On December 1, 2004 World Bank staff gathered at the World Bank Info Shop to launch the recent publication by the Operations Evaluation Department (OED) entitled “Economies in Transition: An OED Evaluation of World Bank Assistance.” Much of the Europe and Central Asia (ECA) region faced unprecedented political, economic, and social turmoil after the break up of the Soviet Union. The years following the collapse were characterized by plummeting GDP (averaging more than 40 percent in the Former Soviet Union), increased inequality and poverty, and lowered standards of living throughout much of the region. The OED study attempted to examine the effectiveness of World Bank lending and non-lending assistance to the region since 1989. The evaluation surveyed 26 countries and emphasized the Bank’s role in supporting the transition from planned economy to market. Five specific areas were addressed: private sector development, governance and public sector management, the financial sector, social protection, and energy.
Gregory Ingram, Director-General for OED, provided a brief overview of the evaluation methodology, and Alice Galenson, Lead Evaluation for the Country Evaluation and Regional Relations Unit of OED, presented the major findings of the study. Galenson said that the report concluded that, despite early mistakes due to the newness of the challenge and the political pressure to act quickly after the collapse, Bank support has been effective overall. Evolving knowledge led to midcourse corrections, she asserted. The Bank’s biggest mistakes came from overlooking the importance of poverty alleviation and good governance and an overemphasis on privatization in the absence of an appropriate government framework. Today, she said, poverty reduction and good governance are integral in any Bank program in the region.
After Galenson’s remarks, Pradeep Mitra, Chief Economist for the ECA region, provided feedback on the report’s findings from the perspective of regional management.
Mitra questioned why the challenges of transition were underestimated in a way that led to such dramatic declines in GDP in the Former Soviet Union (compared with more modest decline in the rest of the ECA region). He hypothesized that perhaps the high level of production in the region were unsustainable, or that the characteristics of specialization and resource allocation were misunderstood by the Bank and other outsiders. Mitra asserted that perhaps a thorough analysis of specific areas in which the Bank was insufficient in knowledge and strategy would have been helpful. He said that in this respect the report could have made for a more useful learning tool had more specific attention been paid to this area. Mitra also asserted that the strategy of rapid privatization was inappropriate and executed in part to foster a political irreversibility of the transition.
Galenson and Ingram briefly responded to Mitra’s comments. Ingram agreed that privatization is often used as a commitment device, but disagreed with Mitra’s assertion that it is irreversible. He elaborated on Mitra’s mention of economic tradeoffs, noting that such difficult choices and opportunity costs still face the region. Galenson responded by saying that, regardless of the causes of the transition recession, monitoring of poverty and an emphasis on good governance would have allowed for a more early detection and perhaps a better outcome. Afterwards, the floor was opened to questions from the audience. Topics addressed included the controversial theme of privatization, the Bank’s policy towards rapid privatization, and the role of institutional knowledge.
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