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Former U.S.S.R: Reform Progressing Everywhere But Belarus, Says World Bank

Washington, 30 September 1996 (RFE/RL) -- With the exception of Belarus, the nations of the old Soviet Union are now entering a second phase of economic transition where the focus must be on the details of privatization and learning to work with market economies, says the World Bank official who heads the department dealing with the western-most countries of the former Soviet Union.

Basil Kowalski says Armenia, the Baltic Republics, Georgia, Moldova and Ukraine are moving beyond the broad concerns of macro-economic development and are now going into "the more difficult phase, the micro-economic phase where there is a great deal to be done at the enterprise level in adapting to the new structures, the new situation."

Kowalski spoke to a small group of journalists in Washington Sunday as he prepared for the annual meetings of the bank and the International Monetary Fund (IMF). Officials from all eight countries with which his department deals will attend.

Belarus is the exception of the region, he says. The bank was preparing loans totaling nearly $170 million for Belarus when President Aleksandr Lukashenko's government changed direction.

Kowalski says the bank has dropped any plans for lending to Belarus "unless and until there is a genuine commitment to reform."

"Many of the steps that have been taken in the last nine months to a year in Belarus have gone in exactly the wrong direction," he says. He adds that only in Belarus is there still question over whether to proceed with reform.

"When I go to the other countries," says Kowalski, "everyone says 'we're not going to discuss the issue of whether or not reform, that really isn't on the agenda any more. The only issue is the strategy -- what comes first and second."

Still, Kowalski says, Belarus remains a member of the bank and it stands ready to help in any way it can. But there is little else it can do until the country changes its policies, he says.

Georgia, on the other hand, is the "big surprise" of the region, says the World Bank official. Two years ago, almost no one was "optimistic about the prospects for a rapid turn around."

"We have been pleasantly surprised by the willingness of the government to take the steps that are needed, and the extent to which the country seems to have come together under Mr. Shevardnadze and decided 'enough is enough - we want peace, we want stability, we want progress,'" he says.

Kowalski says the country still faces "a difficult situation," noting particularly the energy sector -- "which is very bleak" -- and the transportation system -- which is close to collapse.

He says the bank is pushing ahead first with loans to make repairs to existing electric and transport facilities. But looking ahead, Kowalski says the bank is developing "a considerable number of investment projects in the area of energy, transport, municipal investment, health and education."

"I think you're going to see very sizable levels of bank support for Georgia in the months and years ahead," he says.

Kowalski praised Ukraine's progress as well, pointing to agreement in the past week on a number of projects that could bring bank loans totaling around $1.3 billion over the next year or two. He says the measure of Ukraine's progress is the "growing private sector interest" in investing there.

Visiting Tokyo last week, Kowalski says he found private business people are pushing the Japanese government to become "increasingly involved in Ukraine." According to World Bank statistics, Japan lags far behind the other G-7 nations in the amount of private investment it has sent into East and Central Europe and the former Soviet Union.

The western region faces two pressing needs, says Kowalski.

First, it requires a determined effort to bring judicial systems up to international standards. Appropriate laws are being passed, says Kowalski, but judicial systems are still not able to deal with Western-style business standards.

"The ability to enforce contracts through the court system is absolutely fundamental for a private business," says Kowalski.

The second pressing need for the region is to overcome weakness in working beside the private sector to implement and operate programs.

"These are governments which used to get instructions from Moscow and carried out those instructions, but now they have to evaluate and prepare their own policies, and they have to learn to regulate, but not actually run the businesses and farms, and that's a big adjustment," he says.