Ukraine - Institution Building Loan

 ICRR 10364 Report Number : ICRR10364 ICR Review Operations Evaluation Department 1. Project Data : OEDID : OEDID: L3614 Project ID : P009106 Project Name : Institution Building Loan Country : Ukraine Sector : Institutional Development L/C Number : L3614 Partners involved : UNDP Prepared by : Alice C. Galenson, OEDCR Reviewed by : Laurie Effron Group Manager : Rene Vandendries, acting Date Posted : 06/24/1999 2. Project Objectives, Financing, Costs and Components : Objective : To assist the Government to implement economic reforms and to strengthen the institutions essential to the transition to a market economy . The project, the first lending operation in Ukraine, was approved in FY 93 and was restructured in 1995/96 after it became clear that the original design was too ambitious . The revised objective was to build up individual institutions through training and TA; the restructured components were: (a) enterprise sector reform--computerization and training for the State Property Fund (SPF, which managed the privatization process), pilot demonopolization and strategy development, and training and computerization for the Anti -Monopoly Committee (AMC); (b) financial sector reform--modernization of the payments system; and (c) public economic and financial management reform--establishment of a treasury system, pilot modernization of tax administration, computerization and training for Ministry of Statistics (MOS), Ministry of Economy (MOE), and Ministry of Finance (MOF), capacity building to manage external financial resources, training for a committee on entrepreneurship Costs US$27.1 million. Financing : World Bank, development, and support for a project implementation unit (PIU). Costs: US$27 million equivalent; UNDP, US$0.1 million. The project closed in April 1999, more than two years past the original closing date of Dec. 1996. 3. Achievement of Relevant Objectives : Substantial progress was made under enterprise reform in all but the sub -component for the SPF. Modernization of the payments system has made considerable progress . Under the public economic and financial management reform component, the capacity building for external financial resources was successful; significant progress was made in establishing a treasury system and in capacity building for the tax administration; and partial success was achieved in modernizing the tax administration, restructuring the statistics system, building capacity for economic analysis and policy formulation, and building capacity through the PIU for future Bank lending . Support to the MOF linked it with the treasury department to help in the introduction of an automated treasury system . The ICR does not comment on the results of the training for entrepreneurship development . 4. Significant Achievements : As the first operation in the country, the project helped to establish a constituency for reform among mid -level public officials, as well as to build up implementation capacity within the Government . The project initiated the strengthening of institutions essential to the functioning of a market economy . 5. Significant Shortcomings : The relatively modest objectives of the restructured project limited the ability of the project to address Ukraine's development needs. For example, despite capacity building for tax administration, the tax system remains complex, and evasion is widespread (Ukraine Country Assistance Review ). Among the restructured components, computerization of the SPF was not implemented . 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Highly Satisfactory Satisfactory The ICR states that although progress in  meeting the development objectives of the project was only moderate, the outcome was extremely positive because it built a strong constituency for reform and created strong working relations with the executing agencies and capacity to implement future Bank projects. However, given the modest nature of the restructured objectives and the fact that not all of them were fully achieved, OED rates project outcome as satisfactory . Institutional Dev .: Partial Modest These are essentially the same rating . Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf .: Satisfactory Satisfactory Quality of ICR : Satisfactory 7. Lessons of Broad Applicability : (a) Limited, but focused, pilot programs can be effective tools to prepare reforms in politically sensitive areas . (b) Intensive supervision by experienced Bank staff, along with flexibility in project redesign, helped to maximize the positive impact of the project in a changing country environment . (c) Procurement processes for information technology should take into account its relatively short shelf life . 8. Audit Recommended? Yes No 9. Comments on Quality of ICR : While the ICR is satisfactory on the whole, it does not discuss the outcome of certain sub -components (computerization and training for MOF and training of State Committee on Entrepreneurship Development ). It could also have used some editing .