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TQflt jqq'v Public Disclosure Authorized Poland Country Assistance Review Partnership in a Transition Economy - X i a - 3 V - t IN~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*a Public Disclosure Authorized ~~~~~~~~~~~~~~~~a~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Kkl ~~~~~~~~, Public Disclosure Authorized 52-1~~~ 7 Public Disclosure Authorized i Poland Country Assistance Review Partnership in a Transition Economy Other Titles in the Series PREPARED BY THE WORLD BANK OPERATIONS EVALUATION DEPARTMENT Agricultural Extension and Research: Achievements and Problems in National Systems (1997)* Fiscal Management in Adjustment Lending (1997)* Reforming Agriculture: The World Bank Goes to Market (1997)* Paddy Irrigation and Water Management in Southeast Asia (1997)* 1995 Evaluation Results (1997)* Zambia Country Assistance Review: Turning an Economy Around (1997)* Aga Khan Rural Support Program: A Third Evaluation (1996)* Lending for Electric Power in Sub-Saharan Africa (1996)* Industrial Restructuring: World Bank Experience, Future Challenges (1996)* Social Dimensions of Adjustment: World Bank Experience, 1980-93 (1996)* 1994 Evaluation Results (1996)* Ghana Country Assistance Review: A Study in Development Effectiveness (1995)* Evaluation and Development: Proceedings of the 1994 World Bank Conference (1995) Developing Industrial Technology: Lessons for Policy and Practice (1995)* The World Bank and Irrigation (1995)* 1993 Evaluation Results (1995)* Structural and Sectoral Adjustment: World Bank Experience, 1980-92 (1995)* Gender Issues in World Bank Lending (1995)* The World Bank's Role in Human Resource Development in Sub-Saharan Africa: Education, Training, and Technical Assistance (1994)* 1992 Evaluation Results (1994)* New Lessons from Old Projects: The Workings of Rural Development in Northeast Brazil (1993;contains summaries in French, Portuguese, and Spanish) World Bank Approaches to the Environment in Brazil (1993; contains summaries in French, Portuguese, and Spanish) Trade Policy Reforms under Adjustment Programs (1992)* World Bank Support for Industrialization in Korea, India, and Indonesia (1992)* Population and the World Bank: Implications from Eight Case Studies (1992)* The Aga Khan Rural Support Program in Pakistan: Second Interim Evaluation (1990)* *Contains summaries in French and Spanish. Poland Country Assistance Review Partnership in a Transition Economy Luis Landau THE WORLD BANK WASHINGTON, D.C. Copyright © 1997 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing June 1997 The opinions expressed in this report do not necessarily represent the views of the World Bank or its member governments. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries. The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to the Office of the Publisher at the address shown in the copyright notice above. The World Bank encourages dissemination of its work and will normally give permission prompt- ly and, when the reproduction is for noncommercial purposes, without asking a fee. Permission to copy portions for classroom use is granted through the Copyright Clearance Center, Inc., Suite 910, 222 Rosewood Drive, Danvers, Massachusetts 01923, U.S.A. Cover photo: Baltic port of Swinoujscie, Poland Credit: Priit J. Vesilind/National Geographic Society ISSN 1011-0984 Luis Landau is lead evaluation officer in the Operations Evaluation Department of the World Bank. Library of Congress Cataloging-in-Publication Data Landau, Luis, 1936- Poland country assistance review : partnership in a transition economy / Luis Landau. p. cm. -(A World Bank operations evaluation study) Includes bibliographical references. ISBN 0-8213-3980-X 1. World Bank-Poland. 2. Loans, Foreign-Poland. 3. Poland- Economic conditions-1990- I. Title. II. Series. HG3881.5.W57L36 1997 338.9438-dc2l 97-17871 CIP Contents Foreword ix Preface x Pr6logo xi Prefacio xii Avant-propos xiii Preface xiv Acknowledgments xv Abbreviations and acronyms xvi Summary 1 Resumen 16 Resume 33 1. How the Bank's assistance strategy changed over time 51 Background 51 Evolution of the Bank's assistance strategy 52 Cutting back 63 2. Systemic and institutional transformation and social amelioration 67 Systemic and institutional transformation 67 Support for social amelioration 70 Instruments of Bank assistance for systemic and institutional transformation and social amelioration 73 3. Private sector and infrastructure development 81 Instruments of Bank assistance for private sector development 81 Instruments of Bank assistance for infrastructure development 92 4. Implementation and supervision 100 Portfolio management 100 Slow disbursement of credit line operations 104 Aid coordination: changing dynamics of donor operations 105 Cost effectiveness: room for improvement 108 5. Findings and recommendations 110 Outcome 110 Assessment of Bank assistance 112 Major findings for Poland 115 Findings for transition countries 116 vii viii Annexes 121 Poland at a glance 121 The Bank's loan portfolio to Poland 122 References 127 Supplement 129 Introductory note 130 Management response 131 Summary of Committee on Development Effectiveness findings 135 Boxes 1.1 Risks and advantages of creating a large portfolio quickly 54 2.1 Gender differentials during the transition 78 3.1 Polish enterprise behavior study, 1991-92 83 3.2 Agricultural Task Force-a vehicle for providing nonlending services 87 3.3 IFC country strategy in Poland 90 Figures 1.1 Distribution of Bank resources among countries in the Europe and Central Asia Region's Division II, FY85-96 58 1.2 Total Bank commitments to Poland by fiscal year 63 3.1 World Bank lending to Poland by purpose 97 4.1 Average lending completion costs by sector for projects approved between FY90 and FY96 104 Tables 1.1 Bank assistance versus reform program, needs, and environment 64 4.1 Average elapsed time for loan approvals 105 4.2 Poland: cost (staff weeks) of dropped lending activities 106 4.3 Poland: cost (dollars) of dropped lending activities 107 5.1 Poland: economic recovery 111 5.2 Macroeconomic performance: indicators for selected transition countries 113 5.3 Progress in transition: ratings for selected countries 114 5.4 Summary of strengths and weaknesses of the Bank's country assistance to Poland 118 Foreword This review, prepared by the Operations Evaluation Department, evaluates the overall relevance, efficacy, and efficiency of the Bank's assistance to Poland. The review concludes that the Bank's strategy during 1986-96 was highly relevant, its efficacy satisfactory, but its efficiency only marginally satisfactory. During 1986-89, the Bank carried out comprehensive reviews of the economy but postponed lending until 1990, after the solidarity-led government had adopted a radical economic transformation program. Displaying strong support for this program, the Bank's Board approved 15 loans totaling $2.6 billion during FY91-92. The Bank got involved in all key areas of the reform program and set up a high-level resident mission in Warsaw in July 1990. With external financial help and advice, Poland has made great strides toward sustainable growth. Its private sector accounts for two thirds of GDP, its cur- rency is stable, and its international creditworthiness is restored. The Bank's technical advice and intellectual support were pivotal in facilitating the work of Polish reformers. But the rush to lend carried risks. For example, many projects relied excessively on domestic financial intermediaries, whose capacity was not adequately assessed. Bank staff faced the additional challenge of implementing projects in a country where the leadership was changing frequently. Inevitably, these drawbacks led to mixed project performance. The unfinished agenda of Poland's reforms includes restructuring and privatiz- ing its public enterprise sector, reforming the large state-owned banks, strength- ening the social safety net, and modernizing agriculture and institutions. These reforms will facilitate Poland's accession to the European Union and induce increased and sustained private investment. Poland now depends less on the Bank than it did in the early years of reform. Greater selectivity and efficiency will characterize future operations. Stronger partnership with the European Union, more emphasis on private sector operations, and high-quality nonlending services will determine the success of the new country assistance strategy. Robert Picciotto Director General Operations Evaluation ix Preface This evaluation of Bank assistance to Poland is based on a thorough review of Bank files, economic and sector reports, strategy papers, and other internal Bank documents, as well as on relevant documents from Poland and other donors. In addition, the evaluation team conducted an extensive review of the literature on transition economies. Because only a small number of Bank operations in Poland have been completed and evaluated, the evaluation team undertook a detailed review of ongoing operations. The team prepared extensive background

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