ECSPF Portfolio Performance s1

ECSPF Portfolio Performance end-December 2004

I. Portfolio Summary and Key Performance Indicators

Below is a summary of the key issues related to ECSPF’s portfolio in December 20041.

Portfolio size

. As of end-December 2004, ECSPF had 2000 35 21 projects under supervision with a net 1750 30 1500 commitment value of $840.6 million. 25 . Some 20 projects were scheduled to 1250 20 close in the course of the fiscal year 1000 15 decreasing the net commitment value to 750 10 $723.6 million. 500 . Of these 20 projects, 6 have already 250 5 closed, and another 6 have been extended 0 0 beyond FY05. QIV/ FY03 QIV/ FY04 QI/ FY05 QII/ FY05 . FY05 compact envisages appraisal of 13 N e t C o m m i t m e n t s ( U S $ m l n ) N u m b e r o f P r o j e c t s u n d e r S P N new projects. . 8 projects are planned for the Board approval during the fiscal year. . The estimated commitments from the 8 new lending projects will amount to $554.25 million.

Portfolio Quality

. At the end of December 2004, there were four projects at risk comprising 19 percent of ECSPF’s current supervision portfolio. . Realism in December declined to 50 percent, substantially above the ECA target of 80 percent, as two of the four projects at risk had a “potential problem” status. . Proactivity stayed at the same level of 50 percent at end-December 2004 as no further proactive actions have been encountered. This indicator is significantly below the ECA regional target of 90 percent.

FY05 Deliverables

. In FY05, the department is scheduled to complete and deliver 12 ICRs, 13 ESW outputs and 5 Regional Studies. The department is also planning to have at least 13 projects appraised and 8 of them approved by the Board. The number of compacted TA operations is estimated at 16.

Major Operational Activities

. The identification mission for the Turkey SME Access to Finance Project took place from December 8 -15, 2004.

1 All statistics are as of January 8, 2005.

1 . A mission to organize the Istanbul Knowledge Economy Forum, scheduled for the week of March 22nd, visited Turkey from December 16-23, 2004. . A supervision mission for the Turkey Second Export Finance Intermediation Loan (EFIL II) and identification mission for the Turkey Third Export Finance Intermediation Loan (EFIL III) visited Istanbul and Ankara between November 29 and December 10, 2004. . Project Concept Review meeting for the Moldova Competitiveness Enhancement Project was held on November 23, 2004. . The Concept Review Meeting for the Bosnia Medium Term Economic Restructuring and Growth Programmatic Development Policy Credit (MTERG-PDPC) was held on December 3, 2004. . A mission to present and distribute the Tajikistan Financial Sector Strategy Assessment Paper visited Dushanbe, Tajikistan from December 1-9, 2004. The objective of the mission was to explore the next steps and identify potential technical assistance opportunities stemming from the strategy paper. Additionally, the mission has also investigated the demand and feasibility for Bank’s intervention to strengthen the private sector.

II. Projects Under Implementation

ECSPF had 21 projects under supervision as of end-December. The disbursement ratio during this period was at 32.6 percent, considerably above the regional ratio for December of 14.6 percent. Notwithstanding a higher ratio, there are still 8 projects (or 38% of the total number of projects) in ECSPF’s portfolio with a “slow disbursement” flag.

Projects at Risk

In December, the number of ECSPF’s projects at risk declined to four. These included two problem projects and two potential problem projects.

Problem Projects

The two problem projects are for the following countries: Russia, and Ukraine.

Actual Problem Projects Ctry P0 # Project TTL Remarks

RU P008828 Fin Inst Poznanskaya Restructured in FY03 and partially cancelled in FY04, the project continues to proceed as planned, and is being closely monitored in accordance with performance indicators (last mission in October 2004). The project implementation continues to remain satisfactory with a number of activities taking place as per the agreed Procurement Plan (leading to substantial increase in disbursements). The progress on Project Benchmarks agreed with the Bank earlier has also been satisfactory. Notwithstanding its prolonged problem status, the project was extended in December for another twelve months, and is now scheduled to close on December 31, 2005. UA P054966 PSD Jedrzejczak There are three major problems with this project, including slow disbursements, Government's unwillingness to finance VAT, and weak institutional capacity of implementing agencies. A supervision mission initially scheduled to take place in November 2004 was postponed until after the elections, at which time the project ratings will be revisited.

2 Potential Problem Projects

ECSPF currently has two potential problem projects (projects with three or more risk flags).

Potential Problem Projects Ctry P0 # Project TTL Risk Flags N a m e MD P035811 PSD 2 Astrakhan Macro management, risk country, and slow disbursement Although the system has captioned the Moldova PSD-2 project as potential problem, the project is proceeding satisfactory and is scheduled to close at the end of March, 2005. Project objectives have been met, and the benchmark indicators in the last PSR have been achieved and even surpassed. Disbursements are slow attributing to a large-amount invoice outstanding for payment of works that have been completed. YF P074484 Exp Fin Fac Edgecombe Efficiency delay, macro management, and slow disbursement This project has moved from the list of actual problem projects into potential problem projects due to an upgrade in the DO and IP indicators. The project will be closely monitored.

“Watch” Projects

As of end-December, ECSPF had 10 “watch” projects requiring close supervision in order to avoid falling into a problem or potential problem status. The projects with 2 or less risk flags classified as “watch” are shown in the table below.

“Watch” Projects under supervision Ctry P0 # Project Name # Risk Risk flags F l a g s RU P042622 CAP MRKT DEV 2 Country Risk, slow disbursement UA P074885 E-DEVT TA 1 Effectiveness delay AM P044852 ENT INCUBATOR 2 Slow disbursement, financial performance AZ P070973 FIN SCT TA 1 Macro management GE P008416 ENT REHAB 1 Slow disbursement SM P077732 PRBE 1 Macro management HR P057767 TA INST REG REF 1 Slow disbursement RO P039251 PIBL 2 Country Risk, slow disbursement RO P069679 PPIBL 1 Country Risk KG P074881 PYMNT/BANK SYS 1 Country Risk

Project Closings and Extensions

There are 14 projects with FY05 closing dates, of which six have already closed. Six projects have been extended beyond end-FY05. The tables below provide detailed information on closings and extensions.

Projects extended beyond FY05 Ctry P0 # Project Name TTL Revised Closing Remarks Date BH P070917 Priv TA Kreacic 08/31/06

3 GE P008416 Enterprise Rehab Astrakhan 12/31/05 TR P009073 Industr Technol Ozdora 12/31/05 RO P069679 PPIBL Shojai 06/30/07 RU P042622 Cap Mkt Dev Bossoutrot 12/31/06 RU P008828 Fin Instit Poznanskaya 12/31/05

Projects scheduled to close by end-FY05 Ctry P0 # Project Name TTL Closing Remarks D at e AL P057818 FSAC Aghdaey 12/31/04 Closed AL P069079 Fin Sec IBTA Minotti 06/30/05 AM P044852 Enterprise Incub Shojai 06/30/05 BH P045820 Emerg Ind Restart Edgecombe 12/31/04 Guarantee closed BH P070243 Priv Sec Credit B.-Bratanovic 06/30/05 BH P071001 Bus Enabl Env Kreacic 03/31/05 extended to end-March 2005. HR P057767 TA Inst Reg Ref Koryukin 06/30/05 MD P035811 PSD 2 Astrakhan 03/30/05 RO P067575 PSAL 2 Negulescu 12/31//04 Closed RO P039251 PIBL Segal 02/28/05 extended to end-February SM P074127 FSD TA Pankov 12/31/04 Closed SM P074145 PSD TA Pankov 12/31/04 Closed SM P074868 PFSAC 2 Goldberg 12/31/04 Closed UZ P055159 EIBL Botha 06/30/05 Cap mkt component extended

Performance Indicators and Quality

The table below compares ECSPF’s portfolio performance with regional averages and regional targets.

Summary of Performance Indicators as of December 31, 2004 Indicator ECA Target ECA Actual ECSPF Actual Stale PSRs (#) 0 0 0 Backlogged ICRs (#) 0 3 1 Proactivity (%) 90 66.7 50 Realism (%) 80 77.3 50 Project at Risk (#, %) N/A 44 (15.6%) 4 (21.1%) Commitment at Risk (%) N/A 21.1 16.7 Actual Problem Projects (#, %) N/A 34 (12.1%) 2 (10.5%) Potential Problem Projects (#, %) N/A 10 (3.5%) 2 (10.5%)

N/A = not applicable or not available

PSR Timeliness

At the end of December, no stale PSRs were recorded against the department. All PSRs were updated and archived on time before the year-end deadline.

Quality Enhancement Reviews

No QERs were held in December 2004.

4 III. FY05 Deliverables

ECSPF programmed to deliver 12 ICRs under its FY05 compact. To date, the department has delivered five ICRs for Albania Private Industry Recovery Project, Russia Enterprise Support Project, Kosovo PSD TA Project, Slovakia EFSAL Project, and Ukraine Export Development Project. The ICRs for 3 more closed projects are underway, including:

. Albania FSAC; . Bosnia Emergency Industrial Restart Project; . Bosnia Enterprise Export Facilitation; . Romania PSAL 2; . Serbia FSD TA; . Serbia PSD TA; and . Serbia PFSAC 2

The complete list of FY05 ICRs (based on current planning) is summarized in the table below.

Implementation Completion Report Ctry P0 # Project Name TTL Closing ICR to Remarks

AL P057818 FSAC Aghdaey 12/31/04 06/30/05 AL P051602 Priv Ind Recov Edgecombe 01/31/03 09/15/04 Delivered BH P062936 Ent Exp Facil Edgecombe 12/31/04 06/30/05 BH P045820 Emerg Ind Restart Edgecombe 12/31/03 02/28/05 Being reviewed by SM KO P071265 PSD TA Minotti 06/30/04 12/31/04 Delivered RO P067575 PSAL 2 Negulescu 12/31/04 06/30/05 RU P008839 Ent Support Bossoutrot 12/31/03 09/30/04 Delivered SL P064542 EFSAL Bakker 06/30/04 12/31/04 Delivered SM P074127 FSD TA Pankov 12/31/04 06/30/05 Intensive learning ICR SM P074145 PSD TA Pankov 12/31/04 06/30/05 SM P074868 PFSAC 2 Goldberg 12/31/04 06/30/05 UA P044851 Export Developm Prigozhina 06/30/04 12/31/04 Delivered

Projects Under Preparation

Originally, eight projects were scheduled for Board approval in FY05. Turkey Knowledge Economy and Innovation project has been dropped from pipeline in October 2004, and has been replaced with an EFIL-III operation. Currently, there are eight projects with FY05 Board date, including:

FY05 Project Pipeline: Lending Projects for the Board Approval in FY05 Ctry P0 # Project Name TTL Board Remarks A p pr o v al AZ P081616 Mkt Serv Dev B.-Bratanovic 01/06/05 Approved by the Board

5 BH P089043 Corp Restr PAL Kreacic 06/21/2005 HR P080258 Scien and Techn Koryukin 04/14/2005 Appraised in September KO P088045 Bus Env & Rur Ent TBD 05/05/2005 RO P088165 Knowl Economy Jedrzejczak 04/26/2005 RU P088584 Land Launch Guar Bossoutrot 06/07/2004 TR P093568 EFIL3 Raina 06/23/05 Replacing KEI project UA P076553 Access to Fin Svcs Chaves 04/14/2005

In addition to the project appraisals mentioned above (with the Board date in FY05), ECSPF also expects to appraise at least another 8 projects to enlarge the lending portfolio. The pipeline of potential projects is shown in the table below. The expansion of the project pipeline comes in part from the knowledge economy, SME/export development and one company town business lines, as well as a “rebound” in the Balkans, Russia, and Turkey.

Other FY05 Appraisals with outer year Board date Ctry PO # Project Name TTL Comments BG P089157 Innovation and Comp. Adj. Raina KG P087811 Bus Dev Enhancement Bossoutrot MK P079552 Bus Env Reform Minotti MD P089124 Competitiveness Enhanc. Astrakhan RO P083959 Jiu Valley Devt Negulescu YF P089116 Progr. Dev Policy Loan I (PDPL1) Edwards TR P074181 PFSAL Edwards TR P082822 SME Development Motta

ECSPF has planned 13 ESW outputs for this fiscal year, of which five will be Investment Climate Assessments (ICAs) in Kyrgyz, Lithuania, Russia, Serbia, and Tajikistan. In addition, the department has committed to deliver 4 regional studies and 1 workshop (KE Forum IV) in FY05. The table below provides a complete list of ECSPF ESWs and their status.

List of FY05 ESWs Ctry PO # Project Name Delivery Final Remarks t o

C l i e n t REG P084099 Non-Bank Fin Insts 12/30/04 3/31/05 REG P089844 ECA KE Study 4/11/05 5/9/05 REG P089846 One Company Town Reh 4/15/05 5/9/05 REG P089848 Payment/Security Stlmnt 4/11/05 5/9/05 AL P092011 PSD Policy Note 5/1/05 6/30/05 AZ P090732 PSD Bus Env Ind Bench 3/30/05 6/15/05 BL P079089 NBFI sector assessment 9/13/04 -- Delivered CZ P083945 Corp Gov Module (Bank) 12/30/04 5/27/05 KZ P092343 Technology & Compet 6/30/05 6/30/05 KG P084070 ICA 9/30/04 10/29/04

6 LT P083788 ICA 12/15/04 1/31/05 Review meeting held on Oct 8 MK P089113 Leg & Jud Diagn Study 1/31/05 3/14/05 PL P083941 Corp Gov Assmt update 12/31/04 4/29/05 RU P089187 ICA 4/15/05 6/15/05 RU P092952 PCGF w/o Sov Ctry Guar 2/28/08 -- SM P081216 ICA 6/29/04 11/30/04 SM P083900 Progress in Serb Priv 11/22/04 12/13/04 TJ P079021 ICA 12/15/04 1/31/05

In addition to ESWs, ECSPF has also estimated to deliver 16 technical assistance activities shown in the table below.

List of FY05 TAs Ctry PO # Project Name Delivery Final Remarks t o

C l i e n t EU P089240 EU8 KE TA Acts 6/30/05 6/30/05 AL P060043 PSD TA 6/30/05 6/30/05 AL P083716 PSD Policy Note 11/8/04 12/31/04 BG P089160 Innov & Compet Study 6/30/05 6/30/05 HR P091400 NBFI Intgr Spn TA 6/30/05 6/30/05 CZ P085027 FSAP Flwp TA for Insolv 6/30/05 6/30/05 GE P092322 Financial Sector Note 12/3/04 2/1/05 KO P089142 Privatization TA 3/28/05 6/30/05 KG P086990 Strength Natl Stats TA 6/30/05 6/30/05 MK P083827 Post-FSAP TA 6/30/05 6/30/05 RU P090522 Fin and Bank Sect Ref 6/30/05 6/30/05 RU P092887 Microfin Technical Note 4/18/05 6/30/05 RU P093049 Technology Commercial 6/30/05 6/30/05 RU P093093 Regional Bank Devt TA 6/30/05 6/30/05 SM P082456 PRSA Multidonor Mgmt 6/20/05 6/30/05 RU P089310 Fin Sect & FSAP Flwp TA 6/30/05 6/30/05

While FSAPs are not counted against the outputs because they are considered FSE deliverables, the department will work on FSAPs in Albania, Belarus, Serbia and Montenegro, Turkey. ECSPF will also lead FSAP updates in Armenia and Hungary during this fiscal year.

7 IV. Trust Fund Report

Trust Funds as of December 31, 2004 Ctry Project Name TF Closing Grant Grant Avail. Receipt Disburse- m e n t s (mln US$)

YF Financial sector development technical assistance project FRYBK 12/31/04 USD 6.00 0.45 6.00 5.55 YF Private sector development technical assistance project FRYBK 12/31/04 USD 6.00 0.31 6.00 5.69 YF Dutch grant for private sector development technical assistance FRYTF 12/31/04 USD 2.00 0.01 2.00 1.99 YF Technical assistance project for Yugoslavia FRYTF 12/31/04 USD 0.00 0.00 0.00 0.00 YF Private sector development technical assistance project FRYTF 12/31/04 USD 1.59 0.23 1.59 1.36 YF Serbia business registration reform MISC2 05/31/05 SEK 13.00 1.26 1.93 0.61 YF Co-financing of the export finance facilitation project FRYTF 08/30/05 USD 8.92 5.18 8.92 3.74 PHRD-Armenia: business linkages project (recipient AM executed portion) PHRD 12/31/04 USD 0.19 0.06 0.20 0.13 Private and public sector institutional RO building loan – II MISC2 07/31/04 USD 0.00 0.00 0.00 0.00 Private and public sector institution RO building MISC2 07/31/04 USD 3.17 2.57 3.17 0.60 Bosnia Business Environment BH Adjustment Credit MISC2 12/31/04 SEK 3.15 0.24 0.47 0.20 Financial sector UA development project MISC2 02/27/05 EUR 1.83 0.73 2.42 1.48 PHRD-Kyrgyz republic: financial sector and business development project KG (FINBUS) PHRD 03/16/04 USD 0.41 0.00 0.41 0.41 Privatization holding AL trust fund HOLDTF 04/30/04 USD 1.70 0.00 0.00 0.00

8 Privatization strategy program technical AL assistance SPTF 06/30/06 USD 1.74 1.74 1.84 0.09 IDF: accounting and SK auditing reform IDF 03/11/06 USD 0.36 0.24 0.36 0.12 IDF-building capacity in public accounting for the Republic of Slovenia, Albania and SI Croatia IDF 02/02/06 USD 0.37 0.27 0.37 0.11 Private sector development technical KO assistance KOSBK 06/30/04 USD 2.88 0.00 2.88 2.88

Consultant Trust Funds as of December 31, 2004 Ctry Fund TTL Activities Submis Expenses Commit Uncommit B a l

ECA TF030660 Italian Corrochano P089848 $30,100 $10,384 $12,441 $7,275 ECA TF030660 Italian Noel P084099 $16,150 $0 $6,786 $9,364 KZ TF030614 Italian Watkins P090695 $30,000 $0 $0 $30,000 KZ TF030660 Italian Corrochano P092483 $9,900 $6,237 $7,917 $4,254 KO TF030609 Greek Astrakhan P088045 $99,500 $0 $0 $99,500 KO TF030614 Italian Astrakhan P088045 $28,900 $9,880 $11,020 $8,000 KO TF030615 Italian Astrakhan P088045 $107,810 $0 $0 $0 KG TF030614 Italian Bossoutrot P087811 $30,000 $0 $0 $30,000 KG TF030691 Irish Shojai P074881 $37,500 $0 $26,490 $11,010 MK TF030609 Greek Botha P089113 $17,000 $0 $17,000 $0 MK TF030609 Greek Minotti P079552 $74,995 $14,195 $35,520 $25,280 MD TF030622 Pooled Astrakhan P089124 $11,100 $3,315 $5,525 $2,260 RO TF030603 Austria Negulescu P083959 $98,000 $0 $0 $98,000 RO TF030614 Italian Negulescu P083959 $99,600 $0 $0 $99,600 TJ TF030614 Italian Shojai P089182 $30,377 $0 $9,802 $20,575 TJ TF030660 Italian Shojai P090677 $14,850 $10,179 $3,770 $901 TJ TF030691 Irish Shojai P089182 $37,500 $0 $26,490 $11,010 UA TF030691 Irish Prigozhina P079092 $40,500 $0 $26,490 $14,010 UZ TF030660 Italian Botha P055159 $9,000 $2 $8,671 $327 UZ TF030691 Irish Botha P055159 $37,500 $0 $26,490 $11,010 $860,282 $54,192 $224,412 $473,868