IFC in Ukraine: 1993 – 2006 An Independent Country Impact Review http://www.ifc.org/ieg 2008 Washington D.C 2008 © International Finance Corporation (IFC) 2121 Pennsylvania Avenue NW Washington, D.C. 20433, USA Telephone: 202-473-1000 Internet: http://www.ifc.org All rights reserved This volume, except for the “IFC Management Response to IEG-IFC” and “Chairperson’s Summary” is a product of the Independent Evaluation Group (IEG) and the findings, interpretations, and conclusions expressed herein do not necessarily reflect the views of IFC Management, the Executive Directors of the World Bank Group, or the govern- ments they represent. This volume does not support any general inferences beyond the scope of the evaluation, in- cluding any inferences about IFC’s past, current, or prospective overall performance. The World Bank Group does not guarantee the accuracy of the data included in this publication and accepts no re- sponsibility whatsoever for any consequences of their use. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, D.C. 20433, USA; facsimile: 202-522-2422; e-mail: [email protected]. Photo: Women grade tomatoes at an IFC-supported juice project in Ukraine. ISBN: 978-1-60244-085-2 World Bank Infoshop Independent Evaluation Group – IFC Email: [email protected] Email: [email protected] Telephone: 202-458-4500 Telephone: 202-458-2200 Facsimile: 202-522-1500 Facsimile: 202-974-4302 CONTENTS Contents Abbreviations.........................................................................................................................................................i Acknowledgments...............................................................................................................................................iii Foreword ...............................................................................................................................................................v Executive Summary ...........................................................................................................................................vii Основні положення..........................................................................................................................................xi IFC Management Response to IEG-IFC.................................................................................................... xvii Chairperson’s Summary: Committee on Development Effectiveness .................................................. xxiii 1. Introduction ...................................................................................................................................................1 Study Objectives and Scope ...................................................................................................................................1 Study Methodology, Sources, and Limitations .......................................................................................................2 Report Organization.............................................................................................................................................3 2. IFC’s Strategy in Ukraine: Its Context, Content, and Relevance...........................................................5 Ukraine’s difficult and lengthy transition impaired the business environment, resulted in a deeper recession, and hindered foreign direct investment...........................................................................................................................5 IFC’s strategy concentrated on building a relatively new private sector and addressing business environment deficiencies.............................................................................................................................................................7 Recent business climate improvements imply a longer-term, more targeted IFC approach than before. ......................9 3. IFC’s Pursuit of Its Strategy in Ukraine...................................................................................................11 In line with strategy, IFC has had a substantial advisory services presence in Ukraine, but channeled a small portion of total official development assistance funding to the country.....................................................................11 Realizing higher volumes of investments has until recently been problematic, not least because of the leading presence of EBRD..............................................................................................................................................14 4. The Ratings, Success Drivers, and Outcomes of IFC Operations in Ukraine ..................................19 IFC’s advisory operations had mostly satisfactory performance ratings, with better results from larger and longer operations. ..........................................................................................................................................................19 IFC played a strong role in and contributed to sustainable outcomes and impacts of most of its programmatic advisory projects and some of its smaller advisory projects. ....................................................................................24 Performance of advisory projects could nonetheless be improved by applying lessons from completed and ongoing operations. ..........................................................................................................................................................25 To the extent they are evaluable, IFC investment operations perform relatively well. .............................................28 IFC adds value in investment operations centered on supporting emerging strong local players in the real sector......32 5. Recommendations.......................................................................................................................................35 Appendixes..........................................................................................................................................................39 Appendix A: IEG-IFC Methodology for Evaluating IFC Investment Operations ................................41 Appendix B: IEG-IFC Methodology for Evaluating IFC Advisory Operations.....................................47 IFC IN UKRAINE:1993 – 2006. AN INDEPENDENT COUNTRY IMPACT REVIEW Appendix C: List of IFC Investment Operations in Ukraine.....................................................................55 Appendix D: Evaluation Ratings for IFC Advisory Operations in Ukraine............................................57 Appendix E: IEG-IFC Risk Profiling Methodology for Investment Operations and Summary of Risk Profiling Results for Ukraine and ECA Projects ..........................................................................59 Appendix F: List of Interviewees Contacted during IEG-IFC Mission to Ukraine...............................65 Appendix G: Definitions of Evaluation Terms ............................................................................................69 References ...........................................................................................................................................................71 Endnotes .............................................................................................................................................................73 BOXES Box 2.1 Summary of IBRD Strategies and Operations during FY 1999–2006 ......................................... 8 Box 3.1 Overview of Official Development Assistance and Strategic Priorities in Ukraine.................13 Box 4.1 Lessons from Donor Operations in Ukraine and in Transition Countries Relevant to Ukraine's Experience..................................................................................................................................27 FIGURES Figure 2.1 Ukraine's Recession Was More Precipitous Compared with Other ECA and CIS Countries in 1993–2005 ............................................................................................................................... 7 Figure 3.1 Privatization Assignments Comprised the Bulk of IFC's Advisory Operations, FY 1993–2006 (per cent of dollar volume).............................................................................................12 Figure 3.2 Trends in IFC Advisory and Investment Commitments and Risk Ratings for Ukraine, 1993–2006 ....................................................................................................................................................15