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January 2003 Public Disclosure Authorized 0 Public Disclosure Authorized - '-a- - Public Disclosure Authorized Ts l 'A JI4z h____~~;. '______ b Public Disclosure Authorized OPERATIONS EVALUATION DEPARTMENT ENHANCING DEVELOPMENT EFFECTIVENESS THROUGH EXCELLENCEAND INDEPENDENCE IN EVALUATION The Operations Evaluation Department (OED) is an independent Ulilt within the Worlcl Bank, It reports diretly' to the Bank's Board of Executive Directors OED assesses what works, and whiat does not, how a borrower plans to run andc maintain a project; ancl the lasting contrilbution of the Bank tO a country's overall development 'I'he goals of evaluatoio 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 achievemenit of its objectives It also Impro'ves Bank work by identifying and disseminiatinig the lessons learned from experience and by frammig recomimendations drawn from evaluation findings WORLD BANK OPERATIONS EVALUATION DEPARTMENT IED Assisting Russia s Transition An Unprecedented Challenge Gianni Zanini 2002 THE WORLD BANKD http://vwwv.worldlbaiik.oi-g/oed Was hingto n, D .C. © 2003 The International Bank for Reconstruction and Development / I'he World Bank 1818 H Street, NW Washington, DC 20433 All nghts reserved Manufacturecl in the United States of America First printing December 2002 1 2 3 4 03 02 The findings, interpretations, and conclusions expressed here are those of the author(s) and do not necessanly reflect the views of the Board of Executive Directors of the World Bank or the governments they represent Thc World Bank cannot guarantee the accuracy of the data included in this work Thc bounclaries, colors, denominations, and other information shown on any map in the work do not imply on the part of the World Bank any ludgment of the legal status of any territory or the endoresement or acceptance of such boundancs Rights and Permissions The matenal in this publication is copynghted No part of this work may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or inclusion in any information storage and retneval system, without the pnor written permission of the World Bank The World Bank encourages dissemination of its work and will normally grant permission promptly For permission to plhotocopy or reprint, please send a request wvith complete information to the Copynght Clearance Center, Inc,222 Rosewood Dnve, Danvers MA 01923, USA, telephone 978-750-8400, fax 978-750-4470, wwwcopynght com All other quenes on nghts 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 pubrights@worldbank org Cover photo By Peter Turnley/CORBIS Three Miners in the Bolshevik Coal Mine, Sibena ISBN 0-8213-5382-9 library of Congress Caraloging-in-Publication data has been applied for * Printed on Recycled Paper Contents vii Acknowledgments ix Executive Summary ix Executive Summary ix Pe3tOMe xxi Resume analytique xxi Resumen Ejecutivo xxxi Abbreviations and Acronyms I 1. Russia's Transition: From Plan to Market 1 An Extraordinary Challenge 2 Institutional, Economic, and Social Performance 4 Recent Achievements 5 2. The Evolution of Bank Group Assistance 5 The Bank's Goals 5 Early Phases 7 The "Renewed Lending" Phase 8 The "Crisis and Recovery" Phase 11 3. Bank Products and Services 11 Analytical and Advisory Services 13 Bank Lending Trends 13 Closed Project Performance 14 IFC and MIGA Interventions 15 Portfolio Management 16 Project Implementation Units (PlUs) 17 Cost-Effectiveness 18 Decentralization of Bank Operations 19 4. Development Impact 19 Private Sector Development 21 Financial Sector Development RUSSIAN FEDERATION 22 Public Sector Management and Financial Accountability 23 Social Protection 24 Energy Sector 25 Overall Impact of Bank Assistance 27 5. Contributions to Effectiveness of Bank Assistance 33 6. Lessons Learned and Recommendations 33 Key Development Challenges 33 Lessons Learned 34 Recommendations 37 Annexes 39 1 A Thematic Overview of Russia's Transition Challenges 49 2. A Chronological Overview of Russia's Transition Challenges 51 3. Evaluating Bank Assistance to the Transport Sector 53 4 Evaluating Bank Assistance to the Agriculture Sector 55 5: 1997 and 1999 CAS Objectives and Outcomes 57 6. Bank Performance in Sectoral Development 59 7: Discussion of Other Counterfactuals 61 8 Bank Management Views 63 9: Russia IFC Country Impact Review 69 10 Views of External Advisers and Others 75 11 Russian Federation Government Views 83 12 MIGAs Activities in Russia 85 13: The World Bank Institute's Activities in Russia 87 14: Russia's Chamber of Accounts' Views of World Bank-Funded Projects 89 15 Lessons from External Evaluations 91 16: Guide to OED's Country Evaluation Rating Methodology 95 17 Background Papers Prepared for the Russia CAE 97 18: Report from the Committee on Development Effectiveness (CODE) 101 19: Reference Tables 125 Endnotes 131 Bibliography Text Figures 6 2 1 World Bank Gross Commitments, Disbursements, and Net Transfers 13 3 1 Sectoral Composition of New Lending Text Tables 3 1.1 Selected Macroeconomic Indicators (1990-01) 9 2.1 World Bank Commitments (UJS$ million) 14 3 1 OED Evaluation Ratings of Bank Prolects Text Boxes 12 3.1 Good Analytical and Advisory Services 15 3 2 IFC Country Program Strengths and Weaknesses 16 3 3 Coal Sector Restructuring-Best Practice Bank-Supported Prolect 17 3 4 Selected Government Officials' Views of Portfolio Management 20 4.1 Trucking Privatization A Bank Group Success (FY93-94) 21 4.2 Boosting Russia's Comparative Advantage in Space Technology Iv CONTENTS 24 4 3 Bank Assistance for Gender Equality 29 5 1 External Views of Bank Performance Annex Tables 42 A.1 Selected Fiscal Indicators (1992-01) 64 A.2 Summary of the IFC's Strategic Priorities and Results 102 A 3 Russian Federation at a Glance 104 A.4 International Development Goals 105 A.5 IBRD OED Summary Ratings, FY95-0] 106 A 6 Evaluation Ratings of Closed IBRD Projects, 1995-01 107 A.7 1 Bank-GEF Loans, Guarantees, and Grants by Fiscal Year, 1992-01 109 A 7.2 Bank-GEF Loans, Guarantees, and Grants by Sector, Fiscal Year 1991-01 111 A 8 Recipient-Executed Grants (excluding GEF Grants and Special Initiative), as of November 1, 2001 112 A.9 IBRD Lending to Russian Federation (Exit/Approval FY92-01), as of August 31, 2001 114 A 10 Russian Federation-World Bank Economic ancl Sector Work and Research Papers since FY90, by Sector, Disclosecl 118 A 11 Assistance Program Annual Cost, FY92-01 ($'000) 119 A 12 Assistance Program Cost Effectiveness, FY92-96 and FY97-01 120 A.13 Russian Federation-IBRD Portfolio Performance Indicators, FY93-01 121 A 14 Russian Federation-IBRD Senior Management since Calendar Year 1991 122 A 15 International Finance Corporation 123 A.16 MIGA Guarantees Issued in the Russian Federation, FY92-01 Annex Figure 65 A 1 Russia InstItutional Investor Country Creclit Rating (IICCR) and IFC Net Approvals Acknowledgments T his Country Assistance Evaluation (CAE) from three angles The products ancl services di- assesses the development effectiveness mension applies evaluation criteria to major of the World Bank's lencling and non- Bank activities (strategic and policy advice, eco- lending assistance to the Russian Federation nomic and sector work, lending ancl resource since 1991, a 10-year period of tumultuous po- mobilization, anci aicd coordination) and OEG litical, economic, and social change The review ancl OEU criteria to the IFC and MIGA interven- focuses on four areas central to the transition tions. The development impact dimension as- agenda and to the Bank's assistance in Russia, ac- sesses the overall results of the assistance counting for more than 75 percent of the Bank's program. The attnbution dlmension relates these analytical work and lending commitments results to the performance of the Bank, the (a) public sector management, (b) private and client country, its aid partners, ancd exogenous financial sector development, (c) social protec- factors (see Annex 16) tion, and (d) energy. Sectoral reviews were con- This report was prepared by Gianni Zanini ducted by OED staff anci consultants, and by (Task Manager) Major contributors of back- experts from two Eastern European policy re- ground papers, whlich are listecl in Annex 17 and search institutes (the Institute for Economies are available online at http /Avwwworldbank.org/ in Transition, EIT, in Moscow, and the Center oed/russia_cae/ancl upon request from the OED for Economic and Social Research, in Warsaw) Working Paper Series, include Alexander Rady- The CAE also drew on project performance as- gin, Marina Kolosnitsyn-a, and Yuri Bobylev (IET, sessment reviews of individual projects Moscow), Barbara Blaszczyk, Jacek Cukrowski, The Operations Evaluation Group (OEG) of Helena Goralska, and Irena 'ITopnska (Center the International Finance Corporation (IFC) con- for Social and Economic Research, Warsaw), ductecl a parallel evaluation of IFC activities in Vinod Saghal and Deepa Chakrapani (OED, Russia, which is being issued as a separate report Worlcl Bank), Saul Estrin and Alan Bevan (Lon- (its executive summary appears as Annex 9) clon Business School), and Fred Levy, Baran The Operations Evaluation Unit (OEU) of the Tuncer, and Richard Berney (consultants, for- Multilateral Investment Guarantee Agency merly World Bank staff). Other inputs were pro- (MIGA) contributecd a review of MIGAs activities vicled by Marek Dabrowski and Jan Anthony (reproduced in Annex 12) Vincent Rostowki (CASE, Warsaw), Vladimir Mau Using OED's standard methodology, the CAE and Sergei Drobyshevsky (JET, Moscow), Vitto- assesses the effectiveness of Bank assistance rio Corbo (Pontificia Universidad Catolica de Vil ASSISTING RUSSIA'S TRANSITION Chile, Santiago, Chile), Hernan Levy (consultant), and IMF management. Bank management views and Anders Aslund (Carnegie Endowment for In- on past assistance and the CAE are reproduced ternational Peace, Washington, D.C.).