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1997 In Review: World Bank Assists Countries In Transition

Washington, 11 December 1997 (RFE/RL) -- For the World Bank, 1997 was a year of continued major involvement in assisting the countries in transition in East and Central Europe and Central Asia, but also a year of major changes within the bank itself.

So far this year, the bank has made commitments for loans totaling over $4.5 billion for projects in the region. But that figure will rise considerably later this month if, as expected, the bank's board approves two loans totaling $1.6 billion for Russia.

The loans, each for $800 million, are a structural adjustment facility -- to help Russia with its continuing costs of implementing reforms -- and a second coal industry restructuring loan, designed to help the country modernize the coal sector and handle the social costs of a huge number of miners who will be put out of work.

Bank officials say that while their lending to Russia continues to concentrate mostly on structural adjustment of the overall economy, in other countries the bank is focusing more of its lending on social programs.

As significantly, the bank has just completely redesigned, rebuilt and streamlined its own operations to improve efficiency, make bank officials more accountable, and change the bank's emphasis to a more customer oriented approach.

The bank deals only with sovereign nations which are members, but officials say the idea is to make its operations more responsive to those countries by considering them customers.

In the Europe and Central Asia region department, the bank divided its operations into 11 country units to better focus on each nation in the region. One unit deals with five countries but all the rest handle four or fewer. In four cases the country director and his staff are now headquartered within the country.

In a pamphlet distributed to the division's employees, Bank Vice President for the region, Johannes Linn, called it an "on-the-ground strategy" designed to more accurately reflect each member nation's "aspirations and local conditions."

Linn says that several additional country directors may shift their headquarters operations out of Washington over the next few years. He said this is all part of a decentralizing move by the bank to get the staff truly on the "front line."

The bank also redesigned its entire structure for approving loans. Previously, every project had to be reviewed and approved by at least five to seven different groups or officials, but that has now been reduced to only one or two reviews and approval levels.

The idea, say bank officials, is to make officials more accountable for what they approve or deny. Previously, the officials say, no individual official ever had to take the responsibility for the bank's programs. Now they do.

At the same time, the bank is working on more team efforts, bringing groups of specialists together to put several minds to work on specific projects or problems as a way to more quickly find solutions.

The bank has also greatly expanded those with whom it consults within a member nation when considering a new project. Instead of dealing with just government officials, the bank says it now keeps in close contact with the political opposition, citizen groups, non-government private organizations and business leaders who may have an interest in proposed world bank financed projects.

It was never announced by the bank, but this year it commissioned extensive public opinion polls in 21 countries around the world to find out what people really think -- and understand -- about the bank.

The results will not be released, say officials, but they note it has for the first time shown bank leaders and staff how local populations perceive the bank and what it is doing right -- and wrong -- in communicating with the citizens of member countries.

Bank loans to countries in the region have been extensive this year, but officials emphasize that their role as an advisor and provider of technical information is equally as important.

Russia continues to be the largest single borrower at the bank in the region, with loans approved so far this year totaling at least $1.745 billion. "Russia is at the crossroads of its economic reform," said Linn in June, noting that bank lending to Moscow over the next two years could total $6 billion.

Ukraine started the year with a major $120 million loan to help build its export sector and is a partner in a joint U.S.-Russian-Ukraine aerospace sea launch project that received $200 million in World Bank guarantees for commercial loans. But since then, Ukraine's problems at home have blocked further lending projects. Bank officials say privately that until Kyiv's leaders do more than just promise to implement reforms, there is nothing the bank can do to help.

Moldova has been among the bank's more active borrowers this year, taking loan commitments totaling nearly $76 million in programs ranging from improving schools to developing the countries private sector.

In the Caspian sea area, bank officials say they are not getting involved in proposed financing for various oil and gas pipeline proposals. The pipelines, they say, are commercially viable and private companies are competing to finance and build the supply lines.

The bank did provide small loans to Georgia and Turkey to assess the local economic impact of various proposed routes, but is not considering any further loans there.

Nations in the region have been active borrowers in other areas, however. Azerbaijan took two loans of nearly $8.5 million this year for farm privatization and general economic reforms, while Armenia arranged $85 million in loans for health care, education and economic reforms.

Georgia was approved for loans totaling over $153 million dollars for agricultural development, improved electric supply, strengthening local governments and generally implementing economic reforms.

East of the Caspian, Kazakhstan had loans this year from the world bank totaling $240 million for property and real estate development and improving public sector management.

Tajikistan took one loan of $12 million to help develop a pilot poverty alleviation project, while the Kyrgyz Republic got two loans totaling $60 million to improve rural financial arrangements and modernize the country's public sector management.

Turkmenistan borrowed $64.5 million from the bank this year, for an urban transport project and a water supply and sanitation program.

Uzbekistan got a loan of $75 million from the bank to improve rural water supplies and sanitation facilities near the Aral Sea.

Bank officials say they had expected to be leading a major international effort beginning to deal with the Aral Sea, considered one of the world's worst ecological disasters. But officials say that after it had arranged for donor countries to assist the five nations surrounding the sea, they realized that the country's themselves were not even trying to have a hand in the work.

"It must be up to the countries themselves to come up with the basic plan and how it will be implemented," said one official. So far all that has happened, however, says the official, is the leaders of the surrounding countries pose for pictures together, but continue fighting each other behind the scenes. Until that changes, say bank officials, there will be no more international money going into the Aral.

The World Bank remains active in Central Europe. Bank officials are proud of their roles earlier in the year of helping Albania, Bulgaria and Romania design radical economic reform programs after pivotal elections. The officials say there has been concern about Romania's progress, although they roundly applaud last week's shake-up in the Romania government leadership.

The bank provided over $645 million in loans to Romania this year, concentrated on economic development, alleviating poverty and improving rural schools.

In Bulgaria, the bank approved loans totaling $140 million this year, first to finance critically needed imports that were in desperately short supply, and later to help with financial and enterprise sector reforms.

Albania received two loans totaling $25.5 million at the end of the year for a first stage in the country's economic recovery program.

In Poland, the bank put up loans of $322 million this year -- the largest to provide emergency money to repair flood damage to roads and bridges, tying it in to a program already underway to improve the major transportation links within the country. The other loan was to help develop municipal credit markets.

Hungary borrowed $345 million this year to reform its enterprise and financial sectors, upgrade its electric system to European Union standards, and help reduce youthful unemployment.

In the former Yugoslavia, the bank has led international reconstruction efforts for Bosnia and Herzegovina as well as helping Macedonia and Croatia begin to recover from the years of fighting.

The bank provided a $30 million loan for Croatia late in the year to encourage private sector growth but has been blocked from other loans by the U.S. which says Croatia's failure to fully implement the Dayton Peace accords makes it a poor credit risk.

Sources at the bank say, however, that U.S. objections have eased recently and the bank is quietly assessing the possibility of further activity in the former Yugoslav republic.

In Macedonia, the bank has provided loans of $48.5 million to fix primary schools, get its transition to a market economy underway, and rebuild the country's agricultural irrigation system.

In addition to bringing together international financing of $1.240 billion this year for emergency rehabilitation and reconstruction of the war damage in Bosnia, the bank has been working to finance additional programs of land mine removal and primary school reconstruction.

In the Baltic states, the bank loaned Lithuania $3.7 million early in the year to finance programs for the handicapped and elderly. In Latvia, it approved two loans totaling $21 million for a highway modernization project and a program to modernize public and private pension systems.

Bank officials say, however, they are most proud of their work in helping five former communist nations -- Estonia, Poland, Slovakia, Slovenia, and Hungary -- to begin preparing for eventual EU membership. The bank is providing advice and assistance in figuring out the cost of accession to the EU and designing a plan for entry.