Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No: 22469

IMPLEMENTATION COMPLETION REPORT(CPL-36500; TF-22154)

ONA

LOAN

IN THE AMOUNT OF US$21.0 MILLION

TO

UZBEKISTAN

FOR AN

INSTITUTION BUILDING TECHNICAL ASSISTANCE PROJECT

06/21/2001

Poverty Reduction and Economic Management UnitEurope and Central Asia Region

This document has a restricted distribution and may be used by recipients only in the performance of theirofficial duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective May 5, 2001)

Currency Unit = CymCym793 = US$ 1

US$ 1 = Cym 793

FISCAL YEARJanuary 1 - December 31

ABBREVIATIONS AND ACRONYMS

CBU Central Bank of UzbekistanCEM Country Economic MemorandumCSPMP Committee on State Property Management and

PrivatizationEC European CommissionFBS Family Budget SurveyFSU Former Soviet UnionGOU Government of UzbekistanIA Implementing AgencyIBTA Institution Building Technical AssistanceMOMS Ministry of Macroeconomics and StatisticsMOF Ministry of FinanceMOL Ministry of LaborPHRD Policy and Human Resource DevelopmentPIU Project Implementation UnitQAG Quality Assurance GroupSFSC State Forecasting and Statistics CommitteeSOE State-Owned EnterpriseSSPR Social and Strctural Policy Review

Vice President: Johannes Linn, ECAVPCountry Manager/Director: Kiyoshi Kodera, ECCO8

Sector Manager/Director: Pradeep Mitra, ECSPETask Team Leader/Task Manager: Fasliddin Rakhimov, ECCUZ/Pervaiz Rashid,

ECSPE

FOR OFFICIAL USE ONLY

UZBEKISTANInstitution Building Technical Assistance Project

CONTENTS

Page No.1. Project Data 12. Principal Performance Ratings 1

3. Assessment of Development Objective and Design, and of Quality at Entry 1

4. Achievement of Objective and Outputs 5

5. Major Factors Affecting Implementation and Outcome 10

6. Sustainability 117. Bank and Borrower Performance 12

8. Lessons Learned 149. Partner Comments 1410. Additional Information 21Annex 1. Key Performance Indicators/Log Frame Matrix 25Annex 2. Project Costs and Financing 29Annex 3. Economic Costs and Benefits 31Annex 4. Bank Inputs 32Annex 5. Ratings for Achievement of Objectives/Outputs of Components 33Annex 6. Ratings of Bank and Borrower Performance 34

Annex 7. List of Supporting Documents 35Annex 8. Beneficiary Survey Results 36Annex 9. Stakeholder Workshop Results 45

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

Project ID: P009123 Project Name: Institution Building TechnicalAssistance Project

Team Leader: Fasliddin Rakhimov TL Unit: ECCUZICR Type: Intensive Learning Model (ILM) of ICR Report Date: June 28, 2001

1. Project Data

Name: Institution Building Technical Assistance Project L/C/TF Number: CPL-36500; TF-22154Country/Department. UZBEKISTAN Region: Europe and Central

Asia RegionSector/subsector: BI - Institutional Development

KEY DATESOriginal Revised/Actual

PCD: 09/02/92 Effective: 11/01/93 01/27/94Appraisal: 05/17/93 MTR:Approval: 10/07/93 Closing: 10/31/97 10/31/2001

Borrower/lmplementing Agency: REPUBLIC OF UZBEKISTAN/PIU under Cabinet of Ministers, Department forForeign Economic Activities

Other Partners:

STAFF Current At AppraisalVice President: Johannes Linn Wilfried ThalwitzCountry Manager: Kiyoshi Kodera Russell CheethamSector Manager. Pradeep Mitra Kadir T. YurukogluTeam Leader at ICR: Fasliddin Rakhimov and Pervaiz Cevdet A. Denizer

RashidICR Primary Author: Richard J. Carroll

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN-Unlikely, HUN=HighlyUnlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability: L

Institutional Development Impact: M

Bank Performance: S

Borrower Performance: S

QAG (if available) ICRQuality at Entry: S

Project at Risk at Any Time: Yes

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:

The assessments made in this Intensive Learning ICR are the result of a broad-based, consultativeprocess involving Uzbek counterparts and Bank staff at headquarters and in the field. Input from

beneficiaries was received through a comprehensive survey that covered all aspects of the IBTA loan, inboth qualitative and quantitative forms, through a Stakeholder Workshop, and through numerous bilateralmeetings in which individual stakeholders could provide their assessments of the IBTA. On the Bank side,extensive individual interviews were carried out with the many people involved in preparation andimplementation of the IBTA. In addition, several drafts of this ICR were circulated for comment amongstmembers of the country team and the Government of Uzbekistan. These assessments are incorporated inthe main text where possible and in the additional annexes.

Uzbekistan is one of the largest Former Soviet Union (FSU) Republics with a population of about25 million. The Institution Building Technical Assistance Project (IBTA) was the first World Bank lendingoperation in Uzbekistan and was effective on January 27, 1994. The IBTA was an important operation forthe Bank to learn about the country while assisting in its transition to a more market oriented economy.The original objectives of the IBTA in the short term were to provide support to the Government ofUzbekistan (GOU) in formulating and elaborating reforms and in the medium term, to provide support forinstitution building and developing domestic capacity to ensure that Uzbekistan has the capability toimplement and sustain reforms. Institution building and technical assistance activities were for: (i)privatization and public enterprise reforns; (ii) legal and regulatory framework, (iii) financial sector, (iv)social safety netlemployment; and (v) energy and telecommunications sectors. These objectives wereconsistent with the national commitment to move to a market based economy. The specific plannedactivities to meet the objectives emerged from the Bank's work in drafting the Country EconomicMemorandum (CEM) for 1993.

IBTA was launched in a very difficult institutional and economic environment. Although the laborforce was highly educated, the legacy of 70 years of a central planning approach left the country with littleinstitutional capacity to support a private economy. The political situation was fairly stable, but themacroeconomic and legal framework and financial sector had to undergo major restructuring in order toaccommodate the privatization process and achieve competitiveness and growth of newly privatizedenterprises. Previous to the launch of IBTA, the economy experienced drop of 10 percent in real output,very high inflation (several hundred percent), rising budget deficits (11 percent of GDP in 1992), and risingcurrent account debt reaching 17 percent of GDP. These results were not atypical for countries in theinitial phase of separation from the FSU. At the same time, the GOU had begun a wide range of measurestoward transition from central planning to market economy. In 1992 the Committee for State Property andPrivatization (CSPMP) was established and by 1993 almost all of the housing stock had been privatized.By 1994 most small-scale enterprises (SSEs) had been privatized. GOU was also drafting laws to establishproperty rights and private enterprises. Trade policy was also being developed, with many restrictions stillin place. Banking reform was beginning with the Central Bank of Uzbekistan adopting new statutes for itsrole in the private economy. In addition, the Government was exploring options for privatizationspecifically in agriculture, telecommunications, energy and social sectors.

Assessment:

IBTA addressed the key needs of the country and was consistent with the objectives of the Bank'scountry strategy to build capacity to manage the reforms, which was reflected in the project components.The project's objectives and activities were identified from the knowledge gained through a detailed CEMexercise and extensive discussions with the counterparts. While the political consensus on economic reformwithin the country still needed to be developed, the project objectives were broad, clear and flexible torespond to Uzbekistan's evolving priorities, though somewhat ambitious.

3.2 Revised Objective:

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No revisions.

3.3 Original Components:

IBTA had five components: (1) Privatization and Enterprise Reform and (2) Legal and RegulatoryFramework, (3) Financial Sector; (4) Social Safety Net/Employment; and (5) Sector Strategies andStudies. The rationale and activities for each component and their original allocations were as follows.

Privatization ($2.1 million) and Enterprise Reform ($1.9 million). The CSPMP and Uzgosfondrequired improved capacity to carry out Government plans to privatize 16,000 of 30,000 small and mediumscale enterprises (SMEs) and the financial and corporate restructuring expertise needed for enterprisereform. The European Community (EC) was to provide $1.1 million parallel financing for the privatizationsub-component. The planned activities were aimed at building the necessary capacity and included:

* Assistance to CSPMP and the Uzgosfond including experts to advise on aspects of privatizationand public enterprise reform issues including partner search, financial management, corporate governance,and information systems design on a long and short term basis.* Equipment to establish a basic financial database on enterprises, to facilitate their monitoring, toexpedite review of the privatization process, and to facilitate communications between regional offices andthe headquarters of the CSPMP and the Uzgosfond.* Financing training and study tours and providing short term experts in support of the privatizationprogram.

Legal and Regulatory Framework ($1.8 million). Legal capacity to resolve major gaps andinconsistencies in the legal framework for commercial activities and privatization needed strengthening.The corresponding activities were:

* Assistance to the Legal Department of the Cabinet of Ministers including a long-term legal expertto help planning long-term strategy in economic reform and legal infrastructure issues; coordinating alllegal technical assistance relating to economic reform, drafting new laws, decrees, supporting regulations,including petroleum legislation and environmental regulations and reviewing the impact of laws andregulations on private sector development and privatization.

Short-term experts to provide specialized expertise in these areas when needed.* Training programs including seminars, lectures, fellowships and materials on legal issuesconcerning the transition to a market economy.

Financial Sector ($8.8 million). Financial institutions needed to improve allocation efficiency andgain a clearer idea of the condition of the financial sector and, therefore improve the reliability ofaccounting standards. The IBTA was therefore designed to include:

* Assistance to Central Bank of Uzbekistan (CBU) for the initial phase of development of thepayments system ($5.5 million), including short-term improvements in the form of equipment andconsulting services, and financing of a feasibility study for the development of a new payments system overthe medium term.* Establishment of external debt monitoring and debt management departments and providingtraining and equipment.* Strengthening the banking supervisory function, particularly the off-site supervision capacity of

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CBU.* Introduction of modem accounting and auditing principles for the commercial banks and undertakediagnostic studies on the current financial status of the state banks.* Training for CBU staff.

Social Safety NettEmployment ($5.5 million). The State Forecasting and Statistics Committee(SFSC) needed to improve their ability to monitor and evaluate social benefit provision, which accountedfor over one-third of GDP. In addition, rising unemployment claims could not be processed withoutautomation. The EC was to jointly prepare and provide $1.5 million additional parallel financing foradvisory services to the Ministry of Labor. IBTA was designed to fund the following activities:

* Technical assistance to the SFSC to redesign the existing family budget survey to make it a reliablebasis for developing policy on income support and poverty alleviation and to redefine the poverty line, andprovide training to key staff of SFSC.* Enhancing the capacity of the employment service by training and by a major step toward fullautomation.

Sector Strategies and Studies ($2.6 million). Although sectoral ministries have qualified staff,they need specific training in cost-benefit analysis and technical assistance in designing and implementingsector strategies. The Government of Japan provided $1.0 million additional cofinancing for thiscomponent.

* Assistance provided to two priority sectors selected by the Government, energy andtelecommunications. For the energy sector, advisors will be provided to Uzbekneftgas, the nationalpetroleum entity, for petroleum acreage tendering negotiations.* Advisors provided to the Telecommunications Ministry to strengthen policy making capacity and toreview and revise the sectoral rehabilitation plan.

The remainder of the loan was mainly contingencies ($2.0 million) and project coordination(US$0.3 million), for a total loan of US$2 1.0 million (see 5.4 for further discussion of costs). Thecomponents matched the priority constraints in achieving the main project objectives. Issues ofimplementing this complex project are taken up in sections 4 and 5. The Uzgosfond and the StatePrivatization Committee merged in 1995 to form the State Property Committee (GKI in Uzbek).

3.4 Revised Components:

There were no revisions, nor was there a major restructuring of the project. However, there wassome reallocation of funds during project implementation to accommodate evolving needs. The financialcomponent allocation increased by $0.3 million and the other category included 2.1 million for the Ministryof Macroeconomics and Statistics.

Component Planned ActualPrivatization and Enterprise Reform 2.8 2.7Legal 1.8 1.6Financial 8.7 9.0Social 3.9 3.8Sector Studies 1.5 1.3Other (Incl. Project Management) 2.3 2.5Total 21.0 20.9

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Assessment:

IBTA was launched in a very challenging environment as the political consensus on reforms withinthe country needed to be developed. It was also a demanding project for the country to implement since itwas Uzbekistan's first experience with a Bank financed project. The project activities identified wereconsistent with country needs and priorities. The project was however complex and ambitious in view of thescope and the number of ministries and agencies (ten for the various components) in addition to severallevels of beneficiaries involved under a component. Implementation required coordination across these manygovernment department and agencies, and good task management. The lack of adequate implementationcapacity and full awareness of Bank policies also contributed to slow implementation.

3.5 Quality at Entry:

The quality at entry is rated satisfactory by the ICR. The objectives were consistent withGovernment priorities and, for the most part, proven feasible, despite the fact that the policy climatebecame less reform minded. Counterparts were involved in all phases of project preparation and the designwas responsive to national priorities. In addition, the knowledge gained from the CEM exercise helpedidentify activities of the IBTA, which is consistent with best practices. This approach was particularlyimportant because the Bank had a small knowledge base and no project experience in Uzbekistan. Thesatisfactory rating is in accord with the stakeholder survey results. The project was ambitious, especiallyin the context of working in a new country undergoing a profound transformation. The project design didnot provide for a fully staffed, dedicated project implementation unit (PIU). Rather, components wereimplemented autonomously by individual implementing agencies (LAs) under the general direction of aProject Implementation Unit (PIU) in the Cabinet of Ministers. This PIU consisted of a head with severalassistants, but who had responsibilities for other projects as well. The rationale for this approach was thatcapacity could be built faster among a wider range of government agencies if they were not heavilydependent on a self-standing PIU (see section 7). This approach was ahead of its time because it is now inline with the current Bank policy regarding PlUs. The IBTA did not have a clear set of monitorableindicators. However, the appraisal did lay out specific actions and expected results (which are examnined inAnnex 1).

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:

The overall rating for IBTA in terms of achievement of objectives is satisfactory, which agreeswith the results of the stakeholder survey. In reviewing the achievements of objectives, it is important todistinguish between the success in implementing the specific activities of the IBTA and the success of thereform program that it was intended to support. Although the development impact was modest in placesand the associated reform process slow, Uzbekistan achieved a broad range of objectives important to thetransition to a market economy as is detailed in the next section.

4.2 Outputs by components:

The review of activities, objectives and achievements here corresponds to the planned componentactivities of section 3.3 and the summary of objectives, achievements and impacts in Annex Table 1.

Privatization and Enterprise Reform

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The plan at appraisal for the IBTA to support the Government privatization and enterprise reformprogram was carried out with some changes. For example, a number of separate consultancies to supportGOU privatization efforts envisioned at appraisal were consolidated into one umbrella contract. Theactivities were either fully implemented or partially implemented with grant funding from USAIDsubstituting for the remainder of the activities. The elaboration of the GOU privatization plan, for instance,was also supported by USAID grants. Computer and office equipment funded by IBTA helped the GKImonitor and implement the privatization program and link central to regional offices. IBTA supported GKIpromotion of foreign investment through production of investment brochures and launching a website:www.government.gov.spc/. Software provided to the Depository of Shares (formerly Uzgosfond) wasessential to a functioning secondary equity market and stock exchange.

The IBTA helped set up the GOU's Privatization Investment Fund (PIF) program. In this programthe Government divests shares in medium and large-scale enterprises including the sale of shares to thepublic and PIF shareholder thresholds. Over 300 enterprises have been sold to PIFs. LSE privatization isstill in its early stages. The IBTA has supported the Government in its case-by-case approach in theprivatization of LSEs. This approach follows market methods of valuation that includes financialassessments consistent with generally agreed accounting principles (GAAP). GOU developed several listsof enterprises planned for privatization (Resolution No. 477 of the Cabinet of Ministers, November 18,1998, "On Measures to Promote the Participation of Foreign Capital in Privatization of State Property").Key LSEs identified for majority foreign ownership include Uzbek Telecom, Andijan Cable, AlmalykMining, and Uzbekneftgas. National Bank of Uzbekistan (NBU) is listed for partial foreign ownership.The IBTA funded the identification of 40 medium-scale and large-scale enterprises (MSEs and LSEs) ascandidates for privatization. Only two of the 40 companies were sold to foreign investors. The mainreason may stem from the disadvantageous macro-framework with the multiple exchange rate regime. TheEnterprise Institution Building Loan (EIBL) is following up with further efforts to privatize two companieson this list (Uzbek Telecom and Ahangaran Cement). These companies are targeted for privatization bythe end of 2001. The most recent list of MSEs and LSEs for case-by-case privatization was published asan annex to Resolution 119 in March 2001.

The assessment of impact of IBTA on privatization and privatization itself is problematic. As theSocial and Structural Policy Review (SSPR) for Uzbekistan pointed out in August 1999, data on actualprivatizations are scarce. However, it is known that all state-owned small-scale enterprises (SSEs) wereprivatized by 1995 through transfer of ownership to workers and managers, thus meeting the SSEprivatization target, but had little to do with the IBTA. Housing units were largely privatized by 1993(entirely before IBTA). The quality or impact of privatization is very difficult to estimate because there isvirtually no data on before and after privatization performance of enterprises. Institution building throughthe PIF, provision of computers to establish the computer network and drafting laws and regulations ratherthan the attainment of privatization targets are the essence of this component's achievements. Still, becausethere have been no large scale privatizations, the true test of capacity building has not yet happened. Thus,although the component activities of IBTA specifically were largely carried out, the impact has beenmodest and warrants a marginally satisfactory rating.

Legal and Regulatory Framework

TA activities to draft laws and regulations supporting the development of the private sector, alongwith training programs and equipment provision for the judiciary and lawyers, and support to thedevelopment of legal framework and infrastructure were completed. The legal framework for private sectordevelopment was upgraded through new laws such as the Law on Joint Stock Companies and ShareholderProtection, the Law on Securities and the Stock Exchange, the Civil Code, the Law on Competition and

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Restraint on Monopolistic Behavior and the Bankruptcy Law. Other important decrees and resolutionsinclude Resolution No. 220 of the Cabinet of Ministers (June 18, 1996, entitled "On Measures forOrganization of the Activities of Investment Funds"), Resolution No. 410 (September 25, 1998, "Measuresto Perfect the Activities of Investment Funds and Privatization Investment Funds") and the Resolutions 477and 119 (related to foreign investment).

It should be pointed out that most of these activities were not carried out under IBTA, but ratherUSAID grant financing. The fact that GOU secured substitute grant funds does not count against therating for this component. What is important is that, as USAID reported, the impact of legislation tosupport foreign investment was severely weakened by GOU's deletion of key provisions citinginconsistencies with the Uzbek Constitution.

Initially, a contract was signed with an international law firm to cover all planned areas of thiscomponent. After the first contract phase, the GOU decided to exercise its option to terminate the contract.This action freed $600,000 which the Bank agreed to reallocate to computer and office equipment($200,000) and vehicles ($400,000) to support the activities of the MOJ. Training programs includingoverseas study and English training for judges were carried out.

Key petroleum legislation was also drafted, but has not yet been enacted. This legislation wouldaccommodate participation of foreign investors and specifically acreage tendering which was alsosupported by the sector studies component (see Sector Studies below). Issues over foreign ownership ofnatural resources are still hindering passage of significant legislation. Thus, while a number of activitiesenvisioned under the project were carried out through either the IBTA or other donor funds, the impact hasbeen modest and this component is therefore rated marginally satisfactory.

Financial Sector

All major activities including the implementation of a Central Bank payments system,establishment of accounting and audit practices at commercial banks consistent with IAAS, diagnosticstudies of state banks, and activities in bank supervision and external debt management were carried out.This component is rated satisfactory.

The establishment of the payments system was the most significant accomplishment of thiscomponent and perhaps the entire IBTA. IBTA financed not only hardware and software, but achieved aworking system. The payments system installed with IBTA financing far exceeded the appraisal plan aseven district level branches (approximately 900 offices) were connected to the CBU payments system. Itwas originally envisioned that IBTA would connect only the regional level (13 offices). This morecomprehensive payments system has substantially reduced interbank clearing and settlement times and isprocessing 58,300 transactions per day (average for the year 2000), representing a saving of millions ofdays of transactions time, and a doubling of daily transactions only two years before. Transactions thatwould take days and even weeks to clear, are now handled in minutes. Other efficiency improvementsinclude the reduced costs of floating money and payments uncertainties. The good system performancealso attests to the success in training people in the new systems at central, regional and district levels.Monetary payments can be made in a timely fashion and banks can better manage their liquidity.Considerable private local capacity was built in implementing this component through the successful use ofa Uzbek consulting firm in installing the system.

Although the system represents a great stride forward in efficiency, it can be further developed bythe incorporation of debit orders (for utility bills, tax payments, etc.), risk management and enhancements

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to accommodate effective centralized liquidity management (presently, every bank must leave funds in thebranches' corresponding accounts with no overdrafts allowed) to allow for a consolidated account. Toremedy these limitations, CBU plans to implement a centralized Real Time Settlement System incompliance with intemational rules of risk and liquidity management. A Financial Institution BuildingLoan (FIBL) is pursuing these system improvements.

Financial institutions have also been strengthened with the establishment of an extemal debt unit atthe MOF. Previously there was no portfolio analysis, risk control or centralized monitoring. A specializeddebt management database (DMFAS) was implemented. A new chart of accounts has been introduced andaccounting and auditing systems are in place and in the process of becoming fully operational. Over half ofcommercial banks have already been audited according to IAAS. The diagnostic studies were carried outfor three large banks (Uzzilsber Bank, Uzpromstroi Bank, and Pakhta Bank), but might have beenpremature as restructuring measures have been delayed.

Social Safety Net and Employment Policy and Services

This component is rated satisfactory. The automated nationwide employment registry and servicessystem was successfully installed. As a result, job seekers can register with the system and accessplacement services. The automated register allows the Ministry of Labor and Social Policy (MOLSP,merged in February 2001) to calculate allowances more accurately. Computerization has made possible a20 percent reduction in employment services staff. The MOLSP reported that job seekers can be placed innew jobs, on average, within two months of registering, which is well below the 6-month period allowed tocollect unemployment compensation. On average 40,000 people register monthly and seven out of ten areplaced This employment service of the MOL has the advantage that, by law, employers who announcevacancies must accept the job candidates provided through the employment services system. Thesubcomponent dealing with the development of employment policy was financed by EC-TACIS along withother technical assistance. Citing staff changes, neither the EC-TACIS office in Tashkent nor Brusselscould provide an assessment of the work done other than that the funds were fully dispersed. Records showthat 125 staff were trained on issues relating to employment policy, employment services, and labor marketdevelopment. However the MOL commented at the conclusion of the TACIS exercise that the TACISexperts tended to be theoretical in their approach which limited their contribution to efforts to establishemployment services. Moreover, in discussions with current staff at MOLSP, it appeared that the TACISfunded exercise did not have any substantive impact in reforming employment policy.

The Family Budget Survey (FBS) was finally implemented after a prolonged delay, whichnecessitated the third of the project's three extensions. The FBS was a significant accomplishment becausepreviously there was little information on poverty or labor market conditions that the internationalcommunity believed was reliable. The IBTA financed the production of primary and secondary data sets.These data sets are expected to provide a number of benefits. FBS would establish the basis for povertyprofiles including regional and demographic dimensions. The FBS also may give a first hand look at thelabor market and would provide a basis to assess poverty and develop a poverty reduction strategy.Because the FBS was implemented only at the very end of IBTA, activities envisioned at appraisal such asthe redefining of the poverty line and an overall poverty assessment have not yet been carried out. Thetraining to monitor family expenditures has resulted in the capability of MOMS, the implementing agency(IA), to independently carry out the ongoing FBS.

Sector Strategies and Studies

This component is rated satisfactory.

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Telecommunications

The main impact of IBTA was to support the creation of regulatory and legal documents to effectthe transition to the private sector and to create conditions to attract foreign investment and liberalize thesector. Consultants carried out two important studies and provided advisory services to the Ministry. Thestudies were Strategy for Telecom Development (1996), which included network modernization andorganizational development, and the Recommendations of the Advisor to the Minister (1999), whichincluded justification for privatization, and the separation of the regulatory and supervisory functions. Thefirst study was very important to liberalizing tariffs, building acceptance of foreign investment in telecom,and in analyzing the technical conditions and market structure. The second study was implemented as theMinistry of Telecommunications was divided into the Agency for Telecommunications and Post, aregulatory body, and Uzbek Telecom, the operational part of telecom, thus separating the two functions.The telecomnmunications sector was also the first in Uzbekistan to engage in licensing of services. UzbekTelecom is currently in the process of privatization (supported under EIBL) and is seeking majority foreignownership.

Energy

IBTA also provided TA for acreage tendering Uzbekneftgas especially for attracting privatecapital. Gas fields have been tendered and investment blocks created to attract foreign investors. Thestudy was effective in locating private foreign partners and strengthening market knowledge and negotiatingskills at Uzbekneftgas. Foreign investment in the sector still faces legal barriers of foreign ownership ofnatural resources. The Government indicated that, subsequently, $200 million of production sharingagreements were signed to explore and develop oil and gas deposits.

4.3 Net Present Value/Economic rate of return:

Not applicable

4.4 Financial rate of return:

Not applicable

4.5 Institutional development impact:

The institutional development impact of IBTA was achieved through the provision of consultants,training and equipment, which strengthened the lAs and supported the transition to a more private sectororiented economy. There was a major adjustment in the mix of consultants and equipment with thereallocation of over $6 million to the equipment category, $3.35 million from consultant services, $2million from the unallocated category, and $0.7 million from the refunding (Project Preparation Facility)category. This reallocation gave additional support to the establishment of four major computer networksfor four agencies: GKI, CBU, MOL and MOMS. At district, regional and central levels capacity wasbuilt by the installation and use of these systems. The CBU benefits of accelerated transactions are beingfully realized. GKI has also largely realized the benefits of monitoring the progress of privatization. TheMOL is actively placing job seekers. FBS information under MOMS has not been utilized but is expectedto provide the basis for poverty policy. The implementation of the FBS was not only an exercise to acquiredata on the country, but also was a capacity building exercise in which the whole process of gathering data

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and building a database for use in policy formulation was learned. The increase in local consultingcapacity has been significant as demonstrated by the successful use and increasing responsibility of anUzbek consulting firm. The effectiveness of the associated training is reflected in MOMS' ability tocontinue the survey exercise independently. The database is expected to have an impact if the GOUfollows through on defining a poverty line and a poverty alleviation policy, and if the data is shared withthe international community.

IBTA also built GKI capacity by providing equipment and software for the National Depositorywhich now supports the secondary securities market in Uzbekistan. The Republican Stock Exchange wasalso strengthened through computer equipment to handle buying and selling. The capacity to manageexternal debt was significantly strengthened, albeit from a rudimentary starting point. However,weaknesses remain in debt analysis and policy formulation which contributed to a high accumulation ofdebt during 1998-99, and the agenda to improve debt management, including the overhaul of the top-downdecision making and lack of transparency, remains substantial. The policy-making capability of theAgency for Telecomnunications and Post was also strengthened through advice and equipment whichhelped develop a rehabilitation program for the sector and prepare Uzbek Telecom for privatizationscheduled before the end of 2001.

In general, Uzbekistan's ability to utilize TA funds has advanced since the beginning of the start ofIBTA. GOU is more able to match TA to its specific preferences, and has developed the capability topresent bankable projects that exceed the availability of funds.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:

During supervision missions IBTA was rated satisfactory in most aspects throughout the projectlife (Annex 8). Again, these ratings are consistent with stakeholder feedback (see Annex 9). Theevaluation of implementation performance of IBTA must be seen in the context of normal delays for allBank-funded projects in Uzbekistan. Most importantly, IBTA was the first project in Uzbekistan, with theBank having to learn local conditions and constraints and the Government having to learn Bank proceduresfor the first time. The PIU was also supported by a procurement specialist from the resident Bank missionwhich eased this problem. Although the project had three extensions, it was 99 percent disbursed. Thefinal extension was granted to carry out the FBS, which was a critical exercise in developing a database forlabor market and poverty analysis.

5.2 Factors generally subject to government control:

IBTA management was anchored in the Cabinet of Ministers in a small PIU in the Office ofInternational Coordination which had responsibility for a number of other projects at the same timne.Because the IBTA did not have a fully staffed, dedicated PIU, implementation was difficult at times,especially given that the IBTA was a complex project as well as the first operation in the country.However, IBTA did fully disburse and IA institutional development benefited in the long-run from havingto independently carry out project management functions.

5.3 Factors generally subject to implementing agency control.

Although generally successful activities were carried out, the policy environment hampered theimpact. In particular, exchange controls and some degree of re-nationalization diminished the benefits

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expected from privatization. On the implementation side, the Govermment (MOMS) was slow to implementthe household budget survey. The delay resulted from the Government's reluctance to use loan funds forTA activities such as the FBS, preferring instead to use grant funds if they could be raised. Ultimately, thesurvey was carried out and is ongoing.

5.4 Costs andfinancing:

The total project costs estimate at appraisal were US$25 million. The IBRD loan amount wasUS$21 million of which US$20.9 million, or 99 percent, was disbursed. The loan was made on standardIBRD terms with a term of 20 years and five years grace. The remaining financing planned at appraisalwas as follows: GOU-US$0.4 million, European Commission-US$2.6 million, and Japan-US$1.0 million.The funds from Japan were used for the sector studies which were carried out.

6. Sustainability

6.1 Rationale for sustainability rating:

Sustainability is rated as likely. Institutional development is sustainable in the financial sector asthe payments system is now part of regular operations. LAAS is in place at commercial banks. Theautomation of management in privatization is sustainable (beyond result in lasting changes in energy andtelecom sector restructuring and foreign participation in the sectors. For the FBS, the capacity to carry outexpenditure surveys has been developed and the exercise is part of ongoing operations in the regions.Sustainability will result in lasting changes in energy and telecom sector restructuring and foreignparticipation in the sectors. For the FBS, the capacity to carry out expenditure surveys has been developedand the exercise is part of ongoing operations in the regions. Sustainability will be enhanced if the data isreleased to the research community, including think tanks, universities, donors and local NGOs.

Sustainability is somewhat at risk because there is no fornal plan to replace and upgrade the largeamount of hardware financed under IBTA. Sustainability is also compromised by the lack of follow-upreform operations that the Bank envisioned at the time of appraisal of IBTA. In terms of hardwarereplacement, Uzbekistan may be in a better position than most FSU countries because of foreign exchangeadvantages due to gold production, and energy and grain self-sufficiency. Thus, purchasing replacementcomputers may be within Government means if it is assigned priority.

6.2 Transition arrangement to regular operations:

Ongoing projects that carry out further work initiated under the IBTA include the EnterpriseInstitution Building Loan (EIBL, effective September 1998 with a closing date of December 2003) and theFinancial Institution Building Loan (FIBL, effective August 1999 with a closing date of June 2004). TheEIBL follows up in a number of areas initiated under the IBTA, especially at GKI. The goals of the EIBLare to improve the efficiency of already privatized enterprises and support the implernentation ofcase-by-case privatization to enhance enterprise efficiency and attract foreign capital and know-how,expand public participation in capital markets and strengthen govenunent institutional capacity to facilitatereform. EIBL is also financing a contract to prepare and privatize Uzbek Telecom, another follow-up fromIBTA. IBTA supported the FIBL by financing a feasibility study and the EIBL by financing officeequipment for the PIU.

The FIBL follows up in the IBTA initiated areas in the financial sector. The FIBL's goals are to

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improve corporate governance and management capacity of commercial banks in preparation forprivatization in the medium term, increase competition and efficiency in the banking system and improveprudential regulations and supervision capacity of the CBU along with the reporting capacity ofcommercial banks. A Government Financial Management Reform Project is also planned that would coverbudget planning and execution, fiscal management, payments systems, monitoring systems, debtmanagement, tax administration, customs administration and other activities. These activities would helpsustain the impact of IBTA, especially in the areas of government interface with the private sector and thesocial safety net. Other donors such as the Technical Assistance for the Confederation of IndependentStates (TACIS) Programme, funded by the European Union that provides substantial support (between $15and 30 million annually) in the form of grant TA will also contribute to sustaining institutional developmentin the broad areas that were covered by the IBTA. Areas where there is little or no follow-up are at theMOL employment services and policy, and poverty alleviation.

7. Bank and Borrower Performance

Bank7. 1 Lending:

Bank performance was satisfactory. The project design was ambitious given the broad scope, thelack of country knowledge at the Bank (as the first loan to the country), the mixed record of TA projects,and the weak economic conditions. These factors at times overloaded both the Bank and the Borrowerimplementation capacity. In addition, the project life was too short (four years) as it underestimated thetime needed to effect knowledge transfer in a complex, multi-sector project. The three one-year extensionsreflect this underestimate. The Bank did make the right choice, however, in not specifying too manyactivities, but leaving the components designed in a general way. Over-specifying might have necessitatedadditional amendments to the loan agreement. The operation did fulfill most objectives and wasappropriately designed for a reform-minded Government, which appeared to be the case at the launch of theIBTA.

7.2 Supervision:

A weakness during supervision was caused by the many changes in task managers (three) andprogram team leaders (four), a position which was created in 1997. The result was often a lack ofcontinuity and of clear assignment of responsibility and follow-up from headquarters. There was also littleeffective transition between management changes.

In February 1997, task management was officially transferred to the Resident Mission. The taskmanager at the Resident Mission could have used substantially greater support from headquarters in termsof consistent coaching as opposed to ad hoc responses from a wide variety of people. As a result of thelack of cohesive management on the Bank side from headquarters, the benefits of completed tasks did notcirculate to other members of the Bank team as effectively as they could have. The recommendations fromthe petroleum sector study and the telecom studies, for example, did not circulate well among the relevantsector staff and did not feed back into the policy dialog to the extent that they should have.

Management decision-making occasionally lapsed because of frequent changing of task managers.For example, for a period there was confusion over who should sign off on no-objection letters. It was alsodifficult to keep abreast of the history of the project, thus requiring staff to re-learn local constraints andimplementation quirks (such as in procurement difficulties). One result was that the IBTA had exceeded itslimit of local shopping procurement. A 1997 assessment at supervision by QAG rated the IBTAmarginally satisfactory, which was a time when implementation was slow and dialogue with the country

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more strained. The assessment cited only marginally satisfactory Bank focus on development impact.However, it did acknowledge the difficult implementation culture in Uzbekistan, especially regardingprocurement. Bank staff continuity was rated marginally satisfactory, while supervision was ratedsatisfactory.

The Bank's management of the project improved significantly late in the project as the ResidentMission and headquarters in 1998 began taking a more proactive stance in implementation and completionof the project. The exceeding of the international shopping limit was rectified by shifting laterprocurements to non-local shopping (ICB, etc.) procurement. Improved management after the beginning of1998 also included greater attention to development impact, improved dialogue on project related policiesand issue which led to the two successor projects, the FIBL and the EIBL. Bank budget expenditures werehigh in preparation/appraisal (US$370,000) and in the first three years (FYI 994-96) of supervision (aboutUS$500,000), but averaged only about US$50,000 annually for FY1997-FY2001 (US$250,000).Supervision costs were low in the last five years of the project.

7.3 Overall Bank performance:

Bank performance is rated as satisfactory. The IBTA design was ambitious, but was largelyfulfilled and had significant development impact. With three extensions granted by the Bank, most majorobjectives were achieved and the funds were 99 percent disbursed.

Borrower7.4 Preparation:

The borrower's implementing agencies were deeply involved in the design and preparation of theproject. As mentioned, IBTA did not over specify its activities, but left flexibility within an overallinstitution building framework. The project was prepared in a reasonably short period of time and the PIUwithin Cabinet of Ministers mobilized to oversee implementation.

7.5 Government implementation performance:

The Government, as in a number of other countries, was often reluctant to borrow to payintemational consultants, preferring instead to secure grant funds. GOU preferred to use a greater part ofloan funds for equipment. However, all major activities were carried out with the supplemental use ofother donor financing where such funds could be mobilized.

7.6 Implementing Agency:

The PIU was under salary from the Government and no one was paid from the project account.Thus, PIU costs were very low (approximately US$70,000). Actual implementation was carried out by theindividual lAs including the procurement of goods and services and monitoring consultancies. lAs werecommitted to the objectives of their components. They sometimes sought alternative (grant) financing forsome of the consultancies, which they sometimes secured but which also caused delays (such as the FBS),or non-implementation (MOL employment policy TA). The MOJ basically carried out its activities, butweakened impact of some legal refonns citing inconsistencies with the Constitution.

7.7 Overall Borrower performance:

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Taken as a whole (Government and IA), Borrower performance was satisfactory. The Borrowermaintained continuity of project management at the Cabinet of Ministers as the same person was in chargefor all but the very early stage of the IBTA. Most objectives were carried out and the loan was fullydisbursed. In addition, the Borrower has begun implementation of two key follow-up loans, the EIBL andthe FIBL.

8. Lessons Learned

* TA projects, especially in FSU countries, need ample time for implementation. TA projectsthat are in a country that is new to the Bank and have many components take at least 5 or 6 years for aneffective skills transfer. The IBTA time frame clearly did not allow for the challenging situation, delays inimplementation, and complexity. This underestimate was underscored by the three extensions required forimplementation.

* Holding out for grant financing can cause major delays in implementation. The Governmentwas very slow in implementing FBS. Not until the second extension of the IBTA did FBS implementationbegin, and only after it was clear that alternative grant funding was not forthcoming. The cost of notcarrying out the FBS would have been substantial because there would not be data to establish ameaningful profile of the Uzbekistan economy.

* Impact of TA can be diminished when it is not linked to a successful reform program. IBTAwas, in retrospect, largely a stand alone TA project. It was only weakly linked to the subsequentRehabilitation Loan. The Rehabilitation Loan itself was only a quick disbursing operation and withoutfollow-up structural operations. The impact of IBTA was also less visible because it was not closelylinked to a policy operation and it achieved little leverage in the reform program.

* It is important at the design stage to consider the sustainability of project activities beyondproject life, especially for projects financing large amounts of equipment. IBTA really did notincorporate measures to enhance sustainability of equipment supply and maintenance. Although there wasthe expectation of follow-up projects as a way to continue the activities, there was no strategic approach tolessen the dependency for further procurement support.

X A PW whose role is limited to general management and oversight limits bureaucratic layers,is cost efficient, and allows [As greater opportunity to develop project management skills. The PrUfor the IBTA occupied a high authority, the Cabinet of Ministers. This high authority dictated the progressof the project components, while leaving operational responsibilities to the lAs so that they could directlyacquire skills in procurement and budgeting as they managed their own components.

* Lawyers who draft laws have to know local language and be familiar with local circumstancesIBTA legal TA would have been more effective had local specialists been more extensively used. There

was too much reliance on translators and not enough time spent in country to become acquainted with localconditions. As a result, the GOU was not satisfied with some of the legal TA such as petroleum legislation.

9. Partner Comments

(a) Borrower/implementing agency:

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FINAL REPORTon the completion of the project implementation ofInstitution Building/Technical Assistance Project

IBRD Loan No. 3650-UZ

Introduction

1. The IB/TA Loan in the amount of 21 million US$ was granted by the World Bank tosupport the efforts of the Government of Uzbekistan aimed to assistance in forming marketinfrastructure in Uzbekistan, rendering consulting services and staff training in privatization,strengthening the legislative base of economic reforms, forming the financial system, conductingresearch works in principal industries of economy, computer and informational supplying theministries and institutions which are the beneficiary of the institutional loan.

2. The IB/TA Loan was the first lending operation of the World Bank in Uzbekistan. TheLoan Agreement was approved by the Board on October 22, 1993 and became effective onJanuary 27, 1994. The original closing date, October 31, 1997 was extended three times andfinally closed on February 28, 2001. In accordance with the Resolution No.37 of Cabinet ofMinisters of the Republic of Uzbekistan in January 26, 1994 the Loan assets were distributed tofollowing ministries and agencies: the State Property Committee (GKI), the Ministry of Justice,the Ministry of Finance, the Central Bank, Uzbekneftegas, the Ministry of Labor, the Ministry ofMacroeconomics and Statistics, the Telecommunication Agency and Project Implementation Unitunder the Cabinet of Ministers of the Republic of Uzbekistan.

3. The proposed IB/TA Loan was aimed to finance Institution Building/Technical Assistanceactivities for:

Privatization and Enterprise Reform;Legal and Regulatory Framework;Financial Sector;Social Safety Net;Sector Strategies and Studies;Project Implementation.

Assessment of Outputs and Project Objectives Achieved

1. Privatization and Enterprise Reform

GKI. Goskomimushestvo was provided with 2,840,000 US$, including acquisition of1,257,000 US$ computer and office equipment, and 1,583,000 US$ consulting services for thedevelopment of the restructuring and privatization program as well as the development of thestate enterprises reform program and the computer system establishment. Mostly the objectives ofthe component have been achieved. The component is assessed as partly satisfactory.

2. Legal and Regulatory Framework

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MOJ. The Ministry of Justice received 1,420,000 US$ from the IBTA, including: 490,000US$ for legal refonns, 440,000 US$ for development of normative base and 490,000 US$ fordevelopment of the special laws. According to the recommendation of the Cabinet of Ministers,Republic of Uzbekistan and IBRD, in April 1994 the above mentioned funds were redistributed asfollows: 800,000 US$ - remuneration for consulting services, 400,000 US$ - for acquisition ofcomputer equipment and 220,000 US$ - for training. Assessed as partly satisfactory.

Uzbekneftegaz. Uzbekneftegaz was allocated by 330,000 US$ to be disbursed fromMarch 1994 to May 1995 for the development of the Legislation on petroleum. However, aftercoordination with the Cabinet of Ministers of the Republic of Uzbekistan and IBRD, the allocatedsum was reduced by 30,000 US$ and became 300,000 US$. As the result of tender with fiveparticipated companies, Uzbekneftegaz has concluded the 300,000 US$ contract on developmentof the petroleum legislation with "Clifford Chance" company (England). In view of delayedexecution of the contract terms by the above mentioned company, as of 28.02.2001, 200,000 US$are actually disbursed (as the result of the 2 stage works). The sub-component is assessed assatisfactory.

3. Financial Sector

CBRU and MOF. The Central Bank together with the Ministry of Finance allocated8,650,000 US$ to be disbursed in 1994-1996 (for CBRU 8,529,950 US$ and plus 120,050 US$for MOF).Allocation for sub-components includes:Payment System -5,440,000 US$; Bank Supervision -480,000 US$; Diagnostic Studies-1,270,000 US$; Accounting and Audit -1,220,000 US$; External Debt Management -240,000US$.

The aimed objectives achieved fully and assessed as highly satisfactory.

4. Social Safety Net

MOL. 2,970,000 US$ were allocated to the Ministry of Labor for the employment officescomputerization. As the results of conducted tenders, the preference was given up to the "Siemens Nixdorf' company out of the eight participated companies. The 3,470,000 US$ contractwas signed with the above mentioned company (the contract was signed on May 28, 1997) of anallocated sum.

US$500,000 were allocated for the development of employment service policy. Partially,these means were redistributed for the computer equipment acquisition at the request of theMinistry of Labor. All the objectives of the sub-component are achieved and rated satisfactory.

Ministry of Macroeconomv and Statistics. 475,000 US$ were allocated toMinmacroeconomstat for the poverty supervision program and for the survey. As a result oftender, conducted among four companies, the preference was given up to the USA basedcompany "Research Triangle Institute" (RTI). The 490,000 US$ contract (excess on 15,000 US$

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was agreed with the Cabinet of Ministers of the Republic of Uzbekistan and the World Bank) wasconcluded with the above mentioned company and Minmacroeconomstat, on rendering consultingservices, delivering computer hardware and software, as well as on training of the experts fromrepublican state statistics bodies. At some stage a contract dispute arise and finally as the RTIrefused to fulfill their obligations the contract was terminated. After some time, thanks to thirdextension of the loan, contracts with an foreign individual consultant and a local firm wasconcluded and the work was successfully finalized.

US$2 million were allocated for computerization of the Minmacroeconomstat MainComputer Center. In December 1996, tenders were conducted among six companies. By resultsof tenders the preference was given up to "Hewlett Packard" company (England). 2,070,000US$ of the contract sum are actually disbursed, including 70,170.51 US$ for training and1,999,829.49 US$ for purchasing of equipment. The objectives have been achieved. Assessedhighly satisfactory.

5. Sector Strategies and Studies

Posts and Telecommunications Agencyu 935,000 US$ and 1 million as the JapaneseGovernment's grant were allocated to the Posts and Telecommunications Agency for thedevelopment of telecommunications systems strategy, communication networks modernizationand organizational restructuring, with terms of disbursement from February 1994 to June 1995.The total amount was 1,935,000 US$. All the objectives have been achieved and the outcome isassessed as highly satisfactory.

Uzbekneftegaz. For rendering the advisory assistance to Uzbekneftegaz in an evaluationof the geological and economic characteristics of tender perspective of oil and gas fields, 580,000US$ were allocated with terms of disbursement from January 1994 to June 1995. As agreed withthe Cabinet of Ministers and IBRD, the allocated sum is reduced by 280,000 US$, and has made300,000 US$. As result of tender, conducted among five companies. Uzbekneftegaz hasconcluded the 300,000 US$ contract on rendering expert services on evaluation of tenderdeposits with "Wood Mackenzie" (Scotland) company. The allocated means are completelydisbursed. 27.10.1994 a contract with the firm "Foster Wheelers" (USA) was signed forconsulting services in the amount of 185,000 US$. Actually disbursed - 95,000 US$, unusedmeans - 90,000 US$. Activities under this contract resulted in issuing the Evaluation Report foroil-and gas-potential, and for the perspective sites, offered to licensing on the 1 st International oil- and gas - tender in Uzbekistan (1993-1994), as well as recommendation for attraction ofInternational oil-and-gas companies to joint hydrocarbons development in Uzbekistan. The overallobjectives have been achieved and assessed as satisfactory.

6. Price and Physical Contingencies

Minmacroeconomstat. 2,0 million US$ were allocated for computerization of theMinmacroeconomstat Main Computer Center. In December 1996, tenders were conducted among sixcompanies. By results of tenders the preference was given up to "Hewlett Packard" company (England). InMarch of the current year IBRD approved tender results. Minmacroeconomstat has begun contractnegotiations on equipment delivery. 2,070,000 US$ of the contract sum are actually disbursed, including

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70,170.51 US$ for training and 1,999,829.49 US$ for purchasing equipment.

7. Project Implementation

DCEEA CM RU 300,000 US$ were allocated to the Department for coordination ofForeign Economic Activity at the Cabinet of Ministers of Republic of Uzbekistan, from which60,584 US$ are used in 1994-1995 years on advisory services of the Government's adviser. Therest of allocated means of 239,416 US$ is delayed to use for creation of an inter-ministerialcomputer network ("UzNet"). Out the 400,000 US$ the amount of 399,726 US$ is actuallydisbursed for the purchase of equipment and the contract is completed fully. Work of the PIUwas satisfactory. Overall Project implementation is rated as satisfactory.

Meeting Commitments by the Government

IB/TA Loan implementation is satisfactory for all components. The IB/TA Loan got aslow start with modest implementation pace during the first three years and continuing throughthe old regime, except for some low cost, but high impact activities. Most of beneficiary agenciesdid not have adequately trained administrative officials to draft terms of reference and letters ofintent, evaluate proposals, negotiate and monitor contracts. The shortage of training wasaggravated by high personnel turnover. These shortcomings translated into a reluctance to moveforward once the individual activities were identified. The PIU did it's best to ensure that theequipment that was purchased for the components were appropriate to their needs. TheGovernment did provide offices, visa and other support to cover the local expenses of theconsultants and covered the audit expenses.However, implementation rate increased and major objectives were achieved and assessed assatisfactory.

The Role of the Bank

The Bank played a key role in assisting the Government in developing recommendationson the program of economic reform. The main criterion in developing such recommendations wasthe need for more speedy and painful reforms. In other words, the desire to achieve as much aspossible within the shortest time was there in the case of the Republic of Uzbekistan as well. Thegovernment did appreciate that the task management was shifted to the Resident Mission andthat played very much positive role in the project implementation. With three extensions grantedby the Bank, most major objectives were achieved and the funds were fully disbursed.

An especially important area of the Bank's assistance was the following:

* flexible approach to the solution of project implementation issues and mutualunderstanding;

* three times project extension and as a result full utilization of granted funds;* funds reallocation as per Government's request;* timely response of the Bank to the proposals and queries of the Government;* close cooperation with Bank's Resident Office in Uzbekistan.

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The Bank demonstrated flexibility with respect to developments and initiatives inUzbekistan. Thus, the Bank gave greater priority to the interest of the client than to meetingdisbursement targets.

In summary, the Bank, with the Government of Uzbekistan, created a complex, veryspecific project that, despite often weak implementation, had a strong positive developmentimpact. The Bank coped well with the challenges of a new country in difficult circumstancesundergoing a radical transformation. The Bank became more knowledgeable of Uzbekistan and itscapacities. The Bank's performance is rated satisfactory

Sustainability

The Bank and the Government of Uzbekistan set in motion on ongoing process ofcapacity building that supported a successful structural reform program. Sustainability of theIB/TA Loan initiatives as a whole is promoted because most of the measures are in place, haveeffected a substantial reorientation of Uzbekistan institutions, and are mutually reinforcing. In aproject heavy on consulting, the transfer of skills is a key indicator of sustainability. In mostinstances, the project management capacity developed quickly, especially the procurementfimctions.

Sustainability of the results achieved is high in components Social Safety Net, SectorStrategies and Studies, Financial Sector and lower in the other components. It is remarkable thatthe Government of Uzbekistan has begun implementation of two key follow-up Loans, the EIBLand the FIBL. The EIBL follows up in a number of areas initiated under the IB/TA Loan,especially at GKI. The FIBL follows up in the IB/TA Loan initiated areas in the financial sector.Thus the sustainable progress of the privatization and financial sectors is continuing.

Despite the small number of members of the PIU that Department of the Cabinet ofMinisters for Coordination of Foreign Economic Activity, serious delays in implementation due tochanges in government and personnel, overall continued progress in implementing the objectivesof IB/TA Loan was satisfactory. Future planned operations support a continued process of reformnthat will promote and accommodate growing sectors of economy.

Lessons Learned

The Government of Uzbekistan considers that the implementation of IB/TA Loan has beensatisfactorily achieved. In our opinion, the project objectives like strengthening the governmentinstitutions and agencies which have a central role to play in the reform effort, through providinga broad range of experience and the institutional capacity necessary to design and implementstructural reforms and to manage all economic sectors, were achieved. The most immediateneeds of Uzbekistan, in order to make transition to market economy, were development of thenecessary managerial, institutional and technological capabilities to implement suchtransformation. IB/TA Loan was specifically designed to help build these capabilities and thisobjective has been achieved.

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During the implementation of IB/TA Loan there were major factors which affected theproject:

Positive factors

Minimal expenditures in implementation of the project as salaries for PIU staff andconsultants;

Decentralized implementation, obtaining experience of project implementation and WorldBank' procurement procedures;

The beneficiary agencies did implement the project, procured equipment for themselves,hired consultants etc. using their internal resources and expertise;

PIU was appropriately situated in corresponding Department of Cabinet of Ministershaving proper authority and monitoring capacities. It was important for effective projectcoordination and management;

Resident Mission was providing very significant operational and procedural advice andsupport to the PIU.

Negative factors

PIU staff was not working full time on the project, which caused certain difficulties duringthe project implementation;

There was no full time accountant, special consultant and specialists for providingcorresponding expertise on components and financial reports and etc.

The Government shares the above conclusions expressed in the ICR.

The different agencies financed by IB/TA Loan had significant achievements on thetransition process and the Government shares the findings of the ICR in relation to majoraccomplishments in Privatization and Enterprise Reform, Legal and Regulatory Framework,Financial Sector, Social Safety Net, Sector Strategies and Studies, Project Implementation and theAgency of Posts and Telecommunications.

The Government states that the numerous extensions of the Project could be avoided ifnot so many components and sub-components had been presented in the original design of theProject. It is very much difficult to coordinate and keep the same pace of the projectimplementation in all the components.

In conclusion, IB/TA Loan has made a significant contribution to the process oftransformation to a market economy by strengthening and building the capacity of the beneficiary

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institutions which were responsible for carrying out the implementation of the differentcomponents of the Project.

(b) Cofinanciers:

Not Applicable

(c) Other partners (NGOs/private sector):

Not Applicable

10. Additional Information

Supervision Reviews of IBTA-1994-2000

PSR/590 Date 6/29/00 12/28/99 6/30/99 3/22/99 7/6/98 7/8/97 2/14/97 7/5/96 6/24/96 10/26/95 6/1/95 9/30194Component

Consultant S S S S S S S S UServicesGoodsl S S S S S S S S S

Training S S S S S U U S U

Proj. Devel. S S S S S S S S S S S NRObjectivesImplementation S S S S S S S S U S S UProg.

Counterpart S S S S S S S S S 1 1 1FundsProject NA NA NA S S S U S U 2 2 3ManagementProcurement S S S S S S S S S 2 2 2Resettlement NR NR NR NR NR NR NR NR NR NA NA NREnvironment NR NR NR NR NR NR NR NR NR NA NR NREnvironmental NA NA NA NR NR NR NR NR NR NA NR NRPlanFinancial S S S S NR NR NR NR NR NR NR NRCovenantsOther Legal S S S S S S S S U I NR 2CovenantsWIDN NR NR NR NR NE NR NR NR NR NR NR NRMonitoring & NR NR NR NR NR NR NR NR NR NR NR NREvaluation

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Back To Office Report from ICR Mission

THE WORLD BANK/IFC/M.I.G.A.

OFFICE MEMORANDUMDATE: April 10, 2001

TO: Pervaiz Rashid, Lead Specialist (ECA)

FROM: Richard Carroll, Consultant

EXTENSION: 34107

SUBJECT: BTO for IBTA Completion Mission

1. During March 12 to March 26, 2001, I led the mission for the Implementation CompletionReport for the Institution Building Technical Assistance Project (IBTA). Because it was anintensive learning ICR, I also planned and carried out a workshop (with support from the residentmission) and conducted a survey. I arrived one week before the workshop, which was held onMarch 19, 2001, and worked with the resident mission in final planning and implementation of theworkshop and survey. Messrs. Pervaiz Rashid and Marc Blanc arrived shortly before theworkshop. I also held a number of meetings with government agencies and non-governmentstakeholders for additional input on the IBTA operation.

2. The purpose of the workshop was to obtain feedback, assessments and lessons learnedfrom the IBTA, and help the Government would increase ownership of the continuing program.Mr. Rashid and I made presentations on technical assistance projects in general and the surveyresults for IBTA in particular. The goal of these presentations was to allow the workshop tobegin at a more advance point with some major issues already identified. The workshop schedule,which ran from 9:00 AM to 4:45 PM, emphasized working group sessions which were dividedalong the lines of the IBTA components. Several Bank staff of the Resident mission attended theworkshop and assisted during the working groups.

3. The working groups convened for two hours focusing on the impact and follow up ofIBTA. Participants from each working group made brief presentations. A wrap-up from myself,Pervaiz Rashid and Mr. David Pearce Resident Representative concluded the workshop.

4. Invitees to the workshop included both medium and high level government officials. Allgroups worked diligently to summarize the impact of their components and gave pertinentpresentations. Additional surveys were collected at the workshop bringing total survey responsesto 22. This number is a good level of response in light of the fact that a number of respondentswere under the impression that only one completed survey per implementing agency was required.

5. Workshop participation was moderate with about 30 persons attending even though many

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invitations were issued on short notice. The list of attendees is found in ANNEX 10 of the ICR.

6. I compiled the quantitative and qualitative responses of the stakeholder survey in ANNEX9 of the ICR. I held additional meetings with non-government stakeholders to supplement thefeedback from the surveys. All Government agencies provided responses, however, the Ministryof Justice participation could have been stronger, both at the workshop and in terms of surveyresponses.

7. The staff at the World Bank resident mission in Tashkent were very helpful, especially Mr.Fasliddin Rakhimov, and Ms. Sevara Atamuratova. The ICR for JBTA is scheduled to befinalized by May, 2001.

cc: M. Blanc, F. Rakhimov, S. Padilla

Persons Met and Interviewed

Government of Uzbekistan

Cabinet of Ministers

Nariman Mannapbekov, Head of PIU and of Department for Foreign Economic ActivitiesAlisher Ubaidullaev, Former PIU Head, Cabinet of MinistersSobirj on E. Yuldoshev, Consultant to the Department for Coordination of Extemal EconomicActivities

Post and Telecommunications Agency

Abdulla N. Aripov, First Deputy to the General DirectorMikhail Nikitovich Koj akin, Deputy to the General DirectorKhurshid A. Karimov, Head of International Relations Coordination Department

Central Bank of Uzbekistan

Karim M. Umarov, Director of Payment System and Informatization DepartmentAlexander Stupak, Deputy Head of Information DepartmentJacques Gilman, Senior Advisor Financial Sector Development Agency

GKI

Zokhir T. Mukhitdinov, Leading Specialist, International Programs Department

Ministry of Labor

Alexander Novotny, Head of the Department of Labor Market Monitoring

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Bukhara (Regional Offices)

Olim A. Jumaev, Deputy of the Hokim of Bukhara RegionManakova, Head of Regional Statistics Department, Ministry of Macroeconomics and Statistics (MOMS)Akmirdov, Chief Statistician FBS (MOMS)J. Tugoshiva, Statistics Specialist (MOMS)Ilkhom Omonov, Head Regional Labor Department, MOLJuraev Usman, First Deputy of the Legal Department MOJJuraev Rakmatullah, Deputy of Legal Department, MOJErkin K. Faiziev, Deputy Head of Regional GKI

World Bank and Other Donors

Bakhtiyor Abdullaev Operations Officer EIBL and FIBLAsad Alam, Senior Country Economist,PREMUlugbek Isayev, Project Management Specialist, USAID-TashkentAlexander G. Kalashnikov, Project Management Specialist, USAID-TashkentJuan Navas, Operations Officer IFCKazuko Ogawa, Senior Country OfficerDavid Pearce, Resident Representative Tashkent, UzbekistanVayeen Rajagopalan (Task Manager 1995-97)Fazliddin Rakhtimov, Operations Officer and Task Manager of IBTAMansoora Rashid, Human Resources SpecialistPervaiz Rashid, Lead SpecialistPeter Reddish, Team Leader-Support to National Coordinating Unit, EU TACIS ProgrammeSvetoslav Tintchev, Senior Telecommunications Engineer

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Annex 1. Key Performance Indicators/Log Frame Matrix

Objectives/a Planned Project Activities/a Actual Implementation ImpactI. Privatization and PublicEnterprise ReformStrengthen policy Provision of two long-termn Partially implemented. List of 40 companies wasdevelopment and experts for further elaborating Under umbrella contract made with 3 companiesimplementation capacity for GOU's privatization (Deloitte and Touche) instead prepared for sale. Only twoprivatization and public program, including assistance of individual experts. companies have been sold toenterprise reform, develop a with implementation and date. Companies on list areframework for enterprise foreign partner search to be privatized under EIBL.reforms.

Specialist to work on special Implemented. Under Counterparts developedtransactions that require umbrella contract (Deloitte expertise in legal process forsector specific expertise as and Touche) privatizationwell as on legal issues. _

Provision of two public Implemented. Under Restructuring plans wereenterprise management umbrella contract (Deloitte drafted. Preparation forspecialists to develop a and Touche). Funded by privatization has lagged, butframework for enterprise EC-$1.1 million. moved forward.reforms.

Computers and office Implemented. Local Critical to monitoring andequipment for CSPMP and company installed computers managing the privatizationUzgosfond HQ and some of as planned (at GKI, the process, although the overalltheir branches merged entity of Uzgosfond process has been slow.

and CSPMP).Training of CSPMP and Implemented. Under Application of training wasUzgosfond staff in privatization umbrella contract (Deloitte limited because of lowmethodologies and techniques and Touche) number of significantas well as enterprise privatizations.management.

Software for National Made possible the operationDepository. Allowed registry of the Stock Exchange.and control for transactions inthe Stock Exchange.

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Objectivesla Planned Project Activities/a Actual Implementation ImpactII. Legal and RegulatoryFrameworkSupport the design and Long-term legal advisor to Started but cancelled contract Minimal from IBTAarticulation of a strategy for coordinate legal reforms and of int'l law firm as firm didlegislative and regulatory to assist govemment in the not meet governmentreform, in particular the articulation of laws performance requirements.development of the private Other donors carried outsector. planned activities (USAID,

GTZ)Legal expert with strong Not implemented by IBTA, IBTA identified need, butexpertise in corporate and but by other donors. minimal impact as reportedcommnercial law. by USAID.Short-term legal experts to Not implemented by IBTA, but IBTA identified need, butwork on specific laws. by other donors. minimal impact as reported

._____________ _ .by USAID.Advisors for petroleum Implemented. Draft If enacted, law would pavelegislation and model contracts. petroleum law was prepared. way for foreign participation

See also sector studies. in petroleum sectorTraining programs, seminars Implemented. Post training, MOJ specialistsand other materials. continued drafting key

legislation for privatizationincluding resolutions forforeign participation,corporatization, bankruptcylaw and regulatory issues.

Computers and office Implemented. Case Judges can access caseequipment for MOJ information can be logged in. information for better

preparation of adjudication.Vehicle provision for courts Greater facility for judges and(reallocation from cancelled staff to reach meetings andlegal advisor funds) adjudication sites, more

efficient use of time.

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Objectives/a Planned Project Activities/a Actual Implementation ImpactHII. Financial Sector

Support the modernization Payments system feasibility Not implemented. Feasibility Govemment design led toand institutional study. study was not needed because installation of functioningstrengthening of the Uzbek CBU already designed system payments system.financial system and thereby in consultation with Bank.improve its ability tofacilitate economy widereforms.

Equipment, software and Implemented. 14 CBU Reduced paymentsconsulting for the initial branches were linked transaction time.improvements of the presentpayments system.

This component also linked Transaction time reduced900 branches at district level from days to minutes,going far beyond the original improved record keeping andplan. progress toward unified

account for liquiditymanagement (under thefollow-up FIBL).

Equipment and consulting for Implemented. (USAID added Off-site bank supervisionbanking supervision. funds in this area.) capacity was significantly

improved.Expert assistance for Implemented. New chart of New accounting and auditingimplementation of international accounts is in place. standards have been adopted,accounting and auditing but not fully operationalized.standards for commercial banksUndertake diagnostic and Implemented. Saving Bank A strategic step towardstrategic policy studies for and two other large banks restructuring and sale ofleading sectoral banks and (Uzpromstroy Bank and major banks, althoughSaving Bank. Pakhta Bank) underwent restructuring and sale have

diagnostic studies. been delayed.Consultants, equipment and Implemented. External debt External debt monitoring issoftware for external debt units were established at the centralized, but the efficiencymanagement. CBU and the MOF. of external debt management

could be significantlyupgraded.

Training programs for CBU Implemented. Helped implement themanagers, accountants, adoption of accounting andauditors and information auditing standards consistenttechnology specialists. with IAAS.

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Objectives/a Planned Project Activities/a Actual Implementation ImpactIV. Social SafetyNet/EmploymentTo develop a system for Finance consulting services Implemented. A new New comprehensive data willredefining the poverty line and equipment to redesign nationwide Family Budget lead to more reliable policyin order to better target the family expenditure Survey was carried out and is making and povertysocial assistance, and survey. an ongoing exercise. targeting. However,improve capacity to provide redefinition of the povertybenefits and services. line has not been finalized.

Expert assistance to improve Implemented through EC Reports from current staffpolicy making of the MOL on financing (part of IBTA), of suggest minimal impact.employment issues. $1.5 million. (EC-TACIS could not

________ _ _ elaborate.)Computerization of labor Implemented. Functioning Better information for joboffices. employment services was put seekers and faster filling of

in place. vacancies for employees.Reduction of time in locatingjobs. On average job seekerspends two months finding ajob (maximum unemploymentcompensation period is sixmonths).

Expert assistance to train SCFS Implemented. SCFS (MOMS) staff are ablestaff with poverty monitoring to continue survey workand targeting issues and to independently.train MOL staff.

Objectives/a Planned Project Activities/a Actual Implementation ImpactV. Sector StudiesTo initiate policy making Experts to assist Implemented. Gas fields have beenand sectoral development Uzbekneftgas with petroleum tendered. Investment blockscapacity of the agencies in acreage tendering were created to attract foreignenergy and negotiations. investors.telecommunications sectors.

Advisors to develop policy Implemented. Both a policy Improved tariff policy andmaking capacity of the and a technical assessment plan for physical upgrade.Ministry of Telecom. were carried out.Experts for institutional Implemented. Ministry was restructured torestructuring of the Ministry form Agency for

Telecommuncations and Postand Uzbek Telecom, officiallyseparating the regulatoryfrom the operationalfunctions.

Advisors to review the Implemented. Privatization of Uzbeksectoral rehabilitation plan Telecom is being supported

by the follow-up EIBL.

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Annex 2. Project Costs and Financing

Project Cost by Component (in US$ million equivalent) __

Appaisa ActaiiiLatest Per6entne ofEstimate Estimate Appraial

Project Cost By Component US$ milion US$ millionPrivatization and Enterprise Reforms 4.00 4.00 100Legal and Regulatory Framework 1.80 1.60 89Financial Sector 8.80 9.00 102Social Safety Net 5.50 7.00 127Sector Strategies and Studies 2.60 3.30 127Project Implementation 0.30 0.07 23

Total Baseline Cost 23.00 24.97Physical Contingencies 2.00 0.00

Total Project Costs 25.00 24.97Interest during construction

Total Financing Required 25.00 24.97

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Project Costs b Procurement Arran ements (A raisal Estimate) (US$ million e uivalent)

Exedtr Caegi NC tte 2 NF. TotalCost

1. Works 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00) (0.00) (0.00)

2. Goods 8.05 0.00 0.70 0.08 8.83(8.05) (0.00) (.0 (0.00) (8.75)

3. Services 0.00 0.00 9.85 3.32 13.17Consultancies and (0.00) (0.00) (9.85) (0.00) (9.85)Studies/3,4Govemment Overhead 0.00 0.00 0.00 0.00 0.00

(0.00) (0.00) (0.00) (0.00) (0.00)4. Training and Study 0.00 0.00 1.70 0.60 2.30Tours (0.00) (0.00) (1.70) (0.00) (1.70)Refinancing of PPF 0.00 0.00 0.70 0.00 0.70

(0.00) (0.00) (0.70) (0.00) (0.70)Total 8.05 0.00 12.95 4.00 25.00

(8.05) (0.00) (12.95) (0.00) (21.00)1. N.B.F. includes cofinancing , parallel financing and Government contribution2. International Shopping - $700,0003. Consultant services procured in accordance with Bank guidelines4. Includes direct contracting for $100,000

roject Costs by Procurement Arrangements (ActuallLatest Estimate) (US$ million equivalent)

1. Works 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) L (j.0) (0.00) (0.00)

2. Goods 11.50 0.00 3.10 0.08 14.68(11.50) (00)(3.10) (0.00) (14.60)

3. Services 0.00 0.00 6.40 3.52 9.92Consultancies and (0.00) (0.00) (6.40) (0.00) (6.40)Studies/3,4Govemment Overhead 0.00 0.00 0.00 0.40 0.40

(0.00) (0.00) (0.00) (0.00) (0.00)4. Training and Study 0.00 0.00 0.00 0.00 0.00Tours (0.00) (0.00) (0.00) (0.00) (0.00)Refinancing of PPF 0.00 0.00 0.00 0.00 0.00

(0.00) (0.00) (0.00) (0.00) (0.00)Total 11.50 0.00 9.50 4.00 25.00

(11.50) (0.00) (9.50) (0.00) (21.00)

" Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies.

2 Government contribution of offices and personnel.

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Project Financing by Component (in US$ million equivalent)Pementage of Appraisal

Component Appraisal Estimate ActuaILatest EstimateBank .ovL Coa. Bank .ovt. CoP. Baink GOVL .CoF.

Privatization and 2.84 0.06 1.10 2.60 0.06 1.10 91.5 100.0 100.0Enterprise ReformsLegal and Regulatory 1.75 0.05 0.00 1.61 0.05 0.00 92.0 100.0 0.0FrameworkFinancial Sector 8.65 0.15 0.00 9.90 0.15 0.00 114.5 100.0 0.0Social Safety Net 3.95 0.10 1.50 4.27 0.10 1.50 108.1 100.0 100.0Sector Strategies and 1.52 0.05 1.00 2.55 0.05 1.00 167.8 100.0 100.0StudiesProject Implementation 0.30 0.00 0.00 0.07 0.00 0.00 23.3 0.0 0.0Contingencies/Others* 2.00 0.00 0.0Total 21.00 0.40 3.60 21.00 0.40 3.60 100.0 100.0 100.0

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Annex 3. Economic Costs and Benefits

Not Applicable

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Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle No. of Persons and Specialty Performanc Ratin

(e.g. 2 Economists, I FMS, etc.) Implementation DevelopmentMonth/Year Count Specialty Progress Objective

Identification/PreparationNovember 1992 5 E,L, Pr, P S S

Appraisal/NegotiationFebruary 1993 5 E, L, F, P, Pr S S

SupervisionSeptember 1994 5 TM, F, P, L, Pr S S

June 1995 5 TM, F, P. L. Pr S SOctober 1995 5 TM, F, L, P, Pr S SJune 1996 5 TM, F, L, P, Pr S SJuly 1996 5 TM, F, L, P, Pr S SFebruary 1997 2 TM, L S SJuly 1997 3 TM, L, F S SMarch 1998 2 TM, P S SJuly 1998 2 TM, P S SMarch 1999 2 TM, P S SMay 1999 I TM S SJune 1999 1 TM S SDecember 1999 2 TM, P S S

June 2000 1 TM, P S S

ICRMarch 2001 3 TM, E, F S S

TM - Task Manager, E - Economist, F - Financial, P - Procurement, Pr - Privatization, L - Lawyer

(b) Staff:

I Stage of Project Cycle Actual/Latest EstimateNo. Staff weeks US$ ('000)

Identification/Preparation 117.2 310.1Appraisal/Negotiation 21.3 62.2Supervision 299.6 751.6ICR 12.0/a 40.0/aTotal 395.0 1,028.5

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

RatingN Macro policies O H OSUOM O N * NA2 Sector Policies OH OSUOM O N * NA0 Physical OH OSUOM ON ONAE Financial O H OSUOM O N O NAF Institutional Development 0 H O SUO M 0 N 0 NA

IEnvironmental O H OSUOM O N * NA

SocialZ Poverty Reduction O H OSUOM O N * NA

Gender OH OSUOM ON *NAD Other (Please specify) O H OSUOM O N * NA

* Private sector development 0 H O SU O M * N 0 NAF Public sector management 0 H O SU * M 0 N 0 NA0 Other (Please specify) 0 H O SU O M 0 N 0 NA

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Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

M Lending OHS OS OU OHUZ Supervision O HS * S OU OHUZ Overall OHS OS O U O HU

6.2 Borrowerperformance Rating

Z Preparation OHS OS O U O HUF Government implementation performance O HS O S 0 U 0 HUO Implementation agency performance O HS OS 0 U 0 HU@ Overall OHS OS O U O HU

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Annex 7. List of Supporting Documents

Memorandum and Recommendation of the President on a Proposed Loan to the Republic ofUzbekistan for an Institution Building/Technical Assistance Project, September 9, 1993.

Quality Assurance Group Supervision Assessment, 1997

Social and Structural Policy Review (SSPR)

Supervision and Project Status Reports

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Annex 8. Beneficiary Survey Results

ANNEX 8A.

UZBEKISTAN: INSTITUTION BUILDING/TECHNICAL ASSISTANCE PROJECT (IBTA)

IMPACT ASSESSMENT SURVEY FORM

Affiliation: Government Agency/Company Name:Title (during program/loan):Current Title:Length of time working with the program:Component of the program on which you worked:_Date

PART A. Design, Objectives and Quality at Entry of the IBTA

(In your responses, please compare your experience with the attached overall and component descriptions)

i) Was the design of the overall IBTA appropriate and responsive to the main problems?(4) Very appropriate(3) Appropriate(2) Somewhat Appropriate(1) Not appropriate

ii) Was the design of your component appropriate to the problems faced?(4) Very appropriate(3) Appropriate(2) Somewhat Appropriate

(1) Not appropriate

iii) How strong were the roles of major stakeholders in designing the program?Government NGOs Private Sector

(4) Very strong(3) Strong(2) Minor(1) Negligible

iv) Were the objectives of the overall program and component clear?Overall IBTA Your Component

(4) Extremely clear(3) Clear(2) Somewhat Unclear(1) Unclear

v) How would you rate the quality of the IBTA at the time it was launched?Overall IBTA? Your Component?

(4) Very high(3) Good(2) Could have been much better(1) Poor

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vi) Were the objectives achieved: Overall IBTA? Your Component?(4) Completely(3) Mostly(2) Partially(1) Not at all

vii) Were there adequate resources to accomplish the objectives?Fundine

(4) Abundant/More than enough(3) Comfortable, no shortages(2) Adequate with some shortages(1) Insufficient

Staffing(4) Abundant/More than enough(3) Comfortable, no shortages(2) Adequate with some shortages(1) Insufficient

viii) What improvements, if any, would you have made to the design and/or objectives of the IBTA?

PART B. IBTA's Impact Capacity Building

ix) What quantitative indicators do you have that measure the effects of your component of IBTA(number of people trained, number and value of enterprises privatized, new laws enacted, etc.)?

x) How would you rate the increased ability to carry out the reform program?Because of Because ofOverall IBTA Your Component

(4) Greatly improved(3) Improved(2) Somewhat improved(1) Not improved

xi) Did the IBTA improve the efficiency and effectiveness of your section?

(4) Greatly improved(3) Improved(2) Somewhat improved(1) Not improved

xii) How did IBTA perform with respect to major areas of intervention?

Improving Incentives for Carrying out the Reform Program (through clearer goals. instituting betterrewards for good performance. etc.)

Overall IBTA Your Component(4) Very strong(3) Strong(2) Moderate

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(1) Weak/Insignificant

Improving Institutional Ability to Carry out the Reform Program and to Operate within a ReformedSystem

Overall IBTA Your Component(4) Very strong(3) Strong(2) Moderate(I) Weak/Insignificant

Improving Skills and Transferring Knowledge Reguired for a New System (through consultants andtraining)

Overall IBTA Your Component(4) Very strong(3) Strong(2) Moderate(1) Weak/Insignificant

Direct Contribution to Institutional Reform (through actual privatizations, reorganizations. legal changes.etc.)

Overall IBTA Your Component(4) Very strong(3) Strong(2) Moderate(1) Weak/Insignificant

xiii) How effective was the training conducted under IBTA?Overall IBTA Your Component

(4) Very effective(3) Effective(2) Somewhat effective(1) Not effective

xiv) How effective were the consultancies carried out under IBTA?Overall IBTA Your Component

(5) Very effective(4) Effective(3) Somewhat effective(1) Not effective

xv) What, if any, were the negative impacts of the overall IBTA and/or your component?

xvi) What, if any, unexpected positive impacts were there?

PART C. Sustainability (the Likelihood that the Improved Capacity Will Last After IBTA andSupervision)

xvii) How sustainable are the initiatives and accomplishments of the program?

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(4) Highly(3) Probably(2) Possibly(1) Unsustainable

xviii) What were the most important factors in sustaining IBTA's achievements(1- being most important, 6 is least important)

- Level of Government participation and commitment- Factors beyond the control of the Government- Level of participation of non-Government stakeholders- Quality of staff- Sufficient budget resources- Legal issues

xix) Are the gains of IBTA sustainable in the areas of:Training? Procurement Function?

(4) Highly(3) Probably(2) Possibly(I) Unsustainable

xx) How would you describe the importance and quality of World Bank supervision?

PART D. Lessons Learned from IBTA and Suggestions for the Future

xxi) What would you have done differently in implementing the program if youwere the World Bank?

xxii) What would you have done differently in implementing the program if youwere the Central Government?

xxiii) What strategies in implementation and design were particularly effective?

Name (optional):

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Please email your response to:Or Fax to:

ANNEX 8B.

Uzbekistan: IBTA Impact Assessment Survey Quantitative Results

Question Com onent 1/ Rating 2/A. Design, Objectives and Quality at Entry of IBTA 1 2 3 4 5 All(i) Was the design of the overall IBTA appropriate to the main problems in 3.0 3.0 3.0 3.2 3.0 3.1capacity building?(4) Very appropriate (3) Appropriate (2) Somewhat Appropriate (I)Not appropriate(ii) Was the design of your component appropriate to the main problems in 3.0 3.0 3.2 3.3 3.0 3.2capacity building?(4) Very appropriate (3) Appropriate (2) Somewhat Appropriate (1)Not appropriate(iii) How strong were the roles of major stakeholders in designing the

program? (4) Very strong (3) Strong (2) Minor (I) NegligibleGovernment 3.0 3.0 3.2 3.7 3.5 3.3NGOs 2.0 0 3.0 2.0 1.0 2.0Private Sector 2.0 0 3.0 2.6 2.5 2.5

(iv) Were the objectives of the program and component clear?(4) Extremely clear (3) Clear (2) Somewhat Unclear (1) Unclear

Overall 3.0 3.0 3.3 4.0 3.0 3.5Your Component 3.3 3.0 3.0 3.6 3.0 3.3

(v) How would you rate the quality of the IBTA at the time it waslaunched? (4) Very high (3) Good (2) Could have been much better (1)Poor

Overall 3.0 3.0 2.8 3.0 3.0 2.9Your Component 3.0 3.0 2.3 3.1 3.0 2.9

(vi) Were the objectives achieved? (4) Completely (3) Mostly (2)Partly (1) Not at all

Overall 3.0 2.0 3.5 3.2 3.0 3.2Your Component 3.3 2.5 3.3 3.4 3.0 3.2

(vii) Were there adequate resources to accomplish the objectives? (4)Abundant/More than enough (3) Comfortable, no shortages (2)Adequate w/some shortages (1) Insufficient

Funding 2.8 1.0 2.8 2.5 3.0 2.6Staffing 2.8 2.0 2.2 2.3 2.5 2.3

1/ Components: 1. Privatization and Enterprise Reform; 2. Legal and Regulatory Framework;3. Financial Sector; 4. Social Safety Net; and 5. Sector Strategies

Note: Based on 22 responses.2/ Survey form 9a defines the rating for each question.

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Question Compnent RatingB. IBTA's Impact on Capacity Building 1 2 3 4 5 All(x) How would you rate the increased ability to carry out the reformprogram? (4) Very strong (3) Strong (2) Moderate (1)Weak/Insignificant

Because of the Overall IBTA 3.0 3.0 3.0 3.0 3.0 3.0Because of Your Component 3.0 3.0 3.0 2.8 3.0 2.9

(xi) Did the IBTA improve the efficiency and effectiveness of yoursection? (4) Greatly improved (3) Improved (2) Somewhatimproved (1) Not improved 2.8 3.0 3.0 3.0 2.5 2.9(xii) What were the component's impacts? (4) Very strong (3)Strong (2) Moderate (1) Weak/Insignificant

Improving incentives for carrying out the reform programOverall 3.0 2.0 2.7 2.4 2.0 2.5Your Component 3.3 2.5 3.3 3.4 3.0 2.8

Improving institutional ability to carry out the reform programOverall 3.0 2.0 3.5 3.2 3.0 2.9Your Component 3.3 2.5 3.3 3.4 3.0 2.8

Improving skills and transferring knowledge needed for a newsystem

Overall 3.0 2.0 3.5 3.2 3.0 2.4'Your Component 3.3 2.5 3.3 3.4 3.0 2.5

Direct contribution to institutional reformOverall 3.0 2.0 3.5 3.2 3.0 2.3Your Component 3.3 2.5 3.3 3.4 3.0 2.6

(xiii) How effective was the training conducted under IBTA?Overall 3.0 3.0 2.5 2.4 3.0 2.6Your Component 2.5 3.0 2.7 3.2 2.5 2.8

(xiv) How effective were the consultancies carried out under IBTA?Overall 3.0 3.0 2.7 2.4 3.0 2.6Your Component 3.0 3.0 3.0 2.6 3.0 2.9

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Question Component Rating -

C. Sustainability of the Program 1 2 3 4 5 All(xvii) How sustainable are the initiatives and accomplishments of thecomponent? (4) Highly (3) Probably (2) Possibly (1) Unsustainable 3.0 4.0 3.2 3.5 3.0 3.3(xviii) What were the most important factors in sustaining IBTA'sachievements. (1- being most important and 6- least important)

Rank1. Level of Government participation and commitment 2.3 0 1.0 1.0 1.0 1.42. Legal issues 3.3 0 1.7 3.0 2.0 2.53. Quality of staff 3.0 0 2.2 3.3 3.0 2.84. Sufficient budget resources 3.0 0 3.3 2.0 3.5 2.85. Level of participation of non-Government stakeholders 4.0 0 5.0 5.0 5.5 4.86. Factors beyond the control of the Government 5.5 5.0 6.0 4.5 5.3

(xix) Are the gains of IBTA sustainable? (4) Highly (3) Probably (2)Possibly (1) Unsustainable

Training 3.0 0 3.0 2.1 3.0 2.7Procurement function 3.0 3.0 3.2 3.0 3.5 3.1

ANNEX 8C. Qualitative Results

In addition to the quantitative responses, the survey respondents made a number of comments onperformance of the IBTA and suggestions for improvement. A tally of the responses are divided accordingto design, implementation and supervision and results and outcomes of the project.

The responses reveal several themes. The importance of the Bank understanding local conditionsand constraints is brought up by a nunber of respondents. Unfortunately, it was not made clear in theworkshop exactly what local conditions were not considered and, therefore, how these conditions could beincorporated into project design and implementation.

Another theme deals with consultants. The Govermment would have liked greater assistance fromthe World Bank in selecting consultants, ostensibly to avoid the problems encountered duringimplementation of IBTA. Respondents would have liked the World Bank to have taken a stronger role ingeneral in supervising the project. There was also the concem that the Bank took too much time in makingdecisions (approvals) for project activities.

Training is clearly an area that respondents feel is important and most comments concerningtraining indicate the need for increased training allocation. There was not any specific proposal forimnproving the efficiency of training.

Finally, although the Government as a whole sometimes displayed reluctance to use IBTA funds tohire consultants, there were a number of suggestions that additional consulting expertise was needed,particularly in the areas of oil and gas development and banking supervision and accounting.

Specific comments from the surveys are listed below.

Design

Expand objectives and functions of the IBTAComplex implementation approach must incorporate local conditions

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* IBTA covers most buming aspects of institutional development (social statistics)* Privatization approach should recognize existing conditions

hIncrease allocation for training (incl. Project team)* Regular training is needed for regional personnel* More technical assistance is needed for oil and gas* More Technical assistance is needed for banking supervision and accounting

Implementation and Supervision

* Reduce time for WB decision-making* Improve coordination between linked components* Stage by stage implementation with strict deadlines under IBTA was a good approach* Closer monitoring by the WB from the very beginning and render advice and intervention* Improved selection of experts* Personnel in the statistics department are not retained* Additional consulting services to introduce the new chart of accounts and accounting for banks

is needed* The Bank did not intervene adequately in the consultancy for the legal aspects of oil and gas* The complexity of IBTA required greater Bank supervision effort.* More active PIU involvement needed to achieve better results.

Results and Outcome

* IBTA achieved objectives in every component* World Bank must understand client constraints and local conditions* Sector restructuring and development of laws* Implementation of Government reforms* All components achieved good results.* Government should set up an inter-ministerial agency for statistical research* Simplify the structure of the project and eliminate the lack of conformity in procurement

procedures between the Bank and the Government

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Annex 9. Stakeholder Workshop Results

Annex 9A.

Uzbekistan: Institution Building/Technical Assistance Project (IBTA) - Loan 3650Impact Assessment Workshop

March 19, 20019:00 AM - 4:45 PM

Intercontinental Hotel, Tashkent

AGENDA

9:00-9:15 Chairman's Welcome and Opening Remarks - Mr. David Pearce, ResidentRepresentative, World Bank

9:15-9:30 Opening Remarks from the Government - Mr. Nariman Mannapbekov, Cabinet ofMinisters, Head of Project Implementation Unit

9:30-10:30 Review of Survey Results for the IBTA - Messrs. Richard Carroll and PervaizRashid

10:30-10:45 Coffee Break

10:45-11:45 Government Comments on IBTA (by component)

11:45-1:00 Working Groups (1. Privatization and Enterprise Reform, 2. Legal and RegulatoryReform, 3. Financial Sector, 4. Social Safety Net and Employment Services, and 5.Sector Studies)

1:00-2:00 Lunch

2:00-3:00 Working Groups (continued)

3:00-3:30 Component Working Group Presentations and Discussion: Lessons Learned forFuture

Operations

3:30-3:45 Coffee Break

3:45-4:30 Working Group Presentations (continued)

4:30-4:45 Summary and Closing Remarks

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Annex 9B.

Workshop Comments

Detailed Comments from Working Groups

In addition to the qualitative and quantitative survey results, there were specific comments submittedby certain working groups at the Stakeholder Workshop that are included here. The comments areparticularly concerned with the privatization and social components.

Privatization and Enterprise Reform

Achievements

* Creation of the Intranet for the GKI offices (data exchange, integrated database). Fundamentalchanges in the main software of the Central Depository (it complies with international standards; allows forelectronic data exchange with other information systems on the stock market).

* Assistance in developing regulatory framework and privatization strategy (Deloitte & Toucheinvolvement in the development of privatization strategy for large enterprises with foreign investors).

Assistance in developing regulatory framework (capital market development; the key lawsregulating

operation of securities market and JSC for the purposes of privatization through corporatization).

- Creation institutional framework for the future WB projects. Facilitation to establish the twoLKBL PIUs with office equipment. The project has identified the main objectives and tasks for the next WB

project financed through the EIBL(Enterprise Institutional Building Loan).

Sustainability of the achieved results

a) For the present the technical facilitation obtained under the loan is sustainable However, thelntranet has to be further improved to keep apace with the advancements in information and computertechnologies.

Further improvement of securities storage and record reliability through the establishment of abackup

center.

b) In the areas where consultancy services had been provided, the positive results were notsustainable. For instance:* The results of the automobile market survey had been used neither by the GKI, nor the WB projectin their future operations;* Of the 40 enterprises surveyed, only two had been privatized with foreign investments. Nosystematic work had been done on the others.

Lessons learned:

* No component implementation unit was established which resulted in major staff rotation at theGKI and thus affected the project implementation.

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* Lack of experience of the GKI staff in dealing with international financial institutions and projects(drafting terms of reference and bidding documents, negotiating with consultants). It is therefore advisableto begin a project with training the PIU staff in Bank procedures.* Better use could have been made of the local experts' capabilities and potential.

Social component

Achievements included:

* A new design of the family budget survey which is the main source of information on livingstandards and employment and provide reliable information appropriate by intemational standards.* Computerization of employment offices allows a new and better information system on demand andsupply in the formal/official labor market.* Skills transfer-staff who have worked on the component implementation gained newinternationally accepted skills and experience of work.

These results are considered to be sustainable as (1) they are introduced in the activity ofstatisticaland labor agencies; (2) as information based on FBS is regular and systematic; (3) the

ground forfurther activities has been created.

Participants of the discussion group also focused on lessons they learnt during the project work,what helped and what was weak, what they found to be desirable. Professionalism at all levels includingthe WB-consultants- recipient agency is regarded as a necessary condition of success in implementation.Inclusion of the local experts in the team facilitates implementation. Strong partnership relations arerequired for all types of project work. Patience and persistence are necessary. If the work were to be donedifferently, more attention would be paid to the qualifications of international consultants. Lack or absenceof coordination and linkage between governmental agencies related to procurement was stressed as aweakness and a barrier. The project could be designed better, and significant changes like changes in laboroffices could have been done on a pilot basis. The project design leaves room for better time-frame.Financing was not always adequate.

The group made the following recommendations on possible ways to improve project implementationbasing on lessons leamt:1. Improve selection of international consultants and the Bank's staff to help more actively in consultants

selection.2. Better train local specialists who would be implementing a project.3. Improve intergovernmental coordination under the Cabinet of Ministers.4. Implement pilots before large procurements (this relates to labor offices where procurement of softwareand computers had complications). Better identification of priorities and sequencing of procurement andworks.5. Beneficiary agencies should monitor the work of specialists trained; and improve the selection(procedure) of specialists for training.

Main Presentation Points from Working Groups

In addition to these more detailed notes, working groups made presentations from flip charts. The

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main points were translated from the charts and are presented below by component. Many of the pointsreinforce the results of the Stakeholder Survey.

Privatization and Enterprise Reform

* Project implementers need more training from the beginning of the project.* Good skills transfer occurred during negotiations and procurement.* Consultants need to understand local conditions and work closely with local counterparts.

Financial Sector

* The implementing agency went far beyond expectations in terms of the scope of the Paymentssystem with transactions times reduced from days to minutes.* World Bank was slow to believe in the local financial capacity.

Social Component

* With the implementation of the Family Budget Survey, the Govenmment went far in overcomingintemational non-acceptance of social data.* The RTI contract was a victory for the client (GOU) asserting its rights and insisting on adherenceto contract provisions. Main lesson was to select consultants very carefully (consultants familiar with localconditions).- Bank provided good expert advice and was not just in the role of a creditor). However, the Bankshould help more in consultant selection

Sector Studies

* For both the Telecom and Uzbekneftgas consultancies, the main impact was the change inmentality helped by the consultants (Mckinsey, NTTI/DETECON).* On the Telecom side, the studies were successful in all aspects.* However, the ability to pay off existing loans in Telecom is exhausted (implying that proceedsfrom the privatization of Uzbek Telecom are needed soon).For Uzbekneftgas, the acreage tendering study was successful, but follow-up legal and negotiations trainingis needed.

General ICR Comments on the Workshop

Strategic Solutions. Although the workshop was comprehensive and participants were fairly candid intheir comments, there seemed to be a lack of strategic thinking in many of the presentations. For example,it would have been valuable to go beyond expressing the need for improvement in skills transfer,maximizing consultant benefits, inproving work with the Bank, and training. The Bank presented thesurvey results as a starting point for discussions, reported areas where respondents expressed the need forimprovements, and provided guidelines for working groups discussions and presentations. Still, it was verydifficult to elicit strategies for achieving these improvements. These areas of needed improvement (shownin Annexes 9A and B) will require continued follow up, in order to identify specific improvement strategies.Staff working on the FIBL and EIBL should be aware of these specific areas and work to devise new waysto achieve better use of loan resources.

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Workshop Format. Although work group sessions were very useful, the Stakeholder workshop as a wholeis perhaps too formal for the give and take type of exchange needed to produce deeper lessons learned andstrategic solutions. Participants also need a clear incentive to attend. Perhaps this could be achieved byenlisting stronger support of the managers of the people who actually attend the workshop.

ANNEX 9C.

LIST OF ATTENDEES BY WORKING GROUP

REPUBLIC OF UZBEKISTANIBTA Implementation Completion Workshop

TASHKENT, March 19, 2001

COM, PIUs and Component's representatives:

l. Mr. Nariman Mannapbekov, Head Department for Foreign Economic Activities2. Mr. Shukhrat Vafoev, Chief, Department for Foreign Economic Activities3. Mr. Sobirjon Yuldashev, Consultant4. Mr. Bakhtier Khamraev, Procurement Specialist5. Mr. Zavikhulla Nasriddinkhodjaev, Information Department

MOF

6. Mr. Abdulaziz Muradov, External Debt Component Coordinator7. Mr. Ilkhom Babajanov, Leading Economist

GKI

8. Ms. Fiagul Mirgalieva, Chief Technologist, Depositary9. Mr. Zohir Muhiddinov10. Mr. Haydarov, Sector Development

Uzbek Post and telecommunication Agency

11. Mr. Abdulla Aripov, First Deputy General Director12. Mr. Khurshid Karimov, Head of International Economic Relations13. Mr. Mikhail Kojakin, Deputy General Director

MOL

14. Mr. Abdurakhmon Tolipov15. Mr. Nurmamad Tursunov

MOMS

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16. Ms. Reiganat Makhmudova, Head of Poverty Monitoring Departnent17. Mr. Pyotr Dolgopolov

CBRU

18. Mr. Karim Umarov19. Mr. Elibay Jabbarov, Deputy Head of Information Department20. Mr. Alexander Stupak, Deputy Head of Information Department

Deutsche bank

21. Mr. Miyassar Olimova,

UZBEKNEFTEGAZ Corporation

22. Mr. Anvar Gulyamov

Expert Fikry

23. Mr. Alisher Ilkhamov, Director

CER

24. Mr. Bahodur Eshonov, Director25. Mr. Ulugbek Olimov, Expert

World Bank

26. Mr. David Pearce, Chief of the Resident Office27. Mr. Pervaiz Rashid, Lead Specialist28. Mr. Marc Blanc, Regional Operations Advisor29. Mr. Fasliddin Rakhimov, Operation Officer30. Mr. Richard Carroll, Consultant31. Ms. Rada lankina, External Affairs32. Mr. Bakhtier Abdullaev, Operations Officer33. Mr. Bekzod Shamsiev, Operations Officer34. Ms. Dilnara Isamiddinova, Operations Officer35. Mr. Anatoly Krutov, Operations Officer36. Ms. Oxana Mushtatenko, Disbursement Assistant37. Ms. Sevara Atamuartova, Intern38. Mr. Sergei Osipov, Interpreter39. Ms. Tatiana Okunckaya, Interpreter40. Ms. Raisa Kabaeva, Interpreter

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