in the context of non-sector-specific country China or Mongolia. economic memoranda. 2. Serbia and Montenegro is not included, except 11. This report deals only with the World Bank. where otherwise noted. 12. Svejnar (2002) provides data on a number of 3. Throughout this report, references to the Bank areas of performance not covered here, including in- or the World Bank should be understood to include flation, exchange rates and current accounts, external the International Development Association (IDA), debt, budgets and taxes, employment and wages, and and references to loans to include credits. several additional social indicators. 4. There was no definitive statement of Bank ob- 13. Conceptual and measurement problems make jectives at the beginning of the transition; see, for it difficult to compare pre- and post-transition GDP example, World Bank (1996). data; the likelihood that the former was overesti- 5. The 1996 WDR on the transition confirms this mated and the latter underestimated means the col- emphasis (World Bank 1996, pp. 70-71). More re- lapse may not have been as deep as these data indicate. cently, client surveys in 9 countries (out of 12 carried However, the decline in many countries was un- out in transition countries) rate the Bank as having rel- doubtedly severe. atively low effectiveness in giving the appropriate pri- 14. It is not clear to what extent the recent growth ority to poverty reduction, or in reducing poverty; in in CIS countries reflects recovery rather than new in- 8 3 E C O N O M I E S I N T R A N S I T I O N vestment, or the degree to which it is influenced by ranges from 5 to 96 percent in the western FSU, and the performance of the Russian economy. from 0 to 97 percent in Central Asia. 15. The measures of inequality at the beginning of 24. The low rate of satisfactory outcomes in terms the period were skewed by shortages, administered of commitments for Russia reflects unsatisfactory rat- pricing, and privileged access to some goods, so the ings by OED of major adjustment loans. The ECA Re- deterioration is probably less than the numbers indi- gion disagreed with those ratings. cate. 25. Dedicated lending for some sectors, including 16. For comparison, life expectancy in middle-in- PSD and PSM, is only a fraction of total lending for come countries worldwide rose by 1.4 years, and in those sectors, much of which comes from economic low- income countries by 1.9 years, during the same policy operations, so the ratings may overstate their period. success. 17. Including Serbia and Montenegro. 26. The tasks rated in ECA included 4 in Turkey out 18. Belarus, Turkmenistan, and Uzbekistan still of a total of 79. Ratings are not provided for individ- rated a 1 or 2 in trade and foreign exchange liberal- ual countries. ization. 19. Management disagreed with the unsatisfactory Chapter 2 rating of the earlier period for Russia, noting that 1. These papers were based on available OED and many reforms implemented after 1998 reflected Bank Regional evaluative material, as well as on other coun- advice provided during 1992-98 and built on reforms try, sector, and project material and interviews with of that period. Recent project evaluations by OED Bank staff. See the Bibliography. show that the effectiveness of Bank assistance to Al- 2. It was noted in Chapter 1 that PSD, institutions, bania has improved since the CAE was prepared in and public accountability and governance were the 1998. The satisfactory category includes moderately areas most frequently identified by CAEs as needing satisfactory ratings, and unsatisfactory includes mod- greater attention. erately unsatisfactory. 3. In addition, many critical issues in transport are 20. Of CAEs for 40 non-transition countries, 29, or related to PSD. 73 percent, rated outcome for the most recent period 4. During FY89-03, the Bank lent US$2.4 billion to satisfactory, compared to the two-thirds for transi- transition countries for 35 PSD projects. About US$14 tion countries. Taking all periods rated, 33 of 52 (63 billion additional lending had PSD components, in- percent) have satisfactory outcomes, compared to cluding the approximate share of these components 55 percent for ECA. It should be noted that the coun- only, PSD-related assistance amounted to roughly try programs chosen for evaluation, both for ECA and US$10.5 billion. The analysis in this section is based Bankwide, were not a random sample, but rather a on 133 projects, of which 87 have been closed and function of business needs and CAS schedules. rated, as well as on documents from OED and else- 21. Client surveys show that the clients them- where. selves often give little priority to such issues as im- 5. World Bank (2002b) presents these themes in de- proving governance, strengthening civic participation, tail. and reflecting different viewpoints across the popu- 6. The results are not markedly different if only lation. commitments with satisfactory outcomes are used. 22. The satisfactory category includes highly sat- However, since many of the projects contained non- isfactory, satisfactory, and moderately satisfactory. It is PSD components, the ratings may have little meaning. not unusual to find a "disconnect" between ratings at 7. PSD commitments per capita were plotted the project level and outcomes at the country level. against the EBRD scores for enterprise reform (annex 23. Sachs, Zinnes, and Eilat (2000) create seven clus- table A.7). The results suggest that an increase in the ters of countries based on similar initial conditions, former of US$36 is associated with a full point in- but they do not provide additional explanatory power crease in the EBRD index, the difference between with respect to project outcomes; i.e., the range of out- the extent of reforms in Uzbekistan and in Latvia. come ratings within each of the seven clusters is large. 8. Several Background Papers for this evaluation For example, the proportion of satisfactory outcomes touch on this debate. Kogut and Spicer (forthcoming) 8 4 E N D N O T E S review the literature on the Bank's role in the priva- ing methodology, see Kaufman, Kraay, and Mastruzzi tization process. See also Svejnar (2002) for a summary (2003). of the debate; the transition country CAEs for com- 16. These reports, expected to be issued every ments on the Bank's role in those countries; and the three years, are based on the firm-level Business En- country papers (Bager 2002; Blaszczyk, Cukowski, vironment and Enterprise Performance Surveys and Siwiñska 2002; Jandosov 2002) for the point of (BEEPS), carried out in collaboration with the EBRD. view of some borrowers. 17. Kogut and Spicer (forthcoming) conclude that 9. Nellis (2002) elucidates the states of mind that economics has been the only real player in policy dis- prevailed in selected countries and in the Bank, and cussions, and that sociology and political science were describes the reforms as they evolved. He concludes neglected. ECA's publication Transition: The First Ten that although in many cases privatization could have-- Years (World Bank 2002b) recognizes the primacy of and probably should have--been better managed, it political factors in determining economic develop- has proven its worth in CEE countries, while the CIS ments. countries that tried to transit without much change 18. OED's recent report on Mainstreaming Anti- of ownership have not had much success. Corruption Activities in World Bank Assistance (OED 10. Institutional components did appear in ad- forthcoming) similarly called for a better under- justment and rehabilitation loans before 1996 to the standing of social and political factors at the country Czech Republic, Hungary, Moldova, Poland, and Ro- level to enhance the quality and impact of Bank ad- mania. vice and improve the design of anti-corruption in- 11. The World Bank lends a degree of impartiality terventions. in facilitating enterprise reforms that investment banks 19. Such a long-term approach may not be ap- do not. The signal sent to investors by IFC or the propriate for all countries, such as those that have grad- EBRD when they invest their own money is extremely uated or for which EU accession issues shorten the valuable. time horizon. Even in these cases, however, institu- 12. In recent evaluative work on Bosnia and Herze- tion building should be placed within a long-term govina, OED found that the Region continued to sup- framework. The Region notes that it is already applying port mass privatization through vouchers beyond the this lesson. mid-1990s, when a consensus had already emerged 20. World Bank (2000a) and the World Bank/EBRD that this was a mistake. Business Environment and Enterprise Performance 13. The Region has acknowledged that in at least Surveys (1999 and 2002). one case (Armenia), earlier and more aggressive at- 21. Jandosov (2002, p. 8) acknowledges the im- tention to improvements in the business environ- portance of Bank assistance in introducing transpar- ment might have led more quickly to dynamic growth. ent procurement procedures in Kazakhstan's public 14. This section is based on a review of Bank as- sector, only one of many examples. sistance to 14 countries, selected to be representative 22. OED's evaluation of knowledge sharing in the of the different categories of countries: Russia (in a cat- Bank found that while clients welcome improvements egory of its own), one Baltic state (Latvia), three Cen- in the accessibility and timeliness of Bank information, tral European countries (Hungary, Poland, and they still see a need to improve dissemination of the Romania), two in Eastern Europe (Moldova and Bank's knowledge at the country level (OED 2003, p. 27). Ukraine), two in South-Eastern Europe (Albania and 23. The Region notes that most adjustment oper- Bulgaria), and five other CIS countries (Armenia, ations in this sector now have measures to promote Georgia, Kazakhstan, Kyrgyz, and Tajikistan). This transparency, including publishing information such sample includes the largest country and the smallest, as audit reports, reporting to Parliament, and setting the richest and the poorest, and one of the most and up Web sites. one of the least democratic states. 24. The Region notes that in recent months the or- 15. ganization of this work has improved: projects are now govdata2002/. These data are associated with large mar- jointly overseen by the Region and the Legal Depart- gins of error and should be used with caution. Two ment, and a thematic group has been created that in- points were not recorded for 1996. For the underly- cludes all stakeholders. 8 5 E C O N O M I E S I N T R A N S I T I O N 25. This section is based on a review of 26 coun- of ESW focused on labor markets, unemployment, try programs, including policy papers, ESW, and almost and employment services, but none preceded projects. 200 projects identified as having financial sector de- 35. The Bank supported pension reform in 9 in- velopment objectives during the period 1991­00. vestment and 17 adjustment loans, in a total of 16 OED is currently carrying out an evaluation of the countries. The outcomes of most have been rated Bank's financial sector assistance worldwide. satisfactory, or, if still active, they are being imple- 26. Informal financial sector work may have been mented satisfactorily. In only two cases were reforms prepared, but was not reviewed for this evaluation. The analyzed in advance of the policy debate, and in only joint IMF­World Bank Financial Sector Assessment one (Poland) was the reform adopted. Early failures Program (FSAP), initiated in 1999, was also not re- included loans to Belarus, Romania, and Russia. OED's viewed; OED is undertaking a separate evaluation of upcoming evaluation of pension reform Bankwide the this program. will assess in more detail the effectiveness of the 27. See, for example, Báger (2002, p. 5) on the Bank's direct assistance in the pension area. Bank's role in Hungary, and Blaszczyk, Curkowski, 36. For a Polish view of the Bank's contribution to and Siwiñska (2002, p. 26) for a description of a highly pension reform, see Blaszczyk, Cukrowski, and Si- satisfactory financial sector adjustment project linking wiñska 2002, pp. 32­33. bank recapitalization to enterprise restructuring in 37. Eleven investment and 18 adjustment loans Poland. had social assistance components, and 40 reports 28. The countries can be broken down into four were written. With a few notable exceptions since groups, but the CIS countries are concentrated in 1998, the ESW focused mostly on documenting prob- the weak and partial reformer categories, while all of lems rather than on analyzing desirable policy re- the CEB countries fall into the progressing and ad- forms. vanced reformer categories (see also annex table A.7). 38. Only the effort in Romania was linked to a par- 29. The ECA Region and the Bank's Financial Sec- ticular loan. tor Board are putting in place new procedures to en- 39. Lack of administrative, including analytical, ca- sure that financial sector staff review all such pacity is cited as a major impediment to improving so- operations. cial assistance programs in the transition economies 30. This section is based on a review of 83 sector by the ECA Region (Andrews and Ringold 1999; World reports and 60 projects with social protection com- Bank 2000b). ponents, of which two-thirds have been closed and 40. The ECA review of its social protection activi- rated. Some projects included components in sev- ties reached a similar conclusion (World Bank, 2000b). eral areas, so the sum of the numbers of projects re- 41. Some recent adjustment loans have begun to ferred to in this section is greater than 60. address labor market issues. 31. All five of the CASs in 1992 raised this topic, as 42. The success in Russia was temporary, as the gov- did about 60 percent of the CASs in the subsequent ernment could not afford to maintain the real value three years. of the minimum pension after the 1998 fiscal crisis. 32. For example, Andrews and Ringold (1999); Fox 43. A good Regional assessment of social protec- (2002); Lindeman, Rutkowski, and Sluchynskyy (2000); tion strategy was issued in 2000 (World Bank 2000b). World Bank (2000b). This evaluation confirms that if 44. A notable recent exception is the 2002 CAS for the report were rewritten today to reflect experience, Bulgaria. most of the original recommendations would remain, 45. The findings in this section are based on 102 although a few new ones might be added, and rela- projects in 24 countries (there were no projects in Be- tive emphases changed. larus or Turkmenistan) that were either dedicated 33. This study was never adopted as official Bank energy projects or had an energy component, as well policy in the pension area, but it became a reference as on information from CAEs and other Bank docu- for policymakers and Bank staff, and was perceived ex- ments. ternally as the Bank's vision for pension reform. 46. As noted earlier, underlying the objectives of 34. Nine investment and two adjustment operations the Bank was the concern that reforms might be re- had employment service components. Nine pieces versed if they were not implemented quickly and suc- 8 6 E N D N O T E S cessfully. The Georgia Sector Adjustment Credit was 55. This is a key finding in OED, OEG, and OEU the only project to mention the explicit objective of (2003a, p. 44), which also discusses individual coun- combating corruption. try experience. 47. World Bank (1999). The scores are based on a questionnaire completed in 1998 by World Bank staff Chapter 3 with experience in the energy sector in 115 coun- 1. OED's evaluation of knowledge sharing by the tries, including the 24 ECA countries. Bank (OED 2003) echoes this recommendation. 48. A point was awarded if either generation or dis- 2. OED's 2001 Annual Review of Development Ef- tribution or both had experienced some privatiza- fectiveness (OED 2002a, pp. 25, 59) confirmed the crit- tion. ESMAP criteria do not cover financial ical importance of ESW for country programs, and performance, and in some cases (Georgia, for exam- called for a strong evaluative framework to ensure its ple, because of poor performance in governance and continued effectiveness. Activity completion sum- law and order), successful structural reforms did not maries for ESW, while mandated for tasks above lead to improved financial performance during the $50,000, are often not done. time period covered by this report. 3. Jandosov (2002, p. 15) stresses the importance 49. These assessments do not correspond to OED of building local analytical and research capacity ratings of the projects, but are based rather on an as- through joint ESW and the role of its dissemination sessment of the outcome of the energy component in promoting dialogue and consensus in the country. only of each project, as revealed in evaluation re- OED's evaluation of knowledge sharing also finds ports. The other countries judged fair to good were that "clients give particular emphasis to enhanced ef- the Czech Republic, Kazakhstan, and Moldova; they forts by the Bank to incorporate local knowledge and received scores of 4, 4, and 3 respectively on policy collaborate with local experts, strengthen institutional reform, and are in the middle range of improvement capacity, and expand in-country knowledge dissemi- in energy efficiency. nation" (OED 2003, p. 29). 50. Taking only the 31 projects classified as en- 4. The Region points out that they have made ergy projects, 87 percent received satisfactory ratings country-by-country or subregional attempts to en- for the Bank's performance, compared with 70 per- courage this kind of behavior; and that a lot of donor cent of all energy and mining projects Bankwide. coordination already takes place in the EU accession 51. This conclusion affirms other OED findings, for countries. example, in the evaluation of the Comprehensive De- velopment Framework (CDF Secretariat 2003). Annex C 52. This conclusion is in line with Bank opera- 1. In some cases, the positions listed are those tional policy. held at the time of the interview; some of the people 53. For example, in Bulgaria and Kazakhstan, the no longer occupy the same positions. Bank needed to understand the business environ- ment in which SOEs operated in order to impose Annex D hard budget constraints and financial discipline. Cut- 1. This observation is not fully consistent with an- ting them off from the budget and imposing penalties other of the report's observation: that capital market for a build-up of interenterprise arrears achieved lit- development was sometimes overemphasized in the tle if they simply financed their losses from the state early years of transition. banking system. 54. Good examples were Bulgaria, Kazakhstan, the Kyrgyz Republic (despite limited energy lending), Lithuania, Poland, Romania, and the Russian Federation. 8 7 BIBLIOGRAPHY Background Papers for the evaluation *Desai, Raj. Forthcoming. "Private Sector De- can be identified by the asterisk (*) that velopment Assistance to the Transition precedes them. All papers will be available Economies: A Decade of World Bank Lending." on the study Web site: OED, Washington, D.C. . transitioneconomies>. Djankov, Simeon, and Peter Murrell. 2000. De- terminants of Enterprise Restructuring in Andrews, Emily, and Dena Ringold. 1999. "Safety Transition: An Assessment of the Evidence. Nets in Transition Economies: Toward a Re- Washington, D.C.: World Bank. form Strategy." Social Protection Discussion EBRD (European Bank for Reconstruction and Paper No. 9914. World Bank, Europe and Cen- Development). 2001. Transition Report 2001: tral Asia Region, Human Development Sector Energy in Transition. London. 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Extractive Industries and Sus- sion Systems in Eastern Europe and Central tainable Development: An Evaluation of Asia: Opportunities, Constraints, Dilemmas World Bank Group Experience. Vols. 1­4. and Emerging Practices. Washington, D.C.: OED Study Series. Washington, D.C.: World World Bank. Bank. Lovei, Laszlo. 1998. "Energy in Europe and Cen- Sachs, Jeffrey, Clifford Zinnes, and Yair Eilat. tral Asia, a Sector Strategy for the World Bank." 2000. "Patterns and Determinants of Eco- Discussion Paper No. 393. Washington, D.C.: nomic Reform in Transition Economies: World Bank. 1990­98." Harvard Institute for International *Nellis,John.2002."TheWorldBank,Privatizationand Development, Consulting Assistance on Eco- EnterpriseReforminTransitionEconomies:aRet- nomic Reform II Discussion Paper No. 61. rospective Analysis." OED Working Paper, Wash- Cambridge, MA. 9 0 B I B L I O G R A P H Y Sahgal, Vinod, and Deepa Chakrapani. 2000. ------. 2000b. 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Power's Promise: Region," Vol. I, "The Overall Profile." Working Electricity Reforms in Eastern Europe and Paper 18891, Washington, D.C. Central Asia. World Bank Technical Paper. ------. 1997a. "Central and Eastern Europe: Washington, D.C. Power Sector Reform in Selected Countries." ------. 2004. Anticorruption in Transition: ESMAP (Energy Sector Management Assis- Corruption in Enterprise-State Interactions tance Program) Report No. 196/97. July. in Europe and Central Asia, 1999-02. Wash- ------. 1997b. World Development Report: The ington, D.C. State in a Changing World. New York: Oxford ------. 2003. Hidden Challenges to Education University Press for the World Bank. Systems in Transition Economies: Education ------. 1996. World Development Report: From Sector Strategy Paper for Europe and Central Plan to Market. New York: Oxford University Asia Region. Washington, D.C. Press for the World Bank. ------. 2002a. "Economic Development and Pri- ------. 1994. Averting the Old-Age Crisis: Poli- vate Sector Growth in the Low-income CIS cies to Protect the Old and Promote Growth. Countries: Challenges and Policy Implications," New York : Oxford University Press. CIS-7 Initiative Paper, ECSPF, Lucerne Confer- ------. 1993. The World Bank's Role in the Elec- ence of the CIS-7 Initiative, January 20-22, 2003. tric Power Sector: Policies for Effective Insti- ------. 2002b. Transition: The First Ten Years. tutional, Regulatory and Financial Washington, D.C. Reform--A World Bank Policy Paper. Wash- ------. 2001. "Training Program on Social Pol- ington, D.C. icy Reform in Transition Economies (SPRITE)." ------. 1992. Governance and Development. WBI Evaluation Briefs. Evaluation Unit, World Washington, D.C. Bank Institute, Washington, D.C. ------. 1983. World Development Report: Man- ------. 2000a. Anticorruption in Transition-- agement in Development. New York: Oxford A Contribution to the Policy Debate. Wash- University Press for the World Bank. ington, D.C. 9 1 OED PUBLICATIONS Study Series 2003 Annual Review of Development Effectiveness: The Effectiveness of Bank Support for Policy Reform Agricultural Extension: The Kenya Experience Assisting Russia's Transition: An Unprecedented Challenge Bangladesh: Progress Through Partnership Bridging Troubled Waters: Assessing the World Bank Water Resources Strategy The CGIAR: An Independent Meta-Evaluation of the Consultative Group on International Agricultural Research Debt Relief for the Poorest: An OED Review of the HIPC Initiative Developing Towns and Cities: Lessons from Brazil and the Philippines The Drive to Partnership: Aid Coordination and the World Bank Financial Sector Reform: A Review of World Bank Assistance Financing the Global Benefits of Forests: The Bank's GEF Portfolio and the 1991 Forest Strategy and Its Implementation Fiscal Management in Adjustment Lending IDA's Partnership for Poverty Reduction Improving the Lives of the Poor Through Investment in Cities India: The Dairy Revolution Information Infrastructure: The World Bank Group's Experience Investing in Health: Development Effectiveness in the Health, Nutrition, and Population Sector Jordan: Supporting Stable Development in a Challenging Region Lesotho: Development in a Challenging Environment Mainstreaming Gender in World Bank Lending: An Update The Next Ascent: An Evaluation of the Aga Khan Rural Support Program, Pakistan Nongovernmental Organizations in World Bank­Supported Projects: A Review Poland Country Assistance Review: Partnership in a Transition Economy Poverty Reduction in the 1990s: An Evaluation of Strategy and Performance Power for Development: A Review of the World Bank Group's Experience with Private Participation in the Electricity Sector Promoting Environmental Sustainability in Development Reforming Agriculture: The World Bank Goes to Market Sharing Knowledge: Innovations and Remaining Challenges Social Funds: Assessing Effectiveness Uganda: Policy, Participation, People The World Bank's Experience with Post-Conflict Reconstruction The World Bank's Forest Strategy: Striking the Right Balance Zambia Country Assistance Review: Turning an Economy Around Evaluation Country Case Series Bosnia and Herzegovina: Post-Conflict Reconstruction Brazil: Forests in the Balance: Challenges of Conservation with Development Cameroon: Forest Sector Development in a Difficult Political Economy China: From Afforestation to Poverty Alleviation and Natural Forest Management Costa Rica: Forest Strategy and the Evolution of Land Use El Salvador: Post-Conflict Reconstruction India: Alleviating Poverty through Forest Development Indonesia: The Challenges of World Bank Involvement in Forests Uganda: Post-Conflict Reconstruction Proceedings Global Public Policies and Programs: Implications for Financing and Evaluation Lessons of Fiscal Adjustment Lesson from Urban Transport Evaluating the Gender Impact of World Bank Assistance Evaluation and Development: The Institutional Dimension (Transaction Publishers) Evaluation and Poverty Reduction Monitoring & Evaluation Capacity Development in Africa Public Sector Performance--The Critical Role of Evaluation Multilingual Editions Allègement de la dette pour les plus pauvres : Examen OED de l'initiative PPTE Appréciation de l'efficacité du développement : L'évaluation à la Banque mondiale et à la Société financière internationale Determinar la eficacia de las actividades de desarrollo : La evaluación en el Banco Mundial y la Corporación Financiera Internacional Côte d'Ivoire : Revue de l'aide de la Banque mondiale au pays Filipinas: Crisis y oportunidades Reconstruir a Economia de Moçambique : THE WORLD BANK TMxHSKIMBy359341zv":;:^:$:% ISBN 0-8213-5934-7

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